#Amazon’s deal to buy MGM puts it back in streaming game

Amazon’s big $8.45 billion bet on Hollywood studio MGM comes at a crucial time for the e-commerce giant, which had been losing ground to streaming rivals Netflix, Disney+ and Warner Media’s HBO Max.

While the deal isn’t enough to knock Netflix off its throne, media watchers said it will put Amazon back in the game and trigger even more consolidation as streaming services vie for eyeballs.

“It’s a streaming arms race. Amazon really felt they had to step up and give themselves a fighting chance,” said CFRA analyst Tuna Amobi. “Their options were narrowing.”

According to Amobi, the Seattle-based company behind shows like “Sneaky Pete” and “The Man in High Castle” needed to take swift action to keep pace in the “brutal business” of streaming, which was showcased last week with a $43 billion merger between Discovery’s and AT&T’s WarnerMedia.

“I don’t believe this will be the end of acquisitions,” said the analyst, who noted that media properties like ViacomCBS, Comcast’s NBCUniversal, AMC Networks and movie studio Lionsgate are also ripe for the picking.

“Apple is going to feel the most pressure right now. For them, it’s almost like they have to do something more dramatic,” he said.

“They’ve been traditionally more diligent and disciplined in terms of pricing,” he added. “But the way streaming is shaking out, you will have the top three and right now it seems like the race is to become the forth or fifth, which will lead to more consolidation.”

According to Amobi, the top three streaming networks are Netflix, Disney+ and HBO Max, although some argue that Amazon, which owns streaming platform Prime Video and Hollywood studio Amazon Studios, is also in position to snag 3rd place.

That leaves Apple+, Hulu, NBCUniversal’s Peacock and ViacomCBS’s Paramount+, among others, duking it out for the rest.

Apple, which reportedly spent about $6 billion on original content ahead of the 2019 launch of its streaming service AppleTV+, kicked the tires on buying MGM, but sources buzzed that the price tag was too high for the iPhone-maker.

But LightShed Partners analyst Rich Greenfield questioned whether the Silicon Valley giant actually needs to join in the acquisition frenzy.

“Apple is a 2 trillion dollar company. I’m not sure they’re struggling in any form,” he said of acclaimed AppleTV+ shows like “The Morning Show,” “Ted Lasso” and “The Mosquito Coast.”

“It feels like Apple is going to continue to build content,” he said. “For smaller companies, there’s going to be increasing pressure to consolidate as scale keeps getting redefined.”

“If you don’t consolidate, the odds are we will see some companies become content dealers” and license content to better funded streaming giants, he said.

Analysts agreed that Amazon’s deal to buy MGM — the home of the “James Bond,” the “Rocky” movie franchises and popular reality TV shows like “The Apprentice” and “Shark Tank” — will bolster subscribers to its Prime Video platform. It will also grow Amazon’s surging ad business, which generated $22.4 billion in the past 12 months, they said.

Amazon Prime currently has 200 million members, 175 million of which use Prime Video, a statistic that can only get better, according to Raymond James analyst Brian Yarbrough.

And Yarbrough called the MGM pact a “game changer” when it comes to its advertising potential by creating a “flywheel” of buzzy movies and TV shows that Amazon can offer to Prime subscribers, which will attract more eyeballs and even more ad dollars.

The MGM deal also gives Amazon more gravitas in Hollywood — something it has been working towards for years. MGM’s pipeline of upcoming Oscar contenders include “Respect,” an Aretha Franklin biopic starring Jennifer Hudson; Ridley Scott’s “House of Gucci” starring Lady Gaga and Adam Driver, and Paul Thomas Anderson’s latest flick, “Soggy Bottom,” starring Bradley Cooper.

The Jeff Bezos-led company has had difficulty making its own hit films in the past and has instead invested boatloads of cash for exclusive movie rights.

During the pandemic, Amazon reportedly shelled out $125 million for the rights to “Coming 2 America,” $80 million for Sacha Baron Cohen’s “Borat Subsequent Moviefilm,” and $200 million for “The Tomorrow War,” starring Chris Pratt.

Amazon has also revved up its own Oscar ambitions, scooping up the rights to “Sound of Metal,” which netted 6 Oscar nominations and won two awards for sound and editing. It has also hired back Jeff Blackburn, an Amazon vet with strong ties to Tinseltown, to help grow its entertainment unit.

Greenfield said he doesn’t see the Amazon deal upsetting the streaming world order, but instead “validating” their push into the space as Netflix has done with its $20-billion-a-year spending on content and Disney’s $71 billion acquisition of Fox’s media properties.

But Scott Schiller, a former NBCUniversal exec who now works as global chief commercial officer at media marketing firm Engine, sees top companies like Netflix feeling the heat of rising competition “whether they admit it or not.”

“For Netflix, this deal adds continued pressure to their [ad-free] business model,” Schiller said. “There’s only a finite amount of money consumers will spend on streaming services.”