[Asia Economy Reporter Yujin Cho] Amazon, the world's largest e-commerce company, is acquiring MGM, a Hollywood film production company that holds the rights to franchises such as 007 and Mad Max. This move is seen as the beginning of an intensified war among media giants over the rapidly expanding online video platform market, which has grown significantly amid the COVID-19 pandemic.
On the 24th (local time), The Wall Street Journal (WSJ), citing anonymous sources, reported that the acquisition deal between Amazon and MGM could be announced as early as this week.
If this acquisition deal is finalized, it will be Amazon's second-largest merger and acquisition (M&A) following its $13.7 billion purchase of Whole Foods, the largest organic food retailer in the U.S., in 2017.
The acquisition price of $9 billion is about 50% higher than the $6 billion offer previously proposed by Apple, which had also considered acquiring MGM. WSJ analyzed that this premium reflects the expansion of the online video service (OTT) market due to theater closures and increased remote work caused by COVID-19.
This market expansion is putting additional pressure on Amazon's moves, which have been significantly lagging behind competitors like Netflix, which possess vast content libraries. WSJ interpreted Amazon's push for this acquisition as an effort to compete against Netflix and others who dominate the market through diverse content capabilities.
Amazon first entered the media content business in 2010 by establishing Amazon Studios, a drama production company, and has since expanded its related business by launching the OTT service 'Amazon Prime Video.'
According to CNBC, Amazon, which has been competing with Netflix, Disney, and others, is interested in securing more TV and movie content, and MGM's rich content library is seen as suitable for strengthening the Prime Video business.
Founded in 1924, MGM is a major Hollywood production company that owns the rights to globally successful films such as the 007 series, Rocky, and Mad Max.
In addition to films, MGM operates Epix, a TV program production company, and the value of MGM's content is estimated to reach $10 billion.
MGM filed for bankruptcy in 2010 and, after undergoing restructuring, has been seeking a buyer for several years.
WSJ noted that this negotiation came a week after AT&T's content subsidiary WarnerMedia announced its entry into the OTT market by partnering with cable TV channel operator Discovery, forecasting that the OTT market will heat up with new entrants and mergers and alliances.
Comcast, the parent company of NBC Universal, which owns NBC broadcasting and Universal Studios, launched the OTT service 'Peacock' in July last year, while ViacomCBS, which owns CBS broadcasting and Paramount Studios, launched the Paramount+ OTT service in March.
Traditional media companies are seeking new opportunities through M&A or business partnerships as the transition to the OTT market accelerates.
WSJ reported that the merger between WarnerMedia and Discovery has made competitors reconsider their decisive moves, and other competitors must decide whether to make similar choices.
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