- Amazon's MGM deal has insiders speculating about which film and TV producers could be acquired next.
- The deal throws attention on a dwindling number of companies that could make a difference to the streamers.
- All eyes are on Legendary Pictures, Lionsgate, and Sony.
Amazon's $8.5 billion purchase of movie and TV production company MGM has dealmakers thinking about what cards are left on the poker table.
Now that Big Tech has put its toe in the media industry water, people familiar with conversations say other Silicon Valley players will follow. Expect IP (Internet protocol) to meet IP (intellectual property) in a much bigger way.
The announced MGM purchase, which is subject to regulatory approval, throws attention on a dwindling number of companies that could make a difference to the streaming platforms.
As for tech buyers, think beyond Apple, Amazon, and Netflix. There are a host of industry players such as Roku, which acquired the remains of Quibi in a deal assembled by the ubiquitous LionTree founder Aryeh Bourkoff, that might surprise. Roku, which operates a streaming device, has a market cap of $46 billion; compare that to ViacomCBS, with a market cap of $27.6 billion.
Lex Miron, the chief executive of Relativity Media, and managing partner of the holding company UltraV Holdings, told Insider on May 26, "The Amazon transaction and the Netflix "Knives Out," transaction are a validation of the value of content, whether it's in development IP rights, or library. These deals are exciting for anybody that is in the filmed content business." Netflix paid $450 million for the sequel rights to the detective flick distributed by Lionsgate.
Industry insiders speculated that these five companies could follow MGM down the road to a sale.
Legendary Pictures: Just weeks ago, the film company behind "Godzilla versus Kong," hired bankers to explore strategic options including merging with a SPAC. The production company was acquired in 2016 by China's Dalian Wanda Group, which just sold its entire stake in another US asset, theater company AMC.
The company owns content such as "The Dark Knight Rises" and "The Hangover."
Lionsgate: The Santa Monica headquartered content producer behind "John Wick," and "Hunger Games," is also the owner of Starz, which it is positioning as a niche streaming service. The company stock has been on the rise this month in the wake of the MGM sale. Given the new $8.5 billion attached to MGM (including debt), one might wonder if Lionsgate now has a sale on its mind. The stumbling block to all potential deals: shareholder Mark Rachesky, a former protegee of activist investor Carl Icahn who's known to be tough to deal with.
Sony: CEO Kenichiro Yoshida told the Financial Times on May 26 that Sony Pictures is not for sale and won't be spun off. "There's a drastic realignment in the media industry, but I think our strategy of creating content as an independent studio while working with various partners will work."
The chairman and CEO of Sony Pictures Entertainment, Tony Vinciquerra, has explained his strategy to investors: Remain a neutral party in the streaming arms race and sell content to everyone. Sony has output deals with Netflix and Disney, according to Variety. Sony's Hollywood operations will do more to work with gaming franchises from sibling PlayStation, too. Even so, every asset has a price and Sony 's long held stance that they're not a seller has rarely deterred interested parties.
Relativity Media: Two years ago, Lex Miron and partners acquired the company out of a bankruptcy proceeding and decided to keep the name despite its association with founder, Ryan Kavanaugh. The film acquisition and distribution entity owns content including movies such as "The Fighter" and "Act of Valor" and has been buying up rights to other movies such as "Come Away" to release in the US.
ViacomCBS: Get bigger, or sell the whole thing? That's the choice now faced by controlling shareholder Shari Redstone as she, with CEO Bob Bakish, figures out what's next. Right now, it's trying to build its own streaming business with Paramount+ while also selling its hits such as "Jack Ryan" and "Emily in Paris" to rival streaming services. The company is believed to have discussed a potential MGM purchase, but Amazon's foot was already firmly in the door with a big price tag.
CNBC suggested its owner Comcast as a potential partner for its NBCUniversal unit and ViacomCBS. That's unlikely to happen anytime soon; Comcast CFO Michael Cavanagh told investors this week, "Hear me loud and clear. We like the hand we have" before adding, "But we'll obviously do what's right for shareholders, as time passes."
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