The Amazon’s Primed Double Play Strategy with MGM Acquisition

The Amazon’s Primed Double Play Strategy with MGM Acquisition

Amazon is nearing a deal to acquire MGM Studios, the co-owner of the James Bond franchise and other film and TV series, for between $8.5 billion and $9 billion, according to people familiar with the matter.

The deal is expected to be announced as soon as Tuesday. The people asked not to be named because the talks are private.

It would mark Amazon’s biggest acquisition since it bought Whole Foods in 2017 for $13.7 billion.

The Wall Street Journal reported earlier Monday that the deal could be announced this week.

Amazon is interested in acquiring more TV and film content for its Prime Video service as it competes with Netflix, Disney and other streaming video services. MGM is a natural fit for any streaming service because of its plethora of content.

At about 200 million members globally, Prime members pay Amazon more than $20 billion yearly for the privilege to shop at Amazon. To keep them renewing the memberships, Amazon believes that buying MGM movies could help. If you look at it, it is a slam dunk: pay $9 billion a year, bring in $20 billion on club fees. And then when those 200 million people shop, another profit margin stays on top. Now you see why the company is on its way to hit $2 trillion on market cap.

Amazon has 147 million Prime members in the United States, according to estimates from Consumer Intelligence Research Partners. Amazon.com Inc. has 200 million members in its Prime membership program worldwide, CEO Jeff Bezos said in his annual letter to shareholders published April 15.

Simply, Amazon can run a Fortune 500 business within its existing  Fortune 10 company purely on Prime membership; getting MGM is part of the playbook.  The ecommerce remains the One Oasis which is making it possible for the house which Jeff built to orchestrate all the multiple plays at scale. It is always great when great founders develop playbooks to capture value within their ecosystems; Amazon is matchless on that extraction of value.

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3 thoughts on “The Amazon’s Primed Double Play Strategy with MGM Acquisition

  1. Amazon has 147 million Prime members in the US alone, that’s roughly 45% of the entire population. When you analyse your home market, how many of your big brands have cracked 25% of the population? Once you remove the top telcos, it’s a struggle, meaning that there’s still room for growth here…

    Amazon has over 200 million Prime members
    Netflix has over 250 million subscribers
    Disney has over 100 million subscribers by default, with amalgam of merchandise and tribes.

    And they are all American companies…

    Potential acquisition of MGM by Amazon is more or less like adding more spices to an already good delicacy.

    I think the biggest lesson for some of us here is learning how digital behemoths do their thing, first you need to build a community of believers, then form tribes within the community; subsequently you can keep acquiring anything that deepens and widens the empire.

    We are learning…

    Reply
  2. Awopetu Emmanuel · Edit

    I am not surprised at this news, the goal of the Princeton graduate is global dominance- a really extreme and ambitious goal. This April, I wrote to a leading Logistics Chief executive on lessons that could be learned from the Tech Mogul, one of which, is not being distracted by pulse of the market, rather placing concern on the overall state of the market. At first, it made no sense to me when I was watching the YouTube interview with Jeff in which he made the bold declaration, “that the management team are not bothered about what Wall Street says, and is traded on the market floor, as they are years ahead of them in planning.” (Emphasis Added).

    To me that was broad thinking, and foresight at its peak, however, there is something that has really been of concern to me which I feel the global business community in particular the tech space should pay more attention to, which is, “Ridiculous Valuation, and Inflation”. I have always been concerned about the future of the economy in terms of the bogus unrealistic value business are pegged at, because if this ridiculous sentimental acts continue unregulated there would be in no time hyperinflation, and this concerns of mine do not end with me, today, I was watching Bloomberg, and in a conversation amongst the team, concerns were raised on Biden intentions to this budding trends, cause as of now, they are just weak signals, but if cautions are not taken and regulatory policy and action initiated, there could be damage, with the scale unimaginable, and its impact undesirable.

    Lastly, why would MGM, a company that has once struggled with high-end debts be valued at roughly 9 billion USD, who does this valuation, and is a company longevity a thing of importance when it comes to value offering?

    Reply

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