The Echo-nomist

Old is gold, right? At least for Amazon it is.

Amazon is in talks to buy this roaring lion. Well, not the lion, but the company it’s associated with- Metro Goldwyn Mayer (MGM). They’re one of the world’s oldest film studios, involved mainly in the production and distribution of feature films and television programs. The company was closed to bankruptcy in 2010, but they jumped back. They weren’t able to dominate the market like before, but they’ve had significant success since then. They have produced some of the most classic movies, from Legally Blonde to Gone with the Wind and other popular films like A Star is Born and Everything, Everything.

This deal could value MGM between $5 billion to $10 billion. MGM has been looking for a buyer for a few months now, with $9 billion floating as an asking price. Apple was in talks with them too, but they decided their worth was $6 billion and declined the offer.

But what’s in this deal for Amazon?

It’s no surprise that streaming platforms like Netflix, Prime Video, Hulu etc. did awfully well during the pandemic. According to their Q1 report, Netflix revealed that they plan on spending $17 billion on content this year. Amazon spent $11 billion on content last year (music + movies combined). People have exhausted content on streaming platforms while in lockdown. They consumed all the content and are hungry for more. Netflix’s solution to this is more original movies and tv shows. Whereas, Amazon’s solution is licensing more content and expanding their library.

Netflix is leading the industry when it comes to original content produced. Amazon is next, but there’s a gap of more than 300 tv shows. No one’s catching up with Netflix anytime soon.

Netflix continues to grow its collection of original tv shows and has significantly increased the percentage of original content from 2020 to 2021. The up and coming Disney+ has the second highest growth as they, too, are focused on original content. Prime Video, however, had minimal growth in terms of new original content.

With around 175 million subscribers, Prime Video is second only to Netflix in this industry. So they must be doing something right.

The competitors in this industry are divided – with half of them focusing on original content and the other half focusing on acquired content. Is this market pressure enough to make all the companies follow the same path??

The purchase of MGM could help Amazon with original and acquired content. Killing two birds with one stone.

If they do close the deal, it will be the second biggest acquisition in Amazon’s history after the purchase of Whole Foods for $13.4 billion. This deal could lead to a massive expansion in Prime’s movie and tv show library. MGM owns the rights to more than 4,000 movie and tv titles which could all be Amazon’s. Think: James Bond movies, Pink Panther series, Rocky, No Time to Die, Shark Tank, Handmaid’s Tale, Real Housewives and many many more.

• 

This would be big for Prime as it relies on content like this for subs. Another underlying benefit that Amazon could claim from this deal is advertising new MGM content as Amazon Original, giving it exclusivity over their latest content. It could help push their original content up a notch and put them in a closer competition with Netflix.

As of now, representatives for Amazon and MGM declined to comment. We should respect their privacy and wait patiently as they contemplate and negotiate a deal. That’s it. That’s all I’ve got to say on the world of OTT and movies (for now).

UPDATE: Amazon has agreed to buy MGM for $8.45 billion. Keep a lookout for all the new movies coming on prime👀