On March 17, Amazon announced the completion of its $8.5 billion acquisition of MGM Studios, its second-largest acquisition ever. The deal was approved by EU antitrust regulators two days ago. Industry analysts say it’s Amazon’s boldest foray into digital entertainment yet, and its streaming ambitions have been laid bare.
How much is MGM worth?
Founded in 1924, MGM Studios is one of the eight major film companies in Hollywood in the United States and a symbol of American films and Hollywood. It once became famous for “big stars, big productions, and big scenes”. here.
It is reported that MGM’s superstars gather and have created the myth of releasing a movie every week. “The Wizard of Oz”, “Gone with the Wind”, “Silence of the Lambs”, “Legal Blonde”, “Tomb Raider”, “The Hobbit”, “007”, “Tom and Jerry”, “Pink Panther” and many other popular IP works are from its hands. Up to now, MGM’s films have won a total of 170 Oscars, ranking first among major Hollywood studios.
However, due to many reasons such as the turmoil in the early film industry, internal high-level divisions, legal disputes, missed opportunities for new special effects technology and animation technology, and the rise of competitors, MGM’s light gradually faded until after the financial tsunami in 2010. Reluctantly declared bankruptcy. Another private Hollywood studio, Spyglass Entertainment, merged two of its subsidiaries with it to form the new MGM Studios, revived with The Hobbit and James Bond films.
According to Amazon, bringing in the legendary studio with more than 4,000 movies, 17,000 TV episodes, 180 Oscars and 100 Emmys will significantly complement Prime Video and Amazon Studios’ resources to offer users Provide more diverse options.
The industry generally believes that the key to MGM’s ability to attract Amazon is timing. Amazon is currently fighting head-to-head with rivals such as Netflix and Disney+ in the streaming media server video live broadcast system market. Lots of dominance. Compared with its competitors on the content development track, Amazon’s overall strength is stronger, but it remains to be seen how much help it can get after acquiring MGM.
Amazon’s next bigger game on streaming media
Alan Wolk, a media industry consultant, said that the significance of this acquisition is far more than strengthening the TV business, but also has deep strategic significance behind it.
Financial report data shows that in 2021, Amazon’s advertising business is growing rapidly, with revenue reaching $31.2 billion, second only to Google and Facebook. Previously, Amazon included advertising revenue in its “other” business unit. “This has been a major source of other revenue,” said Brian Olsavsky, Amazon’s chief financial officer. “We’re very pleased with the growth in advertising, which continues to drive value.”
At the same time, Amazon raised the annual fee for its Prime membership from $119 to $139, and the monthly membership fee from $12.99 to $14.99. This is Amazon’s first major increase since 2018 (when the Prime annual fee went from $99 to $119). You must know that Amazon Prime members exceed 200 million, and the membership service is the ballast of Amazon’s value. Therefore, this round of price increases also means that Amazon’s membership service needs to be optimized and upgraded again.
After the acquisition, Amazon-owned PrimeVideo will likely become one of the top streaming DTC (direct-to-consumer) companies. The addition of MGM will bring more popular programs and movies to the audience. Amazon can take this opportunity to attract more users to watch its own advertisements or pay to watch their favorite movies, which not only optimizes the membership service experience again but also further enhances the membership. Stickiness and loyalty can also bring more advertising revenue and movie viewing revenue, and even attract more companies to join its huge ecosystem.
Today, it is no longer appropriate to define Amazon simply as cross-border e-commerce. From the perspective of Amazon’s business map, since Amazon Cloud Technology (AWS) became the second growth curve, Amazon has been looking for new growth points, successively involved in express delivery services, streaming media, e-books, publishing, physical stores, intelligent voice, aerospace, domestic services and other fields, covering almost all popular tracks in recent years. Now it seems that streaming is undoubtedly a position Amazon has carefully selected to bet heavily.
“Streaming media needs to transmit a large amount of data per second, and it also requires consistency, low latency, and uninterrupted data flow. This must be supported by strong cloud computing capabilities to achieve a seamless experience. And cloud computing happens to be exactly that. Amazon’s strength.” an insider said in an interview, “The acquisition of MGM is an important part of Amazon’s entry into streaming media. For Amazon, streaming media and cloud computing are two things. The development of business lines is complementary to each other, and it is also the easiest to achieve results in a short period of time.”
Streaming media has become a hot property in the eyes of giants
Streaming media is a kind of media that spreads while spreading, and is classified as a kind of multimedia. Compared with the network playback form of watching after downloading, the typical feature of streaming media is to compress continuous audio and video information and put it on the network server. Users can watch while downloading without waiting for the entire file to be downloaded. The technology is widely used in video-on-demand, video conferencing, distance education, telemedicine and online live broadcast systems, and is regarded as a sign of a new generation of Internet applications.
Currently, on a global scale, the development of the streaming media industry is accelerating. According to the European Audiovisual Observatory, a media think tank, European countries’ revenue in subscription-based video streaming has soared from $14.6 million in 2010 to $11.7 billion in 2020, with about 140 million Europeans subscribed to at least one video streaming service. In Latin America, subscription video streaming users are expected to reach 69 million this year. In Asia, China, India, and Japan are among the subscription-based video streaming markets with the greatest potential, and the number of subscription-based video streaming users in China will reach 300 million in 2021.
In this field, Amazon can only be regarded as a strong competitor at best. According to Nielsen’s rating data, the overall market share of streaming media in the United States is 28%, of which Netflix has the largest market share with 7%, followed by Google’s YouTube with 6%, Hulu with 3%, and Amazon’s with 3%. Prime Video and Disney’s Disney+ each accounted for 2%, and other streaming media accounted for 8%. It can be seen that Amazon is far from Netflix and Google, and can only barely compete with Disney and HULU. In addition, new entrants such as Warner’s HBO Max, Paramount Pictures’ Paramount+, Apple’s Apple TV+, and Universal’s Peacock will also put a lot of pressure on Amazon.
In China, the streaming media market has also attracted the attention of many giants, and there has been a wave of acquisitions, such as Baidu’s acquisition of iQiyi shares, Alibaba’s acquisition of Youku, and Tencent’s acquisition of short video platform VUE. In recent years, some excellent Streaming media platforms have grown rapidly, such as Douyin, Kuaishou, iQiyi, Mango TV, Tencent Video, etc., and even “going overseas” to attract a wave of overseas fans.