Amazon has reportedly been in talks for weeks to buy legendary film studio Metro-Goldwyn-Mayer (MGM), which has long been looking for a buyer. The acquisition will increase and strengthen the monetization of Prime Video and Amazon Studios’ media divisions.
Amazon (AMZN) appears to be looking for a strong new growth factor as the media reported on Monday about its talks with MGM Holdings, the holding company that owns 100-year-old Metro-Goldwyn-Mayer film studio.
Amazon stock jumped 1.47% at the close of the NASDAQ trading session on Monday, continuing its gains in non-trading hours.
According to Variety reports, the talks are being spearheaded by Amazon Studios and Prime Video’s senior vice president, Mike Hopkins, and MGM chairman of the board, Kevin Ulrich.
Sources cite a potential deal value of $ 9 billion, according to earlier rumors: from $ 7 billion to $ 10 billion. Amazon and MGM declined to comment on the message.
Metro-Goldwyn-Mayer has long been considered a takeover target and announced last December that it was looking for a buyer and hired consultants to collect offers.
The legendary film studio has one of the largest libraries of films and TV series in the world, licensed to screening by Netflix (NFLX) and other streaming services.
What will Amazon get from Metro-Goldwyn-Mayer purchase?
It looks like Amazon isn’t enough to be # 1 in cloud computing and # 1 in e-commerce, and the company wants to dominate the global video streaming industry by ousting the current leader Netflix.
Commenting on Amazon’s first quarter report in May, its gen. CEO Jeff Bezos celebrated the success of the video streaming service Prime Video, a subscription to which users pay $ 119 for a Prime Club membership with access to free 2-day online delivery, basic Prime Music and more.
The company had over 200 million Prime subscribers at the end of March 2021, up 50 million from early 2020. According to the gene. directors of 175 million subscribers streamed Prime Video content last year.
It is difficult for investors to estimate the amount of income and profits from Prime Video, since they are included in the general income item – payment for membership. It is clear, however, that Amazon sees the importance of Prime Video in that this service, in addition to free shipping and so on, is an argument for a one-year subscription.
Prime members are statistically making 10x more purchases on the Amazon platform than non-subscription customers.
Add to that digital ad revenues, as well as individual movie view sales (new or franchise), and it’s clear that Amazon’s media expansion could represent one of the fastest growing business segments.
Competition in the global video streaming industry has intensified sharply in the past year, and analysts noted that Amazon spent $ 11 billion last year on TV shows, movies and music for its Prime services, up 40% from a year earlier.
In addition to its ambition to surpass Netflix, Amazon is expanding in the healthcare industry today, all because it is difficult for such a giant to maintain high rates of growth in revenue and profits.
While Amazon’s revenue and earnings growth charts are showing a good upward trend, the giant’s growth rate is no longer impressive to investors.
The chart for Amazon stock below shows that growth has stalled since the second half of 2020, following a sharp rise since the start of the coronavirus pandemic.
Amazon stocks are up 35.7% over the past 12 months, but stocks have hardly increased since early 2021 – only 0.41% growth while the Nasdaq Composite is up 3.8% YTD and the S&P 500 by 10.8%.
Market analysts have previously said that Amazon stocks need a significant new growth momentum – the confirmation of the deal with Metro-Goldwyn-Mayer could be just that momentum.
Amazon is hugely financially capable, with end-2020 profits of $ 21.3 billion, allowing for large acquisitions and investments.