– By John Engle
When the Walt Disney Co. (NYSE:DIS) launch Disney+ in November 2019, it marked a critical escalation of the so-called “Streaming Wars.”
The Home of Mouse is hardly the one firm hoping to supplant Netflix Inc. (NASDAQ:NFLX) because the business chief, but few streaming firms can boast a content material library something like Disney’s, which is probably probably the most worthwhile portfolio of artistic mental property on the earth.
For these platform homeowners not blessed with Disney-like IP, one answer has been to show outward, constructing content material libraries by acquisitions. Such has been the case for Amazon.com Inc. (AMZN), which has more and more seemed to content material acquisitions, even because it has expanded the scope and scale of in-house content material growth for its Prime Video service. This week noticed Amazon’s greatest plans for content material acquisition but with the announcement that the e-commerce behemoth intends to purchase MGM Studios for $8.45 billion.
The identify’s Bezos, Jeff Bezos
An Amazon-MGM merger was not on many traders’ radars earlier than it was revealed on Might 26. On a name with analysts shortly after the announcement, Amazon CEO Jeff Bezos made his case to the market:
“The acquisition’s thesis right here is de facto quite simple. MGM has an unlimited, deep catalog of much-beloved mental property, and with the proficient individuals at MGM and the proficient individuals at Amazon Studios, we are able to reimagine and develop that IP for the twenty first century.”
Whereas the $8.45 billion price ticket could look steep at first look, the deal provides Amazon entry to MGM’s storied content material library, which the venerable studio has developed over the course of practically century-long existence. With greater than 4,000 function movies, together with the “Jame Bond” franchise, in addition to about 17,000 tv collection in its library, MGM will likely be including a wealth of content material to Amazon’s rising streaming service.
After its preliminary courtship efforts have been rebuffed by MGM, Amazon turned to Mike Hopkins, a media business veteran it had employed in February 2020 to handle each Prime and Amazon Studios, to shut the deal. One may forgive Hopkins if he needed to take a trip after orchestrating such a large deal, however I doubt that’s on the playing cards for him. Along with his division all of the sudden awash with recent content material, sorting and integrating the brand new IP into Amazon’s technique seems set to be a prolonged job.
Momentous second or banal bolt-on?
Unsurprisingly, the announcement of Amazon’s newest mega-deal was not met with common enthusiasm. CNBC’s Alex Sherman, for instance, bemoaned the acquisition as “underwhelming” at the same time as he acknowledged its historic significance:
“It lastly occurred. After years of ready, a big expertise firm lastly acquired a major legacy media firm…So why does it really feel so underwhelming? Maybe it is as a result of that is, in essence, a bolt-on acquisition for Amazon. There’s nothing concerning the MGM deal that is notably revolutionary or leans into cutting-edge expertise. Relatively, Amazon wants extra content material for Prime Video to remain related towards Netflix, Disney+, Hulu, HBO Max and the various different streaming providers competing for eyeballs. Maybe it is as a result of the essence of this deal is not about media or expertise in any respect. Amazon is taking part in a distinct sport than each different leisure firm. The first rationale behind shopping for MGM is getting extra shoppers to pay for Prime.”
The criticism that the deal is about content material moderately than expertise is true, as far as it goes. But Amazon by no means denied that. Certainly, Hopkins advised analysts on Might 26 that IP was the prime motivator of the acquisition:
“The actual monetary worth behind this deal is the treasure trove of IP within the deep catalog that we plan to reimagine and develop along with MGM’s proficient workforce. It is very thrilling and offers so many alternatives for high-quality storytelling.”
Amazon is an unlimited and worthwhile enterprise that’s greater than able to absorbing the required prices of constructing an expansive content material library for Prime Video. Given its huge content material finances, which exceeded $11 billion in 2020, Amazon appears fairly comfy spending cash to generate profits. So to talk.
As different streaming gamers react to Amazon’s huge transfer, I’d not be shocked to see a spate of comparable acquisitions. Many storied content material libraries stay unclaimed by the streaming giants. Some could discover recent suitors calling. If that’s the case, the following part of the Streaming Wars might nicely be marked by a revival of merger mania.
Disclosures: No positions.
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