Amazon Inc (NASDAQ:AMZN) will acquire MGM Studios in a deal worth $8.45 billion, the two companies announced today. The move marks the online retailer‘s biggest push into the entertainment business and a major coup for its streaming video division.
Amazon to acquire MGM Studios
According to CNBC, the acquisition is the second-biggest in Amazon's history, just behind its $13.7 billion Whole Foods purchase in 2017.
The e-commerce giant wants to leverage MGM's filmmaking history and tap into its massive catalog containing 17,000 TV shows and 4,000 movies to boost Amazon Studios, its TV and film division. Mike Hopkins, senior vice president of Amazon Studios and Prime Video, said the real value of the deal is the "treasure trove of IP in the deep catalog that we plan to reimagine and develop together with MGM's talented team."
MGM Chairman Kevin Ulrich said in a statement that being able to "align MGM's storied history with Amazon is an inspiring combination." The transaction highlights the online retailer's willingness to spend piles of cash to remain competitive in streaming, which is continually growing more competitive.
Amazon, The Walt Disney Company (NYSE:DIS) and Netflix Inc (NASDAQ:NFLX) have spent billions of dollars on licensing content and developing their own TV shows and films. Meanwhile, media giants have been consolidating to build scale to compete with Netflix and Amazon more easily.
Amazon faces lawsuit over price increases
In other Amazon news, the e-commerce giant is facing an antitrust lawsuit filed by Washington, D.C., Attorney General Karl Racine. According to CNBC, he alleges that the company unfairly used its dominant position to raise prices for consumers and restrained innovation.
Racine alleges that Amazon illegally used price agreements to beat the competition. The lawsuit demands penalties and damages to prevent such behavior in the future. Racine wants the court to halt what the lawsuit calls Amazon's ability to damage competition in various ways. One of the solutions could include a breakup of the online behemoth.
The lawsuit alleges that Amazon illegally held a monopoly through contract provisions that prevented third-party sellers on its platform from selling their products on other platforms at lower prices.
According to a press release, Racine's office claimed the contracts cause "an artificially high price floor across the online retail marketplace." The attorney general argued that such agreements harm both third-party sellers and consumers by restricting choice, innovation and competition.
Merchants that want to sell on Amazon's marketplace must follow the company's business solutions agreement. Until 2019, the online retailer included a clause referred to as a "price parity provision," which required that merchants not sell their products at a lower price on other online marketplaces.
Amazon removed the clause quietly in March 2019 as antitrust scrutiny grew. However, even after the clause was removed, it added a nearly identical class it called its "fair pricing policy," which enables the online retailer to "impose sanctions" on merchants who offer their products on other online marketplaces at lower prices.
Amazon is part of the Entrepreneur Index, which tracks 60 of the largest publicly traded companies managed by their founders or their founders' families.