Amazon Strengthens OTT Business Expansion
To Enhance Media Content Capabilities
[Asia Economy Reporter Yujin Cho] Amazon, the world's largest e-commerce company, is acquiring Hollywood film studio MGM, which holds the rights to 007 and Mad Max, for $8.45 billion (approximately 9.5 trillion KRW).
The Wall Street Journal (WSJ) and others reported on the 26th (local time) that Amazon has agreed to acquire MGM under these terms.
The acquisition price includes cash and debt, with the purchase price excluding debt estimated to be around $6.5 billion, according to an anonymous source.
Jeff Bezos, Amazon's founder and CEO, said during a call with shareholders immediately after the acquisition announcement, "MGM has vast content, and when the talented personnel of MGM and Amazon Studios come together, there will be synergy in reimagining and developing intellectual property."
This acquisition deal is Amazon's second-largest merger and acquisition (M&A) following its $13.7 billion purchase of the largest U.S. organic food chain Whole Foods Market in 2017.
MGM values its own content holdings at $10 billion, but there are criticisms that this is overestimated.
The rights to famous films produced before 1986, such as The Wizard of Oz, Gone with the Wind, and Singin' in the Rain, have already been sold to other studios like Warner Bros.
Additionally, MGM currently owns only 50% of the rights to the most famous MGM-produced film series, the 007 series.
This is also why Apple, which previously considered acquiring MGM, offered a purchase price of $6 billion.
However, WSJ analyzed that Amazon's higher acquisition price compared to Apple reflects a premium due to the expansion of the online video service (OTT) market amid theater closures and increased remote work caused by COVID-19.
Amazon first entered the media content business in 2010 by establishing Amazon Studios, a drama production company, and has expanded the related business by launching the OTT service "Amazon Prime Video."
Amazon offers Prime members, who pay a monthly fee of $13, video streaming services along with other shopping benefits. It is known that Amazon Prime currently has 200 million members.
It is expected that Amazon's acquisition of MGM to strengthen its video streaming service will help increase the number of Prime members and related revenue.
Experts view Amazon's active pursuit of MGM acquisition as an effort to expand its market share, as it is currently trailing competitors like Netflix, which hold vast content libraries, in the OTT market.
U.S. economic broadcaster CNBC analyzed, "Amazon, which has competed with Netflix and Disney, has shown interest in securing more TV and movie content," and "It seems they judged that MGM's rich content is suitable for strengthening the Amazon Prime Video business."
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