🔔 Here's why Amazon & MGM are the perfect match...

There's a lot of confusion about Amazon paying $8.45 billion for MGM.

Purely from a balance sheet perspective, it makes zero sense.

A heavily indebted studio, stagnant revenues, and the widely-held Tinseltown belief that the iconic MGM studios' best days are in the past and the only good thing about them is Bond movies.

There's no way Amazon are getting sentimental, so what's really going on?

This is all about Amazon Prime.

Maintaining and extending the appeal of the subscription, although not (just) for the subscription fees...

Morgan Stanley found that households with Prime memberships typically spend $3,000 per year with Amazon, double the amount that non-prime members spend!

Those compounding effects soon add up 👇

The data used is a little stale now, but the graphic shows how the core business (around 70%) is ecommerce and third party services...  

Amazon Prime is more of an accelerant than a primary revenue stream.

The acquisition of MGM will bring depth to the Amazon Prime library with MGM adding around 4,000 films and 17,000 TV episodes, including some classics:

• James Bond (Huge Prime campaign for this when No Time To Die launches)

• Rocky

• RoboCop

• The Pink Panther

• The Silence of the Lambs

• Legally Blonde

• Moonstruck

• Basic Instinct

• The Thomas Crown Affair

• Tomb Raider

• The Usual Suspects

• The Good The Bad & The Ugly

And there are some potential new blockbusters in the pipeline too...

Ultimately, Amazon is gaining leverage for their Prime service, making further inroads into the streaming market, while MGM gains a bankroll (and distribution) for future productions.

Win-Win. It's a perfect match.

Those asking if this is the 'silver bullet' for Amazon to dominate the streaming market miss the point.

This is all about keeping the customer in the Amazon/Prime ecosystem...

Who's going to subscribe to ALL of these streaming services?

As long as Amazon are providing quality content (including sports), Prime subscribers, & Amazon will keep growing.

While we're on the point of Big Tech & ecosystems, give this thread a read.

To understand Big Tech means understanding the difference between their business models.

They don't ALL want your data for ads...

For companies like Amazon & Apple, it's about the ecosystem and brand loyalty...

See how much Apple earns from advertising?

Compare this to Facebook 👇

Almost exclusively dependent on advertising (although they are trying to make inroads in ecommerce & AR to diversify)

This discrepancy in business models is part of the reason Apple & Facebook are a little unhappy with each other right now...

A heavy part of Apple's branding has always been user privacy. They make no direct gain from allowing Facebook (and others) to exploit the data of their users...

It would be remiss not to include Microsoft & Google so here you go 👇

All images used are courtesy of the awesome Visual Capitalist 👇

Big Tech expert level achieved.

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