Amazon’s deal to buy MGM puts it back in streaming game

Amazon’s big $8.45 billion bet on Hollywood studio MGM comes at a vital time for the e-commerce big, which had been dropping floor to streaming rivals Netflix, Disney+ and Warner Media’s HBO Max.

While the deal isn’t sufficient to knock Netflix off its throne, media watchers mentioned it will put Amazon back in the game and set off much more consolidation as streaming providers vie for eyeballs.

“It’s a streaming arms race. Amazon really felt they had to step up and give themselves a fighting chance,” mentioned CFRA analyst Tuna Amobi. “Their options were narrowing.”

According to Amobi, the Seattle-based firm behind exhibits like “Sneaky Pete” and “The Man in High Castle” wanted to take swift motion to preserve tempo in the “brutal business” of streaming, which was showcased final week with a $43 billion merger between Discovery’s and AT&T’s WarnerMedia.

“I don’t believe this will be the end of acquisitions,” mentioned the analyst, who famous that media properties like ViacomCBS, Comcast’s NBCUniversal, AMC Networks and film studio Lionsgate are additionally ripe for the choosing.

“Apple is going to feel the most pressure right now. For them, it’s almost like they have to do something more dramatic,” he mentioned.

“They’ve been traditionally more diligent and disciplined in terms of pricing,” he added. “But the way streaming is shaking out, you will have the top three and right now it seems like the race is to become the forth or fifth, which will lead to more consolidation.”

According to Amobi, the highest three streaming networks are Netflix, Disney+ and HBO Max, though some argue that Amazon, which owns streaming platform Prime Video and Hollywood studio Amazon Studios, can be in place to snag third place.

That leaves Apple+, Hulu, NBCUniversal’s Peacock and ViacomCBS’s Paramount+, amongst others, duking it out for the remaining.

Apple, which reportedly spent about $6 billion on unique content material forward of the 2019 launch of its streaming service AppleTV+, kicked the tires on shopping for MGM, however sources buzzed that the worth tag was too excessive for the iPhone-maker.

But LightShed Partners analyst Rich Greenfield questioned whether or not the Silicon Valley big really wants to be a part of in the acquisition frenzy.

“Apple is a 2 trillion dollar company. I’m not sure they’re struggling in any form,” he mentioned of acclaimed AppleTV+ exhibits like “The Morning Show,” “Ted Lasso” and “The Mosquito Coast.”

Amazon's deal to buy MGM puts it back in streaming game
Daniel Craig as James Bond in MGM’s “No Time to Die.”
MGM

“It feels like Apple is going to continue to build content,” he mentioned. “For smaller companies, there’s going to be increasing pressure to consolidate as scale keeps getting redefined.”

“If you don’t consolidate, the odds are we will see some companies become content dealers” and license content material to higher funded streaming giants, he mentioned.

Analysts agreed that Amazon’s deal to buy MGM — the house of the “James Bond,” the “Rocky” film franchises and standard actuality TV exhibits like “The Apprentice” and “Shark Tank” — will bolster subscribers to its Prime Video platform. It can even develop Amazon’s surging ad business, which generated $22.4 billion in the previous 12 months, they mentioned.

Amazon Prime at the moment has 200 million members, 175 million of which use Prime Video, a statistic that may solely get higher, in accordance to Raymond James analyst Brian Yarbrough.

Amazon's deal to buy MGM puts it back in streaming game
Amazon’s $8.45B acquisition of MGM Studios is its greatest since it purchased Whole Foods in 2017.
Anadolu Agency through Getty Images

And Yarbrough known as the MGM pact a “game changer” when it comes to its promoting potential by making a “flywheel” of buzzy films and TV exhibits that Amazon can supply to Prime subscribers, which can entice extra eyeballs and much more advert {dollars}.

The MGM deal additionally offers Amazon extra gravitas in Hollywood — one thing it has been working in direction of for years. MGM’s pipeline of upcoming Oscar contenders embrace “Respect,” an Aretha Franklin biopic starring Jennifer Hudson; Ridley Scott’s “House of Gucci” starring Lady Gaga and Adam Driver, and Paul Thomas Anderson’s newest flick, “Soggy Bottom,” starring Bradley Cooper.

The Jeff Bezos-led firm has had issue making its personal hit movies in the previous and has as an alternative invested boatloads of money for unique film rights.

During the pandemic, Amazon reportedly shelled out $125 million for the rights to “Coming 2 America,” $80 million for Sacha Baron Cohen’s “Borat Subsequent Moviefilm,” and $200 million for “The Tomorrow War,” starring Chris Pratt.

Amazon has additionally revved up its personal Oscar ambitions, scooping up the rights to “Sound of Metal,” which netted 6 Oscar nominations and received two awards for sound and modifying. It has additionally hired back Jeff Blackburn, an Amazon vet with robust ties to Tinseltown, to assist develop its leisure unit.

Greenfield mentioned he doesn’t see the Amazon deal upsetting the streaming world order, however as an alternative “validating” their push into the house as Netflix has achieved with its $20-billion-a-year spending on content material and Disney’s $71 billion acquisition of Fox’s media properties.

But Scott Schiller, a former NBCUniversal exec who now works as international chief business officer at media advertising agency Engine, sees high corporations like Netflix feeling the warmth of rising competitors “whether they admit it or not.”

“For Netflix, this deal adds continued pressure to their [ad-free] business model,” Schiller mentioned. “There’s only a finite amount of money consumers will spend on streaming services.”

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