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| December 18, 2018
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Article | May 20, 2021
MGM, which holds the largest film and TV library in Hollywood, is finally in play – and likely to be acquired by tech major and video streaming behemoth Amazon. With a rumoured price tag of $9 billion, the deal, while substantial, is merely equivalent to 8.3% of Amazon’s Q1 2021 earnings of $108.5 billion. Indeed, the 44% year-on-year (YoY) increase for its Q1 results alone would pay for the deal more than four times over. When it comes to investment capital to deploy, the tech majors led by Amazon and Apple are in a financial class of their own. This is the kind of deal that helps to explain why AT&T was so keen cut its losses and incur a $66 billion loss on its Warner Media assets by merging the former Time Warner media major with Discovery for $43 billion in cash and receiving 71% in equity in the new combined entity in return. It also follows on from Amazon’s 15.4x increase in what it is willing to pay to secure exclusive NFL Thursday Night Football coverage for its US Amazon Prime customers.
If that does happen, Cinemark and AMC Entertainment might reopen their theaters for the traditional blockbuster summer movie season. AMC CEO Adam Aron hopes customers can return by mid-June, and analysts at B. Riley even upgraded Cinemark to a buy and noted the company should be able to "control cash flow and get through this shutdown period without any adverse liquidity events."
The UK has officially left the EU, well, kind of. Now we are in the next phase of negotiations, a transition period that is supposed to run until January 2021. This means, for the time being, not much will be changing for the UK’s entertainment industry. Filmmakers, musicians, game developers and other creative types will not discover the exact effects of Brexit on the sector until next year, but that doesn’t mean future challenges cannot already be seen in the distance. Whereas some see hurdles to navigate, other professionals in the entertainment see an opportunity, especially with the development in smart 5G technologies, virtual/augmented reality, and a booming new niche of entertainment, in eGaming.
The first half of 2021 has been a year of continued change and disruption for subscription video. The global incumbent subscription video on demand (SVOD) leaders, Netflix and Amazon Prime Video, have been busy signalling to the financial markets how they intend to entrench their market dominance in light of the ongoing market acquisition pushes unleashed by the D2C disruptors following the D2C ‘big bang’ moment of Q4 2019 – Q2 2021.
Netflix announced in January that it was no longer going to borrow on the financial markets to fund its day-to-day operations – specifically for its content acquisition budget, which is now driven predominately by commissioning original content for its service. This leaves the SVOD leader with $14.9 billion of outstanding long-term debt to service as it seeks to live within its means by commissioning future content from its ongoing cashflow. In Q1 2021 alone Netflix spent $500 million on servicing this debt pile versus $1.7 billion in net income generated over the same period.
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