Amazon's acquisition of MGM for $8.45 billion is a strategic move to significantly bolster its Prime Video content library, enhance its competitive position against streaming rivals like Netflix and Disney+, and drive subscriber growth and revenue.
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why did amazon buy mgm
this is the question on the lips of many
after it was reported that amazon had
taken over legendary motion picture
company metro goldwyn mayer
in an 8.45 billion dollar move
the takeover was announced not too long
ago in what happens to be amazon's most
significant takeover move yet
in this video we will explain the
reasons behind amazon's decision to make
such a strategic move
and what this decision could mean for
the entertainment industry moving forward
forward [Music]
jeff bezos company amazon has taken over
metro goldwyn mayer in a deal worth over
8 billion dollars
the supply chain conglomerate now
controls a vast portfolio of motion
picture content
numbering more than 4 000 films worth
more than 17 000 hours of film
this move is not one the decision makers
at amazon would have made lightly
as it appears to be a highly strategic
move but before we explore the reasons
behind the move
let us review the lofty position mgm
occupies in the entertainment industry
mgm has been a brand that has led the
way in the industry for generations
the studio was the brain ox behind
classic movie franchises like rocky and
james bond
mgm also made a name for classic
releases like 12 angry men and chart
bursting tv shows like vikings and
handmaid's tales
so when it comes to television
entertainment only very few studios have
the reputation
and portfolio that mgm has so in taking
over mgm
amazon is only signifying its intention
to be a major player in the hollywood circuit
circuit
the statistics behind the move are
mind-boggling to say the least
from the surface it is clear that this
acquisition places amazon on a strong
footing to launch its prime video service
service
in direct competition with disney plus
and netflix
the financial value of this move is not
in liquid cash but a treasure chest of
video catalogs that amazon can use to
its advantage amazon prime may also
remake some of the classic movies on the catalogue
catalogue
and profit immensely from it amazon's
prime outfit is only a small portion of
the company's vast
investment worth hundreds of billions
currently amazon prime
has a 200 million plus subscriber base
and over the course of the last year
over 175 million videos were streamed on
the platform
by prime subscribers during this period
the company had added thousands of more
tv shows and films to the platform
to boost its catalogue this move was
evident even before it was announced
sometime in mid-may variety magazine
announced that the deal was being
negotiated on behalf of amazon by
hopkins then on may 24th
amazon announced that it was nearing a
deal with mgm
before the completion of the deal mgm
was owned by several equity firms
some of which are solas alternative
asset management highland capital
management and anchorage capital group
this move follows a trend that has
gripped hollywood in recent times
netflix and disney currently dominate
the online content library landscape
so to meet up rivals have adopted an
acquisition strategy of buying up
contents and movie studios
instead of producing their own contents
for instance
at t currently merged warner media with discovery
discovery
a tv company in a move that made it the
second largest media firm
in the world by revenue with disney
occupying number one spot
both at t and disney have their own
streaming services
namely hbo max and discovery plus
the same merger and takeover moves have
been witnessed across the industry
so why has amazon taken over mgm
the answer to this question is quite
simple the logical explanation is that
the company wants to build its
subscriber base on amazon prime
currently the platform has about 200
million subscribers
all over the world who pay more than 119
yearly to access contents on the platform
platform
in data released by amazon prime figures
show that about 175 million of the population
population
actually watch videos on the platform
which is not very far from the 200
million subscribers on netflix
so owning mgm is a strategic means of
expanding its library
by adding 4 000 films on top of the
estimated 13 000 films already present
in their catalogue
access to many more films will give
subscribers even more incentives to
renew their membership on the platform
if we compare the 17 000 films amazon
prime will have with netflix's 4 000 films
films
you will see what advantage this move
will give amazon
and on the business side of things more
prime subscribers will translate to more
revenue for amazon
records show that prime subscribers
spend 133 percent more money annually
than non-prime subscribers however
amazon's other rivals do not have this
level of customer loyalty
acquiring mgm will only be a move that
plays to the company's strength
of all the benefits amazon could milk
from this move the james bond movie
franchise could be a slippery slope for
the company
james bond is mgm's biggest movie
franchise and every single bond movie
has been a hit
however mgm does not fully own the franchise
franchise
only half of it the other half is owned
by michael g
wilson and barbara broccoli through
their uk production company eon
eon owns full creative rights over the franchise
franchise
not mgm and the company has ultimate
control over every single production
detail of bond films
so while amazon may now own distribution
rights to the franchise
they do not have any influence over the
production and release of bond films
insiders have also said that the
partners are known to be very
controlling and protective of the
franchise and have sometimes clashed
with mgm executives in the past over
release dates and storylines
as if to reiterate their artistic
control of the franchise the partners
released a statement
saying for better or worse we are the
custodians of this character
we take that responsibility seriously we
are committed
to continuing to make james bond films
for the worldwide theatrical audience
if this statement is anything to go by
amazon may have little or no say
regarding one of the biggest catalogues
on their portfolios
this may even make it tough for them to
stream the movie on their platform
before it hits the cinemas without the
approval of michael wilson and barbara broccoli
broccoli
with everything that's been happening in
hollywood in recent months it is clear for
for
all to see that the future of
entertainment is moving away from
cinemas to online streaming
cinemas will continue to serve a section
of the market but the big players know and
and
understand that online streaming is the
future where megabucks will be
made they also know that subscribers are
only going to remain loyal to platforms
with hundreds and thousands of contents
this realization is behind the intense
competition taking place in the industry
this move by amazon will have
far-reaching implications for the industry
industry
taking over mgm now gives amazon prime
an advantage
and their rivals know it so we expect
this takeover
not to be the last we will see in the
industry as there will be many more
not too long ago disney and netflix
reported a subscriber growth slowdown
and this cannot be as good a sign for
both companies
amazon prime is expected to release its
subscriber base due to its access to
more content
so the last thing netflix and disney
want is to hit a snag just at the time
when amazon prime
is on the rise to keep pace both
companies will have to create more content
content
amazon is not resting on its ores either
as the giant is spending more than 465 million
million
dollars on a new lord of the rings
series so netflix and disney will have
to expand their library if they do not
want to be blown out of the water
the options available to streaming
companies now will be to
1. buy more studios similar to what
apple is trying to do
two buy more content from studios like
amazon has with mgm
and three buy each other out with apple
trying to buy netflix
no one can say for sure who will win the
race but the winning brand will
have to be very innovative in its
approach as well as spend a treasure
chest of cash to get by
netflix may be one of the strongest
streaming brands in the industry
but it does not have the cash to burn
like amazon or apple
with this new move by amazon it may have
taken the lead for now but this may be
short-lived if apple goes big and buys
netflix or many more studios
apple not netflix represents amazon's
biggest threat to global dominance and
there is one reason for that
apple has more cash to burn and with money
money
comes influence let us know your opinion
about this move by amazon in the
comments section below
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thanks for watching [Music]
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