Skip to Content
Stock Analyst Update

Amazon Expands Video Library With MGM Acquisition

Our fair value estimate remains at $4,200 per share.


On May 26, wide-moat Amazon (AMZN) formally announced the acquisition of privately held MGM Studios for $8.45 billion; the deal had been rumored for several days. No timing has been provided, but we do not expect regulatory delays. While the deal is immaterial relative to Amazon’s $1.6 trillion market cap and we are not adjusting our $4,200 fair value estimate, we see this move as strategically important as the company adds more content to its Amazon Prime Video library. MGM’s content spans movies, scripted and unscripted television, video games, and podcasts. Notably, MGM owns a variety of franchises including James Bond, Rocky, Pink Panther, The Handmaid's Tale, and Real Housewives and boasts a catalog of more than 4,000 movies and 17,000 TV episodes. We think Amazon must continue to expand its content library to remain one of the relevant streaming players. We can envision the company justifying an increase in Prime membership prices next year based on the MGM acquisition.

We believe Amazon remains well positioned to prosper from the shift toward e-commerce during the COVID-19 pandemic in the near term, with particular strength in groceries and staples, but also from the secular shift toward e-commerce in the long term, and we see content as a differentiator for Prime members. We expect some content to be made available for free to Prime members, as Amazon has continued to expand benefits for this important group of consumers who shop more frequently on, purchase from more retail categories, and spend more overall with Amazon. Amazon’s subscription services generated $25.2 billion in revenue in 2020, representing 7% of total revenue and up 31% over 2019. We think most of this is Prime memberships, but we also see other paid subscriptions, including Kindle Unlimited, Prime Video, and Amazon Music Unlimited, as growing faster within the mix.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Dan Romanoff does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.