Amazon nears blockbuster deal for MGM Studios: report

Myles Udland, Brian Sozzi, and Julie Hyman discuss how Amazon is reportedly close to finalizing a $9 billion deal for MGM Studios that would diversify its streaming catalog and its possible impact in the streaming landscape.

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MYLES UDLAND: Amazon is nearing a deal-- "Wall Street Journal" with the latest report on this language-- to acquire MGM Studios for about $9 billion. It would bolster the company's Prime Video library. Of course, they would bring the James Bond brand, among others, in-house with that. And this comes at a time when, of course, media is doing its inevitable and endless cycle of reshuffling, divesting, combining, putting new assets in new homes.

The AT&T Warner Media deal from last week for Warner Media will be spun out, combined with Discovery, kind of a take over, take under. Some people have called it an aqua hire of Discovery, CEO David Zaslav. We talked with CEO John Stankey-- AT&T CEO John Stankey about that deal yesterday.

But Sozzi, when you look at the potential for Amazon to make this transaction, I guess I would just ask what you think they're after and what it means for MGM, if anything? Because I think there's a lot of questions about what Amazon wants from its Prime Video arm, but-- but also questions about what it really needs, considering how Amazon actually makes its money and is certainly not streaming movies and TV shows.

BRIAN SOZZI: Myles, my analysis is very simple on this. And I think you highlighted this a little bit on our Slack channel last night when we were talking about this. This dollar amount really is immaterial. You go back to Amazon's most recent quarter, they ended the quarter with about $72 billion in cash and marketable securities. So $9 billion is not a big deal.

And for them, it boils down to this, you're getting access to a content library that is unlikely to be replicated any time soon. Rocky Balboa, one of my favorite franchises of all time, James Bond, these are historic franchises with a lot-- likely a lot more content that could be extracted from them for future generations, in addition to owning all of that library of content that could be shared, potentially exclusively, on Amazon Video. So this is, from where I'm sitting, looks to be a smart potential acquisition.

And I encourage everyone to go on the Yahoo Finance home page right now. Our deputy managing editor Erin Fuchs has a great story. And her headline here is that this would make-- this deal would make the-- it would make Amazon the king of streaming content, and the deal wouldn't likely get blocked. So that is very good things if you are an Amazon shareholder.

JULIE HYMAN: Yeah, and when you're talking about the regulatory environment for Amazon, I think it's also interesting too. This will be sort of a test of it under this administration versus the prior administration, which, as we know, was very unfriendly to Amazon, both sort of on a professional and-- on a personal and on a corporate level. So we'll see how that plays out under the Biden administration.

But you know, when you look at Amazon, obviously what makes it unique among the streaming services is that you don't just get the streaming service. You are buying a whole suite of services when you get Amazon Prime and you get Amazon Video. I don't think there are any Amazon Video-only subscribers. I think people get Prime and then they get everything. I don't even know if you can just subscribe to the video service. Do you guys know? I don't think you can. I think you--

BRIAN SOZZI: I'm just--

JULIE HYMAN: --just get Amazon Prime and then you get it all, right?

BRIAN SOZZI: I'm a Prime sub.

MYLES UDLAND: Yeah, I mean--

JULIE HYMAN: I mean, I--

MYLES UDLAND: I don't know. I just have Prime, so.

JULIE HYMAN: Right. Exactly. That's what everybody has. So I think it's just very interesting that Amazon wants to throw as much as possible into that subscription. Are they going to raise the cost of the subscription more at some point--

BRIAN SOZZI: They're going to have to.

JULIE HYMAN: --and then justify it because they're giving you more stuff? I don't know. It doesn't feel that way, does it?

MYLES UDLAND: Well, I think a differentiator also between Amazon and some of its other peers here is that the traditional way that you-- I mean, again, the whole AT&T and, to some extent, Verizon, though, you know, we are, of course, significantly smaller than, you know, Warner Media or any of those other assets, but you know, the AT&T question here and the eternal content distribution question has been that they are different skill sets and that you monetize both of those arms of a business differently, you have different strategic approaches, and that combining them, while it might look good on a strategy deck, just does not tend to work out.

And so I do wonder if Amazon sees MGM and says, well, you know what, we can just-- we'll just collect the royalties when we license this back to Netflix. Maybe Amazon doesn't actually care about Prime Video. Maybe they just like having the library. And the library is the thing that's going to be monetized as we, I think, inevitably combine down to a handful of streaming services that are in the traditional role of a cable distributor the way that Netflix has been for some time where they are buying content produced elsewhere, housed elsewhere, licensed elsewhere, and bring it on to their platform for a fee and then charging their subscribers a fee to watch it.

And maybe Amazon sees it that way. I think it would be more-- it would be a cleaner strategic direction, I think, for Amazon to go to say, you know, we'll buy Bond, and we'll collect some royalties on that, and you know, the studio arm will do whatever it does over time, but we're happy with the size of that investment right now. To me, that makes a little bit more strategic sense than, oh, Amazon is going to try to challenge Disney and 21st Century Fox.

I mean, I'm not exactly sure that that's in the cards for them, though they have had quite a few impressive pieces of original content that were developed and created in-house. So, you know, maybe that's another alternative for this deal and-- and a luxury maybe that Amazon has, because this is, again, as we mentioned, such a complimentary piece of this business, if even one that has to-- you know, has to really be thought about in part of that portfolio, Julie.

JULIE HYMAN: Yeah, I mean, I think that it is interesting that the tack that the different services will take in terms of whether they're keeping that content exclusive or not so that, as you proposed, the idea of collecting royalties or charging a fee and letting other services use this stuff is also interesting. We'll see what the willingness is on their part to pay it when they're also spending a lot of money to acquire a lot of different content.

MYLES UDLAND: Yeah. I think, you know, we'll see-- we'll see how-- how closely everyone holds their original content versus letting Reed Hastings write them checks every quarter and making their--

JULIE HYMAN: Right.

MYLES UDLAND: --their money that way.