Amazon acquires MGM, streaming media war escalates again

The new owner of MGM has finally made an official announcement.

Amazon acquires MGM, streaming media war escalates again

007 has found a new owner.

MGM’s new owner has finally made an official announcement.

On May 26, local time, Amazon announced that it will spend $8.45 billion to acquire the veteran film company MGM. This deal is the second largest acquisition in Amazon’s history, after the acquisition of supermarket chain WholeFoods Market for $13.7 billion in 2017.

It is no coincidence that Warner and Discovery Channel also went from rivals to teammates this month. Will the big shuffle of film and TV giants lead to another escalation of the streaming war?

Amazon to join hands with MGM
According to U.S. media reports, Internet giants including Netflix and Apple have made offers to MGM, but Amazon eventually took MGM into its pocket with the highest offer. In the industry’s view, the wealthy Amazon still spent more “unjust money,” with most agencies valuing MGM at between $4 billion and $6 billion.

For Amazon, which has a cash flow of more than $23 billion, the investment in acquiring MGM is not much of a drain, but rather highlights its determination and ambition in the streaming media and entertainment industry.

Founded in 1924, MGM was the dominant player in the movie industry during the golden age of Hollywood.

In its heyday, MGM had a large number of superstars such as Katharine Hepburn, Cary Grant and Clark Gable, and created such classic films as “The Wizard of Oz”, “Gone with the Wind” and “The Bridge to Nowhere”, as well as “Cat and Mouse” and “James Bond”. and other highly influential screen images.

From the 1960s onwards, MGM’s insistence on independent production was no longer in line with the market trend, and gradually pulled away from other studios. In the new century, MGM’s fortunes deteriorated. Although Sony funded the acquisition, but MGM still can not support the wall, can only eat the old capital.

In 2010, MGM filed for bankruptcy trusteeship, the capitalist changed hands several times. In recent years, although through the earlier accumulation of “The Hobbit”, “James Bond” and other IP and other companies to maintain the operation, the influence is still greatly reduced.

The outbreak of the new crown epidemic made MGM give high hopes to “007: Flawless to Death” continued to delay the release of the film, although MGM has the will to sell the film’s streaming rights, but the $ 600 million super high offer scared off a large number of potential buyers.

After all, the old money was thick enough that MGM saw the attraction of having the film and TV rights to 007, Silence of the Lambs, The Handmaid’s Tale and The Viking Chronicles in their hands for the giants in the streaming war, and MGM initiated the sale process at the end of 2020.

Of the several streamers, Amazon naturally emerged as the most likely company to take over.

In Bezos’ shareholder letter this year, he said that Amazon has 200 million Prime members worldwide, 175 million of whom use its streaming service Prime Video.

Although Amazon has launched its streaming service for 10 years, but Amazon’s own content is not rich, and the breakout works are far less than competitors such as Netflix, Disney +, probably the most influential is “The Great Mrs. Maisel”.

In 2020, as the studios or team up, or with the Internet company after the launch of their own streaming services, Amazon was recovered more and more film and television rights, the urgent need to supplement their own content supply.

MGM’s rich library of rights is in line with its demands, and the two sides naturally hit it off.

In a statement, Amazon officials said it plans to work with MGM’s team to re-imagine and develop the IP in its rights library, “which is very exciting and offers many opportunities for quality storytelling.”

Warner joins forces with Discovery Channel
It’s no coincidence that Warner and Discovery Channel also went from rivals to teammates this month.

On May 17, local time, U.S. telecommunications giant AT&T Inc. 17 reached an agreement with Discovery Channel to divest its media and entertainment company Warner Media and merge it with Discovery Channel.

Three years ago, AT&T spent $85 billion to acquire Time Warner, but in a hurry to split it up, perhaps on the one hand, want the parent company to focus on communications business, the other side of the media business to comply with the new landscape of the current streaming competition, the two lines are no longer shackled to each other. It is reported that AT&T will receive $43 billion worth of cash and bonds in the deal.

AT&T will hold 71% of the new company and Discovery Channel will hold 29%.

Warner Media owns several channels and business units such as HBO, CNN and Warner Bros. Studios. Previously, WarnerMedia has launched its own streaming service, HBO MAX, integrating related premium content to join the streaming war. In order to grab new users too, HBOMax has even taken the approach of breaking the traditional offline and online window period, directly streaming and theatrical simultaneous release model.

Discovery Channel also has an exclusive streaming platform “Discovery+”, which provides a variety of non-fiction programs from within the channel.

According to the latest statistics, HBO and HBO MAX have 63.9 million subscribers worldwide, and Discovery Channel has 15 million subscribers.

The new combined company will have more than 100 channel brands under its umbrella, and although it can’t compete with Netflix and Disney + in terms of subscriptions and content, it can definitely form a complementary advantage and have a stronger impact on other streaming services.

In 2020, U.S. box office revenue was only $2.2 billion, down 80% year-on-year; global box office revenue was about $12 billion, down 72% year-on-year, and the runaway epidemic of new crowns overseas has made online streaming a “lifesaver” for the film and TV industry.

According to statistics, there are currently about 150 to 200 companies offering streaming services in the U.S., including Netflix with more than 200 million paid subscribers, Disney+ with more than 140 million subscriptions in less than 2 years online, and Paramount+ with between 35-40 million subscriptions.

Amazon acquires MGM, streaming media war escalates again

In 2020, the total number of subscribers to the top nine streaming services in the U.S. grew by more than 50% year-over-year to a combined total of more than 250 million. The average U.S. household now subscribes to 3.1 streaming services.

According to Tim Hanlon, CEO of consulting firm The Vertere Group, “There will be more consolidation in the streaming space.”

Multiple companies popping up to small players joining forces with each other could be the path to competitive streaming. Compared to traditional station networks and theaters, streaming services previously had the huge advantage of enjoying relatively rich content for a relatively affordable monthly fee, with the option of viewing scenarios of your choice.

As each content provider supplies its own products individually, viewers have to pay more and more monthly fees to see content that they could previously see by paying only one monthly fee. After reaching a certain critical point, viewers will abandon most platforms, leaving only one or two. After the incremental competition is over, it is inevitable to enter the stock competition.

The U.S. sees a streaming war
When the three major domestic video sites are already reflecting on what the years of “burning money” have brought, the streaming war across the ocean seems to have just entered the stage of giant competition.

Why the U.S. long-form video site development speed from the surface lags behind the domestic market?

A very important reason is that the long-standing U.S. pay-TV subscription services are very well developed, the domestic audience is familiar with HBO, Discovery are paid subscription channels. According to statistics, the U.S. pay-TV market revenue peaked at $104 billion in 2015.

Therefore, when streaming was just emerging, the old TV network giants did not see Netflix, which transformed from a disc rental company, as a strong competitor, but more like some kind of complement.

With the boom in streaming, Netflix can watch far more content for the cost of a monthly package than a subscription to a single pay channel, and more and more while U.S. households choose to cancel their subscriptions to limited TV.

Data show that the number of U.S. pay TV subscribers at the end of 2019 was about 91 million. 2020 saw a decline of about 5.12 million U.S. pay TV subscribers, a churn rate of 5.93%. AT&T CEO John Stankey endorsed the idea that millions of people will stop using pay cable services during an earnings call.

Some projections suggest that 25 million U.S. households will drop their subscriptions to traditional pay-TV services over the next five years.

It was even further suggested that nearly 25 percent of U.S. households will give up traditional TV altogether by 2022.

According to reports, the three most optimistic U.S. mainstream media companies only expect cable TV subscriptions to stabilize at 50 million in the future. The remaining cable TV subscribers will also be concentrated in the elderly group, from the advertisers’ point of view, the elderly is most of the time not their target audience, advertisers in the traditional TV network investment will only be less and less.

According to the relevant assessment, the loss of subscribers will give AT&T, Fox and other traditional U.S. television companies brought more than $ 25 billion in losses.

The old giants continue to cling to the traditional business can be expected to end, embracing streaming media is inevitable, they can only choose to cooperate with the Internet companies.

Tim Hanlon predicts that the U.S. streaming services will become “four giants” after the consolidation is completed.

From the current perspective, the first to occupy the mountain of streaming media Netflix, deep, rich library of Disney + will certainly occupy two positions. Warner and Amazon still need to ensure that they can sit on the remaining two seats by further integrating their smaller counterparts or joining forces.

It should be emphasized that most analysts are not optimistic about the future of Apple TV +, believing that Apple has not been able to find its own clear position after entering the market with great fanfare.

Apple did not disclose the actual number of subscribers to the TV service, which is presumed to be around 40 million. But MoffetNathan’s data shows that 62 percent of Apple TV+ subscribers are participating in the promotional program, and that users are subscribing because it’s free. Apple officials also seem to have run out of steam, extending the free trial period several times. So when the promotion ended, the market was skeptical about how willing users were to pay.

In addition, Apple TV+ accounts for only 3.7 percent of Apple’s total service revenue, a complete mismatch between investment and revenue, and cutting this business will not affect Apple’s development.

From the beginning to the present, Hollywood studios have had many changes. In the 60s, independent production companies were acquired by a diversified operating consortium; in the 80s, production companies joined integrated media groups; and now the streaming wave is just a new reshuffle in the industry.

Capitalists, channels, carriers and scenes are indeed changing. Short videos, games, AR and other entertainment methods have successfully captured a large amount of users’ time, but the audience’s demand to see professionally produced content will still exist for a long time.

From content to user experience, quality will still be the key to the streaming media war.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/amazon-acquires-mgm-streaming-media-war-escalates-again/
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