INSUBCONTINENT EXCLUSIVE:
MGM's content is tied up in multi-year deals with television networks, former Amazon executives saidAmazon.com Inc said on Wednesday it is
buying MGM, the fabled United States movie studio home to the James Bond franchise, for $8.45 billion, giving it a huge library of films
and TV shows and ramping up competition with streaming rivals led by Netflix and Disney+
Privately-held MGM, or Metro Goldwyn Mayer, was founded in 1924, owns the Epix cable channel and makes popular TV shows including "Fargo",
"Vikings" and "Shark Tank."The deal is designed to help Amazon supercharge its Amazon Prime Video service by keeping customers engaged and
paying an annual subscription that also guarantees rapid delivery of purchases from its online store."The real financial value behind this
deal is the treasure trove of (intellectual property) in the deep catalog that we plan to reimagine and develop together with MGM's
It's very exciting and provides so many opportunities for high-quality storytelling," said Mike Hopkins, senior vice president of Prime
Video and Amazon Studios.Amazon's Prime Video faces a long list of competitors including Netflix Inc, Walt Disney Co's Disney+, HBO Max
and Apple Inc's Apple TV+
The companies are increasing spending and expanding in international markets, aiming to capture the pandemic-led shift to binge-watching
shows online.Amazon has also made big bets courting fans of live sports and has picked up lucrative licenses to stream games, including a
long-term deal with the National Football League that was estimated to cost about $1 billion per year.The proliferating streaming services
are also scrambling for brands that they can expand and libraries of older shows and movies
Analysts have said this is a big motivation for another round of consolidation of media properties after a brief hiatus during the
pandemic.Underscoring the trend, AT-T Inc announced a $43-billion deal last week to spin out its WarnerMedia business and combine it with
Discovery Inc, one of the most ambitious yet in the streaming era."Amazon is seeking to become a more prominent player in the entertainment
world, and there's no better way to do that than by buying one of the most iconic movie studios in Hollywood," said Jesse Cohen, senior
"It's all about content as the streaming war heats up." The acquisition is Amazon's second-biggest after Whole Foods Market, which it
bought for $13.7 billion in 2017.The price represents a lofty premium relative to other deals
The price is about 37 times MGM's 2021 estimated EBITDA - or almost triple the enterprise value-to-EBITDA multiple that Discovery's deal
implied for AT-T's content assets - according to Reuters Breakingviews
MGM started a formal sale process in December, when it was estimated to be worth about $5.5 billion.The deal can be viewed as a doubling
quarterly profit and boasted more than 200 million Prime loyalty subscribers
moved from art-house fare toward content with wider appeal
The MGM acquisition accelerates that move, giving it rights to James Bond, one of the most lucrative franchises in film history that's
earned nearly $7 billion at the box office globally, according to MGM.MGM also has a massive library of classic films including "Rocky,"
"Moonstruck," and "The Silence of the Lambs." The potential to mine this intellectual property, by making new shows and films based on
popular characters, will help Amazon draw viewers to Prime, two former Amazon executives told Reuters.Still, efforts by Amazon to profit off
MGM's library won't be easy, or cheap
In many cases, MGM's content is tied up in multi-year deals with television networks, the former Amazon executives said
the James Bond saga to Prime viewers may be a particularly difficult task, the sources said
The terms under which MGM acquired the franchise leave control in the hands of the Broccoli family, the Bond films' producers.News of the
acquisition followed quickly on the return of Jeff Blackburn, Amazon's former senior vice president overseeing content and M-A, who had
Incoming Amazon CEO Andy Jassy had particular trust in Blackburn after decades at Amazon together, hoping he'd shepherd a complicated
merger, the sources said.
