Amazon snaps up MGM for $8.45bn
Amazon has agreed to buy the storied MGM studios for $8.45 billion, the companies said Wednesday, giving the US tech giant a vast library to further its ambitions in streaming. The deal bolsters Amazon Prime Video, which competes with Netflix and others in the fast-evolving market, with some 4,000 films -- including the James Bond franchise -and 17,000 television shows. “The real financial value behind this deal is the treasure trove of IP in the deep catalog that we plan to reimagine and develop together with MGM’s talented team,” said Mike Hopkins, senior vice president of Prime Video and Amazon Studios. The deal comes with Amazon experiencing surging growth in online retail and cloud computing, making a push into entertainment as consumers turn to streaming media. It gives Amazon the fabled Metro Goldwyn Mayer studios, an iconic name in Hollywood.
NEW YORK: Amazon.com Inc. agreed to buy the Metro-Goldwyn-Mayer movie company for $8.45 billion, a bet that a nearly century-old Hollywood icon can feed an insatiable demand for streaming content.
The proliferation of streaming services, including newer arrivals such as HBO Max and Disney+, has put pressure on Amazon to acquire more programming. Chief Executive Officer Jeff Bezos has made no secret of his desire for movie moguldom, and MGM’s vast backlog provides an abundance of streaming material, not to mention an opportunity to mine the iconic James Bond and Rocky franchises for new films and television shows.
Moreover, with retail rivals like Walmart Inc. rolling out more sophisticated online stores, Amazon must work even harder to keep its 200 million Prime subscribers loyal.
“This jumpstarts them by 50 years,” said Michael Pachter, an analyst with Wedbush Securities. “That’s really what it comes down to. They weren’t going to be able to produce enough content to ever get close to Netflix.”
Pachter said that Amazon’s studios produce a few hundred hours worth of television shows and movies a year. MGM adds a back catalog of 25,000 hours that Amazon could divvy up between its Prime Video offering, or its free-to-stream, ad-supported IMDb TV.
Amazon shares were up less than 1% Wednesday morning in New York.
The takeover is Amazon’s biggest acquisition since it agreed to buy Whole Foods in 2017 for $13.7 billion but follows investments of about $11 billion on content for its streaming video and music services last year alone. Mike Hopkins, senior vice president of Prime Video and Amazon Studios, in a statement pointed to MGM’s “deep catalog” as justification for the purchase.
MGM has been seen as a takeover target for years, but was never able to close a sale before. The company made a fresh push last year, when it reportedly hired advisers to seek offers.
For MGM, the studio that brought James Bond to the big screen, the deal provides a finale to a bumpy era of hedgefund ownership that began with a bankruptcy over a decade ago. MGM’s lead shareholder is the Anchorage Capital Group LLC, which became an owner with three other investors as part of a 2010 bankruptcy agreement that erased about $4 billion in debt.
MGM’s earnings before interest, taxes, depreciation and amortization rose 48% to about $307 million last year, lifted by profit from its 4,000-title film library. But with a lack of new releases, sales declined 3% to $1.5 billion.
Under Anchorage, the studio aspired to its old glory—a legacy that includes Gone With the Wind, and the biblical classic “Ben-Hur,” which shares the record for most Academy Awards at 11.
The new owners hired a moviemaker CEO in Gary Barber, a Hollywood heavyweight known for films such as The Hitchhiker’s Guide to the Galaxy and Ace Ventura: Pet Detective .He oversaw a new James Bond movie, Skyfall, that generated more than $1 billion in ticket sale and partnered with Warner Bros. on films.