Why Amazon bought MGM for $8.5B

The acquisition figures to help the company boost both subscription and advertising revenue.

Amazon’s Hollywood ambitions are nothing new.

The company launched the streaming service that would become Prime Video in 2006, and started its own film and television studio, Amazon Studios, in 2010.

Now, after getting the go-ahead from EU regulators, the Bezos behemoth officially owns a piece of old Hollywood — MGM studios.

The $8.5B purchase…

… includes a massive catalog of content. Per Protocol, MGM’s roster includes:

  • 4k+ films, including franchises like Rocky, James Bond, and The Pink Panther
  • 17k+ TV show episodes, including series like “The Handmaid’s Tale,” “Fargo,” and “Vikings”

Intuitively, many of these titles will end up on Prime Video, and as the rapid growth of Disney+ has shown, having the right content can make all the difference in the streaming wars.

Amazon also plans to utilize MGM’s famous franchises to create new films and series.

Another reason for the acquisition?

Ads. While it gets less billing than Prime Video, Amazon has another streaming platform — IMDb TV.

IMDb TV is ad-supported and completely free, even for viewers who aren’t subscribed to Amazon Prime. The service is a key reason Amazon is able to place ads in front of 120m streamers per month.

If Amazon ends up pushing much of MGM’s catalog to the free service, it might not be under the radar for long.

What’s next?

Analysts have been dreaming of Amazon purchasing AMC Entertainment for years, and if the company truly wanted to revive old Hollywood, investing in the theater experience could be the logical next step.

Theaters fit into Amazon’s physical retail play, and Amazon’s willingness to take losses could actually make a MoviePass-like subscription possible.

Plus, imagine how many Prime sign-ups they’ll get when free popcorn and drinks are added to the subscriber perks.

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Psst

How'd Bezos build a billion dollar empire?

In 1994, Jeff Bezos discovered a shocking stat: Internet usage grew 2,300% per year.

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