Amazon agrees to buy iconic MGM film studio for $ 8.45 Business and Economic News

Amazon.com Inc. agreed to buy the Metro-Goldwyn-Mayer film company for $ 8.45 billion, a bet that a nearly century-old Hollywood icon could fuel an insatiable demand for streaming content.

The decision is Amazon’s biggest purchase since it agreed to buy Whole Foods in 2017 for $ 13.7 billion, but last year it invested about $ 11 billion in content for streaming video and music services.

“The real economic value behind this agreement is the IP treasure of the deep catalog we intend to re-imagine and develop with MGM’s talent team,” Mike Hopkins, vice president of Prime Video and Amazon Studios, said in a statement. “It’s very exciting and offers a lot of opportunities to tell high-quality stories.”

Amazon shares rose about 0.5% in early New York trading.

The proliferation of streaming services, including newer entries like HBO Max and Disney +, has put pressure on Amazon to get more programming. CEO Jeff Bezos has made no secret of his desire to achieve great cinema, and MGM’s big delays offer plenty of streaming material, not to mention the opportunity to pull out the iconic James Bond and Rocky franchises for film and TV shows.

In addition, Walmart Inc. as retail rivals like it expand more sophisticated online stores, Amazon needs to work even harder to keep 200 million Prime subscribers loyal.

MGM has been targeting the purchase for years, but was never able to close the sale. The company gave a new impetus last year by hiring consultants to look for offers.

Previously, Amazon had acquired smaller startups identified as a threat – Zappos shoe retailers, for example, or Diapers.com Quidsi’s parents. Amazon has also revived new businesses, such as the Twitch or Kiva gaming platform, which makes warehouse robots.

Big Bucks

It’s unusual for Bezos to spend a lot of money on a wealth business like MGM. The only other example is the purchase of Whole Foods Market in 2017, where Amazon spent a decade trying to become an agent in food sales – without showing anything little for its efforts and investments. Today, some analysts find it wrong to buy Whole Foods and point out that Amazon has since started a competitive food chain.

With James Bond and Scarlett O’Hara brought to the big screen for MGM, the deal ends the tumultuous era of hedge fund ownership that began more than a decade ago. The main shareholder of MGM is Anchorage Capital Group LLC, which became the owner with three other investors, within the framework of the 2010 bankruptcy agreement, which eliminated the $ 4 billion debt.

MGM’s interest, taxes, amortization and pre-amortization earnings rose 48% last year to about $ 307 million as a result of its earnings in the 4,000-title film library. But in the absence of new versions, sales fell 3% to $ 1.5 billion.

Under Anchorage, the studio wanted to achieve its former glory: “Gone With the Wind,” the all-time leading film in ticket sales and the biblical classic “Ben-Hur,” which shares the record for most Oscars. 11am.

The new owners hired a filmmaker from Gary Barber, a heavyweight in Hollywood who is best known for his films like “The Hitchhiker’s Guide to the Galaxy” and “Ace Ventura: Pet Detective.” He oversaw the new James Bond film, “Skyfall,” which grossed more than $ 1 billion in ticket sales – the largest film the studio has ever won – and collaborated with Warner Bros. on the most successful “Hobbit” films.

MGM also spread to television. The studio took control of the excellent Epix cable network, and acquired a television production company owned by renowned producer Mark Burnett, known for creating “Survivor” and “The Apprentice.” The studio also created critically acclaimed “The Handmaid’s Tale” and “Fargo” sections, adding a profitable library.

Hedging funds are rarely used in these investments for more than a few years, and observers have long thought that Barber was preparing to sell the studio. In 2017, reports suggested that MGM was in talks with a Chinese company, although no agreement was reached.

Lurking Turmoil

Behind the new financial stability of the Anchorage and M&A rumors studio was the uproar among MGM executives. Five months after Barber’s contract was renewed in 2018, CEO Kevin Ulrich Anchorage was violently fired. Reports revealed that the two collided, and that Barber’s relationship with producer Barbara Broccoli Bond was also strained.

Barber eventually went with a $ 260 million exit package. Ulrich never appointed a replacement for Barber, and instead created the office of CEO, where he has served for three years. Unusual organization The Hollywood Reporter said Burnett was sowing chaos within the company. In early 2020, Jonathan Glickman said he led the dismissal of the head of the film studio, at least in part, among other executives.

When the coronavirus struck, MGM was particularly hamstrung. The biggest anticipated film release, the new James Bond film “No Time to Die” has been repeatedly delayed. Apple Inc. and Netflix Inc. he turned to companies to buy the film for online services, but never got a deal.

As Covid-19 was facing production delays and higher costs, MGM suffered another blow. In a June 2020 lawsuit in New York City, a woman accused Ulrich of having a sexual battery in June 2019 at an elegant Manhattan hotel. The case was eventually dropped.

Late last year, MGM hired consultants to study the company’s sales. The studio was said to be looking for about $ 5 billion, compared to the more than $ 8 billion that Ulrich predicted the company could get in a certain amount of time.

Metro-Goldwyn-Mayer merged with Marcus Loew’s Metro film in the 1920s to direct the Louis B. Mayer Hollywood film company. Studios, “Dr. Dr.” while taking great pictures like. Zhivago ”and“ 2001: A Space Odyssey ”, XX. They emerged from financial distress in the second half of the century. For decades, Time Inc., the founder of CNN’s Ted Turner and more than once Kirk Kerkorian, was a billionaire.

Turner kept a large portion of MGM’s library, now owned by WarnerMedia’s AT&T Inc., soon to be discovered by Discovery Inc.

“I am very proud that MGM’s Lions, reminiscent of the Golden Age of Hollywood, will continue its historical history for a long time and that the idea behind the creation of United Artists lives on as the creators originally wanted, the talents and their vision,” said Anchorage’s Ulrich, MGM’s director the president. “The story of MGM is an inspiring combination of the opportunity to merge with Amazon.”

(Updates shared in the eighth paragraph and context.)