Is it the end of the studio era and the beginning of the streaming era?
Once the ink is dry, the deal will cost Amazon $8.45 billion, making it the second-largest buyout in the company's history. Amazon seems to be betting big that the 4,000 movies and 17,000 shows in MGM's back catalog will be enough to give the e-commerce giant an edge in the streaming wars.
"The acquisition thesis here is really simple," Amazon CEO Jeff Bezos relayed to shareholders on a conference call on the same day the buy-out was announced. "MGM has a vast deep, catalog of much beloved intellectual property, and with the talented people at MGM and the talented people at Amazon Studios, we can reimagine and develop that IP for the 21st century."
A decade ago, MGM was forced to file for bankruptcy and soon found itself under the management of Anchorage Capital LLC. Since 2018 the hedge fund has shopped the studio around, but with no luck. Potential buyers like Comcast
Then came Amazon. The ecommerce behemoth's hunger for more content to stuff it's catalog kept them in talks with MGM for the past 18 months. Mike Hopkins Prime Video and Amazon Studios Senior VP, took the lead in the discussions. Still, according to insiders, the talks barely got off the ground. That is until five weeks ago when Amazon made its $8.45 billion offer.
The buy outcomes at the beginning of a significant shift in the streaming industry. Media companies are consolidating: in 2019, Disney
It was once the big three: Amazon Prime, Netflix, and Hulu, who could retain subscribers partly by licensing big-ticket shows and movies from traditional studios. But those days are gone. Studios are now hoarding their content to boost their streaming offerings- such as when NBC pulled "The Office" off of Netflix
Streaming giants like Amazon and Netflix are left with just two options: either sink billions into producing their own content in the hopes that something sticks (as Netflix has done), or buyout legacy studios to get the rights to their content (which Amazon is doing).
That's not to say Amazon hasn't had a measure of success regarding its original content. "Transparent," "Manchester by the Sea," and most recently "One Night in Miami" have enjoyed their share of critical success. But in terms of the popularity and cultural impact of Amazon's original content, these and other titles have had limited staying power.
But with a 97-year-old studio under its belt, and a 50% stake in the Bond franchise, the buy-out represents a significant milestone in Amazon's plan to dominate the streaming market.
"This jump-starts them by 50 years," Micheal Pachter, an analyst at Wedbush, told Bloomberg. "That's really what it comes down to. They weren't going to be able to produce enough content to every get close to Netflix."