Prime Video strengthens its offer with MGM

E-commerce, cloud storage and online video behemoth, Amazon Inc., recently announced that it has reached an agreement with MGM Holdings to acquire the movie conglomerate for $8.5 billion, a move that highlights that the company owned by tycoon Jeff Bezos is ready to use heavy artillery in the video streaming war.

What are the implications of Amazon’s purchase of MGM?

 By: Gabriel E. Levy B.

Although the purchase has not yet been legally configured and must still be approved by the regulatory and federal trade commission (FTC), mainly in the United States, the two companies of North American origin, officially announced the sale of MGM Holdings to the conglomerate Amazon INC, for a total amount of around 8.5 billion dollars. This will undoubtedly allow the Streaming Prime Video platform to have a little more than 4,000 feature films and some 17,000 television shows, including titles such as “Poltergeist”, “Robocop”, “The Handmaid’s Tale”, “Fargo”, “Vikings”, “Rocky”, the “James Bond” saga, among many others.

“Subject to regulatory approval, Amazon has signed an agreement to acquire the company from the iconic Hollywood lion for $8.45 billion, whose vast catalog of 4,000 movies and 17,000 TV series complements the Amazon Studios division.” Amazon Official Statement [1]

The purchase, once finalized, will be of such magnitude that it will become the second largest transaction in the history of AMAZON INC [2], which considering that, this is one of the largest e-commerce technology giants in the world, is an unprecedented move in the entertainment industry, but most likely occurs as a response to the reorganization of the players in the global video streaming market [3].

Just a few weeks ago, it was announced the merger of WarnerMedia [4] (owned by AT&T) with the documentary giant Discovery [5], in a move that seeks to compete head-on in the OTT business, against a NETFLIX [6] that is still positioned as number one in this market, DISNEY, that after the purchase of FOX and the launch of its video platform Disney + consolidated with more than 100 million subscribers, and Amazon Prime, that with this recent purchase, seeks to maintain a competitive content offer [7].

“The real financial value behind this deal is the treasure trove of IP [intellectual property] in the deep catalog that we plan to reimagine and develop together with MGM’s talented team,” Mike Hopkins, the senior vice president of Prime Video and Amazon Studios, said in a statement [8].

MGM – Metro-Goldwyn-Mayer Studios, Inc. (also known as Metro-Goldwyn-Mayer Pictures, is an American production and distribution company of motion pictures and television programs, founded in 1915[9].

By the 1930s MGM, became one of the major Hollywood film studios and later with titles such as James Bond or Rocky, reached its greatest splendor for the second half of the twentieth century.

The first years of the 21st century brought a strong financial crisis, until it declared bankruptcy in 2010. In 2014, it was rescued by the Japanese multinational company SONY, which acquired it for more than $5 billion dollars [10].

The studio has not been going through its best times for years, with an accumulated debt that it is unable to overcome and a decrease in its production capacity, which is why MGM had been looking for a buyer for several months, previously promoting conversations with Apple, Netflix, and several investment funds.

“Through this acquisition, Amazon would empower MGM to continue doing what they do best: telling great stories.” Amazon Official Statement [11]

 In 2020 alone, Amazon Prime Video invested $11 billion in film, TV and music content. Its Prime Video service, included in the Amazon Prime subscription, is used on a recurring basis by some 175 million customers per year, placing it as a competitor against Netflix with 208 million customers, and Disney+, which is advancing at great speed and already exceeds 100 million active subscribers [12].

“MGM has undergone an incredible transformation, and in its many years of history has collected 180 Oscars and a hundred Emmys, which is why I thank all the contributors for their efforts, to enable us to reach this historic day.”

” I am very proud that the Lion of MGM, which has long evoked the golden age of Hollywood, will continue its successful history and that the idea born from the creation of the United Artists will endure as the founders originally intended, led by talent and their vision,” MGM official statement [13]

Will the market support so many video on demand players?

As we previously analyzed in the article “The OTT Chessboard“[14], it is difficult to know for sure if the market will have the capacity to support so many simultaneous players in the connected video on demand consumption market, better known as OTT Video.

On the one hand, the 2019 OTT Consumer Report [15], published in the United States, showed that 52% of adults over 18 years of age consume an OTT video service, demanding more than 2 hours of video on average per day, showing that the average American is willing to pay for 2 or 3 OTTs as long as the quality of the audiovisual productions is a differential factor and their purchasing power allows it.

In Latin America, a study published by the consulting firm DATAXIS [16] showed that by the end of the second decade of the 21st century, the region had reached 20 million active paid accounts for Video On Demand OTT (S-VOD) services, with an average annual growth rate of 30%. Although this may seem like a lot of subscribers, the 20 million are only equivalent to 25% of the total fixed broadband accesses, so clearly the market will continue to grow and the same consultant estimates that there will be more than 40 million users by 2023.

On the other hand, the Q2 study conducted by the consulting firm BB [17], found that on average, households using OTT video platforms in Latin America subscribe to at least 2 services and in many cases 3 or more, showing that the role of connected video in the region is still a complementary platform for access and consumption of content and that users with purchasing power are willing to add this value to their monthly budget.

The results of BB’s report coincide with the data provided by the three waves of the report: “The role of OTT services in Colombia“, prepared by the Communications Regulation Commission – CRC, which concludes that OTT services in the Andean country continue to be complementary and shows that users are willing to pay for multiple services, if their budget allows it [18].

The aforementioned studies show that, both in the United States and in Latin America, as long as there is enough purchasing power in the household, families are willing to pay for more than one OTT video platform if the content offer deserves it. In the case of families with less purchasing power, they will probably only be able to pay for one OTT video platform, if they can afford at least one of them.

In conclusion, the acquisition of MGM Holdings by technology giant Amazon INC. is one of the most expensive and important moves in the short and recent history of the connected video market. Possibly the move made by Jeff Bezos’ company, comes in response to the recent fusion of WarnerMedia (owned by AT&T) with the documentary giant: Discovery, the purchase of Fox and ESPN by Disney and the huge investments of Netflix in new film productions, which ultimately will result in a very wide range of content for users, who as long as their purchasing power allows it, are willing to pay for various streaming services, as evidenced by different published studies.

Photo: glenn-carstens on

[1] Official Amazon press release on the transaction published by Agencia EFE

[2] Encyclopedic article on Amazon INC.

[3] Analysis of the specialized blog My Computer on the purchase of MGM

[4] Encyclopedic article on Warner Media

[5] Infobae article on the fusion of WarnerMedia and Discovery

[6] Encyclopedic article on Netflix

[7] Analysis of the XATACA Specialized Blog on the purchase of MGM by Amazon

[8] Mike Hopkins, Senior Vice President of Prime Video and Amazon Studios

[9] Encyclopedic article on MGM

[10] Hipertextual Blog’s analysis on Amazon’s purchase of MGM

[11] Amazon’s official press release on the transaction published by Agencia EFE

[12] Agencia F report on Amazon’s purchase of MGM

[13] Kevin Ulrich, President of MGM. Published by Agencia EFE

[14] The Video OTT Chessboard

[15] 2019 OTT Consumer Report Study – United States

[16] DATAXIS Latin America OTT Study

[17] Q2 BB Vision Study

[18] Study: The Role of OTT Services in Colombia – Communications Regulatory Commission CRC

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