Analyst Note| Dan Romanoff, CPA |
On May 26, wide-moat Amazon formally announced the acquisition of privately held MGM Studios for $8.45 billion; the deal had been rumored for several days. No timing has been provided, but we do not expect regulatory delays. While the deal is immaterial relative to Amazon’s $1.6 trillion market cap and we are not adjusting our $4,200 fair value estimate, we see this move as strategically important as the company adds more content to its Amazon Prime Video library. MGM’s content spans movies, scripted and unscripted television, video games, and podcasts. Notably, MGM owns a variety of franchises including James Bond, Rocky, Pink Panther, The Handmaid's Tale, and Real Housewives and boasts a catalog of more than 4,000 movies and 17,000 TV episodes. We think Amazon must continue to expand its content library to remain one of the relevant streaming players. We can envision the company justifying an increase in Prime membership prices next year based on the MGM acquisition.