Apple, Netflix Have Eyes for MGM – Report

Apple and Netflix are among a group of large media companies that have held preliminary talks to acquire MGM, a potential move that could help to shore up their content positions as the battles between subscription VoD services become more heated, CNBC reports.

The CNBC report follows one last month from The Wall Street Journal that Apple has held preliminary M&A talks with both the Pac-12 Conference and MGM as a way to possibly broaden the amount and type of content Apple could deliver via its Apple TV app and new Apple TV+ subscription streaming service.

CNBC said a deal for MGM -- which owns assets such as the James Bond catalog, TV series such as Stargate SG-1 and the Epix premium video service, and which made The Handmaid's Tale for Hulu -- would continue a wave of consolidation involving studios and media giants that includes Disney's deal for Fox, Comcast's acquisition of Sky, AT&T's deal for Time Warner and the recent merging of Viacom and CBS.

But scale is the name of the game in this more advanced phase of the video streaming era. This same M&A wave leaves smaller media companies such as AMC Networks, Discovery Networks, Lionsgate and Sony Pictures "in positions of relative weakness," CNBC points out.

Content is still king
But Apple's and Netflix's reported interest in MGM would enter the picture as both companies look to expand and broaden their library content and ability to produce new original fare while other media giants start to pull back some licensed content in order to feed their own streaming services. Disney+ launched last November. New OTT services from WarnerMedia (HBO Max) and Comcast-owned NBCUniversal (Peacock) will launch in the first half of 2020.

Privately held MGM is a "logical candidate to sell this year," CNBC said, noting that industry sources put the value of that asset at more than $10 billion.

As for Apple's and Netflix's reported interest, CNBC points out that both have been "averse" to big acquisitions. Netflix has yet to do a material acquisition and Apple's largest deal so far was its $3 billion purchase of Beats in 2014, "an almost laughably small 'record deal' given Apple's size and cash hoard," the report added.

Colin Dixon, analyst and founder of nScreenMedia, doesn't believe an Apple or Netflix deal for MGM makes great sense. In this blog post Dixon argues that MGM would be too costly for Netflix, which is already spending billions on content, and that such a deal (if that MGM's content was to be exclusively used for Netflix's service) would under-monetize MGM's library. He likewise sees MGM as a "bad fit" for Apple, envisioning a culture-clash in the making.

CNBC said another scenario could unfold in which MGM or another smaller player teams up with a company like WarnerMedia to form a bundling partnership under which a service like HBO Max could serve as a centralized streaming hub.

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— Jeff Baumgartner, Senior Editor, Light Reading

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