Amazon buys MGM in a mega media deal

New York(CNN Business) James Bond, meet Jeff Bezos.

Amazon (AMZN) is investing even more heavily in growing its position in the entertainment world. The company announced Wednesday that it made a deal to acquire MGM, the home of James Bond and one of the most iconic movie studios in Hollywood.

The deal, which is valued at $8.45 billion, gives Amazon an extensive library of film and TV shows that it can use to fill out its Prime Video content coffers. MGM has a catalog with more than 4,000 films and 17,000 TV shows, according to Mike Hopkins, who heads Prime Video and Amazon Studios.

"The real financial value behind this deal is the treasure trove of IP in the deep catalog that we plan to reimagine and develop together with MGM's talented team. It's very exciting and provides so many opportunities for high-quality storytelling," he added.

CEO Jeff Bezos said that Amazon is "really excited about MGM" during the company's annual shareholder meeting Wednesday.

"The acquisitions thesis here is really very simple: MGM has a vast, deep catalog of much beloved intellectual property," Bezos said, "and with the talented people at MGM and the talented people at Amazon Studios, we can reimagine and develop that IP for the 21st century."

The two companies said that the completion of the deal "is subject to regulatory approvals and other customary closing conditions."

Even though streaming is a small part of Amazon's empire, the company has focused on becoming a more prominent player in the entertainment world as of late. For example, a highly anticipated series based on "The Lord of the Rings" is in the works.

Prime Video — which also features original and award-winning shows such as "The Marvelous Mrs. Maisel" — is tied to Amazon's immensely popular Prime program, which offers faster delivery and has more than 200 million paid subscribers. Those kinds of numbers make it a competitor to the likes of Netflix (NFLX), which has 208 million subscribers.

MGM and 007

Although MGM's logo of a roaring lion has played in front of some of Hollywood's most beloved films, including "The Wizard of Oz," it doesn't have the deep franchise bench that other studios have.

So why would Amazon want MGM? Three words: Bond, James Bond.

The studio owns a piece of the spy franchise, one of Hollywood's most famous film series. The Bond brand, which Eon Productions also controls, is more than a box office success story racking up billions of dollars over the past 60 years. The films and their lead character also represent a lifestyle that branches out to all parts of the globe and pop culture. If Prime Video is the new home of James Bond, that's an alluring proposition for potential consumers.

Plus, "No Time to Die," the latest Bond film, is set to open this October after being delayed multiple times because of the Covid-19 pandemic.

Away from the suave British spy, MGM also houses franchises including "Rocky," "The Handmaid's Tale," "RoboCop," "Legally Blonde" and the Epix TV network.

A consolidating media industry

Another reason Amazon would want to acquire MGM is that the media world is consolidating at a breakneck pace. To compete with Netflix and Disney (DIS), companies need scale, and buying up content, networks or studios is the best way to do that.

The latest major media deal happened on Monday when AT&T announced that CNN parent company WarnerMedia would be spun off and combined with Discovery. The deal brings together a litany of brands under the Discovery and WarnerMedia banner, including Warner Bros., Discovery Channel, HBO, CNN and HGTV.

Amazon acquiring MGM may not be as earth-shaking as that Discovery and WarnerMedia deal, but it's still quite notable thanks to MGM's historical prestige and Amazon's reach and resources.

But the simplest reason Amazon wanted to buy MGM is that it can afford to.

The hefty price tag for the acquisition is nothing of significant consequence for Amazon, one of the world's wealthiest companies. Amazon, which paid nearly $14 billion for Whole Foods in 2017, has a market cap of $1.7 trillion.

Ultimately, the deal gives Amazon more content, a respected studio in Hollywood and a stylish super spy. That will only help it further compete in the ruthless world of streaming.