Amazon acquisition of MGM Studious. Can Amazon buy anything it wants? Let’s look at why Amazon just went ahead and acquired MGM Studios for $8.5 billion.
Jeff Bezos
the founder of Amazon, said the following while discussing Prime Video
When we win a Golden Globe, it helps us sell more shoes.
What he’s implying here is that to earn profits consistently when people are loyal to any particular brand even though consumers have access to most platforms and can choose a provider which offers the best value for what they spend.
And the solution he came about to keep the loyalty is by tying customers to the brand by leveraging Amazon prime membership. Faster shipping, free shipping on many items, free music streaming, among other stuff, and all an individual has to do is pay an entry fee and become a prime member. And once that’s done, there’s no going back as the individual will keep buying from Amazon.
All Amazon could do is get an individual to try out the membership once, even including one-month free trials; they’ll likely tie the individual for life. But it will not be an easy task to get customers to spend $100 or ₹1000 every year. Moreover, unless Amazon offered access to Prime Video — Amazon’s content library, it can’t be subscribed to individually. One has to buy the entire Prime membership for Prime video to be accessible.
Now, if Amazon were to have many successful movies in their content library, some of them even won the Golden Globe, wouldn’t that help them get more Prime members on board? And don’t you think it’ll help them sell more shoes?
Well, Amazon has spent $11 billion in licensing deals and producing original content to stay competitive with Netflix, HBO, and Disney. Netflix has been in the streaming business for decades, while HBO and Disney have many inherited legacy content that can drive subscriptions for years. And Amazon is not looking to be fringe that doesn’t go subscriptions as the shoes won’t sell themselves.
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MGM Studios fills Amazon’s shoe just right, having an impressive library of film franchises, including James Bond and Rocky, as they also boast thousands of television episodes and hundreds of blockbuster movies. And Amazon now gets access to MGM’s intellectual properties, too, and they can churn as many James Bond sequels as they like.
And as for MGM, they couldn’t help but agree to the deal as the studio was being offered to prospective investors owing to sub-par performances. The current owners tried to steady the sinking ship, and the deal was too good especially considering the impact on traditional movie studios in the pandemic.
Considering Amazon’s ambition to acquire a century’s worth of movies and shows, the $8.5 billion deal doesn’t sound bad at all. Let us know your thoughts in the comment below.
