January 28, 2020
Both Netflix and Apple reportedly have had preliminary discussions with MGM, whose hedge fund owners have put out feelers for the studio’s storied catalog of movies, the “James Bond” movie franchise and a strong TV production business.
In the burgeoning subscription streaming video ecosystem, content is king. Netflix and Apple are on the opposite ends of the SVOD sphere with the former setting the bar when it comes to market penetration and content spending.
Yet both companies want expansive access to original and catalog content, especially Apple, which has entered the SVOD market relatively late — and with scant programming. Netflix, which has seen third-party catalog content migrate back to original holders’ branded streaming services, is looking for a big push back.
How better to do that than acquiring MGM Studios.
CNBC, citing sources familiar with the situation, says MGM has shrewdly come back from bankruptcy in 2010, and is now worth a reported $10 billion, with its owners willing to sell.
Both Apple and Netflix have been largely absent from the merger & acquisition playing field. Apple most-recently spent $3 billion acquiring the Beats earphone brand.
In 2017, Netflix made its first M&A deal, acquiring Millarworld, the publishing company of comic book writer Mark Millar. In 2019, co-founder/CEO Reed Hastings said Netflix had “no big appetite” for major acquisitions.
“I don’t think investors have too much to worry about there,” Hastings said on the investor webcast last April. Indeed, neither Netflix or Apple are commenting on the MGM media reports.
Regardless, MGM had revenue of more than $1 billion for the first nine months of the fiscal year (ended Sept. 30, 2019) consisting primarily of about $600 million in TV and film licensing revenue and $300 million from Epix subscriptions. The studio recorded pre-tax earnings of $123 million.