"Amazon's Acquisition of MGM Should Be Viewed as a Mid- to Long-Term Positive Factor"

Samsung Securities Report

[Asia Economy Reporter Minji Lee] Samsung Securities on the 29th viewed Amazon's acquisition of the film production company MGM as potentially having a positive impact on Amazon's business in the mid to long term.

Amazon announced it will acquire MGM for 9.4 trillion KRW. This is the second largest acquisition since the 2017 acquisition of Whole Foods (13.7 billion USD). MGM is a Hollywood film production company, best known for the 007 series. The acquisition price is about 49 times EBITDA, whereas Disney's acquisition of 21st Century Fox had an EV/EBITDA multiple of 12.9 times.

The most direct impact of the MGM acquisition is the strengthening of Prime Video's content competitiveness. For several years, Amazon has been aggressively investing in content based on its vast capital. The drama "The Lord of the Rings," whose production was delayed due to COVID-19, had a first season production cost of 520 billion KRW, the highest per episode production cost ever. Analyst Han Jugi from Samsung Securities said, "Purchasing sports broadcasting rights is also a differentiating factor from competitors," adding, "This MGM acquisition aligns with the existing strategy and will lead to an increase in Prime subscribers."

The enhancement of content competitiveness and the increase in Prime subscribers are expected to lead to increased e-commerce traffic. Besides customers naturally flowing into the e-commerce platform, Amazon is deliberately adopting a strategy that connects content and e-commerce. Previously, after securing NFL broadcasting rights, Amazon expanded its NFL product lineup. Analyst Han Jugi explained, "We can expect strategies such as selling 007 series merchandise on Amazon," and added, "Content competitiveness leads to increased e-commerce sales."

Advertising revenue expansion is also anticipated. It is analyzed that increased traffic from content will boost advertising income. Furthermore, the increase in Amazon Marketplace traffic directly translates to FBA (Fulfillment by Amazon) sales, which is noteworthy. The analyst said, "The core of Amazon's strategy is to increase traffic through B2C content and link it with profitable B2B businesses," emphasizing, "The purpose of content investment should not be underestimated as merely strengthening streaming competitiveness."

From a financial perspective, the impact of the MGM acquisition is limited. MGM's revenue accounts for only 0.4% of Amazon's total revenue, and after the acquisition, MGM's IP will be used internally. The analyst stated, "The MGM acquisition should be approached from the perspective that it can positively affect the Amazon ecosystem in the mid to long term," and added, "In the short term, attention should be paid to the e-commerce momentum in Q2 along with the recovering cloud advertising business."

This content was produced with the assistance of AI translation services.