After rampant speculation, Amazon finally confirmed that it had acquired MGM Studios for $8.45bn earlier this week. The deal unites the iconic movie studio known for the James Bond series with the ecommerce tech giant and means it can supercharge Amazon’s streaming platform, Amazon Prime Video, with more premium content.
The deal coincides with a period of considerable strengthening of the streaming market. Over the past year, viewing habits have radically changed as consumers look to streaming services during lockdown. According to research from Ofcom, streaming services boomed during Covid-19, with 26% of people more willing to consider subscribing to online video services than before the crisis.
This acquisition is therefore a mutually beneficial deal for both parties, allowing them to capitalise on this growth. For Amazon, the deal allows the tech giant to compound its entertainment value and broaden its rights after recent sports deals – Amazon Prime Video recently acquired the rights to stream NFL games. It now truly can position itself to compete with the dominant Netflix (208 million subscribers) and Disney+ (100 million subscribers).
MGM, meanwhile, is given more room to breathe and adapt to the changing entertainment landscape amid huge financial pressure following its decision to delay its latest James Bond film during Covid. This is a pressure intensified by competition from the growth of Disney+ during the pandemic and the recent Warner Bros/Discovery deal – and good reason to have a huge financial backer on board.
Making the deal a success
However, Amazon and MGM now have to put the promise of acquisition into reality.
The first step Amazon needs to take is utilising MGM's catalogue in order to grow Prime Video and encourage continual viewing and new customer growth. A wealth of popular films and TV shows such as the globally renowned James Bond and the award-winning The Handmaid’s Tale will provide just that. The deal, if executed properly, will enable Amazon Prime Video to truly become a leading provider in the entertainment world, using MGM’s IP alongside its already burgeoning work such as The Marvelous Mrs Maisel and The Boys.
Mike Hopkins, senior vice-president of Prime Video and Amazon Studios, has shown that he understands this, stating that: "The real financial value behind this deal is the treasure trove of intellectual property in the deep catalogue that we plan to reimagine and develop together with MGM's talented team."
Amazon also can use MGM’s content to nudge people further into its Prime ecommerce ecosystem. Amazon’s Prime package is a key point of differentiation for the company. While competitors rely on original programming to persuade consumers to sign up to the platform, Amazon can use its existing content coupled with MGM’s archive to get people into the ecosystem of the ecommerce business alongside Prime Video to drive subscriptions.
The tech giant can use James Bond and other properties to boost its ecommerce offering by allowing consumers to purchase products featured within their films and TV shows. Conversely, it can drive Prime Video viewers by showing ads and clips of upcoming TV series and movies on its ecommerce platform. In other words, Amazon can drive revenue across the board, if it’s smart in using MGM content in its ecosystem. It can also reduce churn by ensuring that there are as many avenues as possible into the Amazon network to make sure that once you’re in, you’re in.
For Amazon, Prime’s membership ecosystem has been proved to work to great effect. Accounting for almost half of all new UK subscriptions in Q4 2020, and despite purchase delivery being its main appeal, Amazon’s latest results show that watching is on the rise. It is these types of results that are extremely attractive to the likes of MGM, with its ultimate goal, beyond the $8bn deal, being to get its content shown to the widest audience possible.
This deal is the latest in a series being heralded as a new wave of consolidation in the media sector as major players look to build scale in the streaming era. This is a clear sign that Amazon aims to beef up its portfolio of films and TV shows, while MGM is able to preserve its heritage and vast back catalogue of content.
Rebecca Candeland is head of Broadcast at Total Media
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