Amazon deal to buy MGM could be announced this week

Amazon nears deal to buy MGM Holdings for nearly $9 billion: Sources">Amazon nears deal to buy MGM Holdings for nearly $9 billion: Sources

Amazon could announce a deal to acquire Metro-Goldwyn-Mayer (MGM) Studios as early as this week, according to a new report.

On Monday, the Wall Street Journal said the two companies were in the final stages of negotiations regarding an acquisition of the legacy film studio, which could cost more than $9 billion.

The Journal reported an announcement could come later this week, with rival financial news publication Bloomberg saying it may land as early as Tuesday. Discussions over Amazon’s potential acquisition of MGM Studios were first revealed last week by Silicon Valley news outlet The Information, which valued the deal at roughly between $7 billion and $10 billion.

At that valuation, the deal would be Amazon’s largest acquisition of a third party company since it agreed to buy grocer Whole Foods four years ago for nearly $14 billion.

MGM Studios considered putting itself up for sale last year in an attempt to draw down on more than $2 billion in debt. It hired two financial firms last year to begin formulating what a sale of assets would look like, according to the Journal.

In addition to its famed movie studio, MGM Studios holds distribution rights for hundreds of television shows and movies, including much of the “James Bond” film series. It also operates the premium pay television network Epix, which counts more than 20 million paying subscribers across cable, satellite, live television streaming services and its own direct-to-consumer streaming app.

It was not clear which assets owned by MGM Studios were part of the company’s discussions with Amazon, including whether Epix would be acquired by the tech giant, retained or spun off into a separate company. If Amazon acquires Epix, it would be the first time a technology company has owned a television network since RCA launched the National Broadcasting Company (NBC) in the 1920s. (RCA was acquired by General Electric in the mid-1980s; NBC is now a division of cable and Internet provider Comcast.)

Amazon’s interest in MGM Studios is not hard to understand: The tech giant has been aggressively producing and acquiring content for its Amazon Prime Video streaming service, which is included in Amazon’s Prime membership service at $12 a month (it is also available as a standalone streaming service for around $9 a month).

Last year, Amazon committed to spending more than $11 billion beefing up its content for Amazon Prime Video. That amount included around $1 billion to secure exclusive telecast rights to Thursday night National Football League games, which will start streaming on Prime Video next year.

Last month, Amazon’s chief executive Jeff Bezos said more than 175 million of the company’s 200 million Amazon Prime members regularly stream content on Prime Video, making it one of the biggest premium streaming services by subscriber count in the world. The figure marks a 70 percent increase compared to the number of streamers who regularly consumed content on Prime Video in 2019.

Its adoption has been helped by the distribution of third party subscriptions to other streaming services through Prime Video in a marketplace called Prime Video Channels. There, services like Showtime, Discovery Plus, Paramount Plus and Starz are able to sell subscriptions while natively distributing their TV shows and movies to Amazon Prime Video customers.

But that perk is reliant upon Amazon’s partnerships with third party services, which has been rocky at times. Last year, Amazon withheld AT&T WarnerMedia’s streaming service HBO Max from users of its Fire TV devices after the two companies were unable to come to terms over distribution of the app. Some of those issues hinged on whether Amazon would be able to sell HBO Max subscriptions natively through Prime Video Channels, for which it would earn a commission with each subscription sold.

Acquiring MGM Studios’ film and TV show content library would help Amazon market Prime Video by enticing potential Prime members to subscribe while keeping those who already have a membership locked in for the long term. It could also allow Amazon to tap into a new revenue source if it decides to license MGM Studios content to HBO Max, Showtime or Fox Corporation’s Tubi.

In addition to Epix and the James Bond library, MGM Studios holds the distribution rights to popular classic titles like “Singin’ in the Rain” and “The Pink Panther” along with newer films like “Legally Blonde,” “Hot Tub Time Machine” and “The Girl with the Dragon Tattoo.”

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