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Amazon Buys MGM for $8.45 Billion

Amazon overcomes regulatory hurdles to seal the deal.

It’s official. Last week, Amazon and Metro Goldwyn Mayer announced that MGM had joined Prime Video and Amazon Studios in a deal valued at nearly $8.45 billion. MGM brings with it a catalog of more than 4,000 films; 17,000 television episodes; 180 Academy Awards; 100 Emmy Awards; movie franchises including James Bond and Rocky; and classic movies like Thelma & Louise, The Silence of the Lambs, The Magnificent Seven and Legally Blonde.

“MGM has a nearly century-long legacy of producing exceptional entertainment, and we share their commitment to delivering a broad slate of original films and television shows to a global audience,” said Mike Hopkins, senior vice president of Prime Video and Amazon Studios, in a March 17, 2022 announcement. “We welcome MGM employees, creators, and talent to Prime Video and Amazon Studios, and we look forward to working together to create even more opportunities to deliver quality storytelling to our customers.”

Chris Brearton, chief operating officer of MGM, also commented on the deal.

“We are excited for MGM and its bounty of iconic brands, legendary films and television series, and our incredible team and creative partners to join the Prime Video family,” said Chris Brearton, chief operating officer of MGM. “MGM has been responsible for the creation of some of the most well-known and critically acclaimed films and television series of the past century. We look forward to continuing that tradition as we head into this next chapter, coming together with the great team at Prime Video and Amazon Studios to provide audiences with the very best in entertainment for years to come.”

Deal first announced last May

Amazon first announced the deal last May. The 98-year-old film and TV studio had been looking for a buyer for months, but other prospective buyers weren’t willing to pay as much as Amazon. According to The New York Times, Amazon offered about 40% more than other suitors, including Apple and Comcast. At the time of the initial announcement, Hopkins said that the real value of the deal is Amazon’s acquisition of MGM’s deep catalog.

Bond. James Bond.

The popular James Bond franchise is one of the most notable aspects of the MGM deal. Started in 1962, the popular James Bond series now includes 25 films and seven actors portraying James Bond (Sean Connery, David Niven, George Lazenby, Roger Moore, Timothy Dalton, Pierce Brosnan and Daniel Craig). The most recent movie – No Time to Die – was set to premiere in 2020 but was delayed due to the pandemic. It was finally released in October 2021 and was said to be Craig’s last film as Bond. Amazon doesn’t own the entire franchise, however. They only own half. The other half is owned by Barbara Broccoli and brother Michael G. Wilson.

Second largest acquisition for Amazon

The purchase of MGM is Amazon’s second-largest acquisition to date. Its most expensive acquisition was the purchase of Whole Foods for $13.7 billion in 2017, followed by Zappos at $1.2 billion in 2009, and Ring at $1.2 billion in 2018.

Regulatory approvals

European Commission

Last month, the European Commission approved Amazon’s acquisition of MGM unconditionally, stating that they had no competition concerns in the European Economic Area.

“Based on its market investigation, the Commission found that the transaction, as notified, would not significantly reduce competition in the markets for (i) the production and supply of AV content, (ii) the wholesale supply of TV channels, (iii) the retail supply of AV services, (iv) the production and licensing of distribution rights to third-party distributors of films for theatrical release and (v) the provision of marketplace services. These markets are found to be likely national in scope,” the Commission wrote in a February 8, 2022 announcement.

Federal Trade Commission

According to Politico, the Federal Trade Commission did not block the acquisition, allowing the deadline for a review of the deal to expire. When we first reported on the FTC’s involvement last July, Sen. Elizabeth Warren (D-MA) wrote a seven-page letter to new FTC chair Lina Khan, urging Khan to scrutinize the deal from an antitrust perspective.

“I support the Federal Trade Commission’s (FTC) review of this deal, which is consistent with your ongoing investigation into Amazon’s anticompetitive business practices,” wrote Sen. Warren.

Insider Take

Amazon Prime Video faces a lot of competition from other streaming companies (e.g., Netflix, HBO Max, Disney+, Paramount+), so this strategic move will better position the company to increase market share. By acquiring popular franchises like James Bond, Amazon will have the exclusive rights which may draw some subscribers, if not to an Amazon Prime membership then perhaps as standalone subscribers to Prime Video. This is the first major streaming deal to close this year. Next up is the completion of the Discovery Inc. and WarnerMedia merger in the second quarter. This could be a very exciting year for streaming! Who will be next?

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