Interview Synopsis

MGM Studios – post-coronavirus recovery & strategic optionality

  • Credit
  • TMT
  • North America

The COVID-19 pandemic created the perfect conditions for direct-to-consumer (D2C) over-the-top (OTT) players such as Netflix and Amazon to thrive even more so than they were previously. But with the market getting increasingly saturated, long-term profitability — particularly among smaller players — remains a concern. 

Impact of D2C OTT growth on independent studios

Meanwhile, the extent to which companies such as Metro-Goldwyn-Mayer Studios Inc (MGM) Studios can sell their productions to streamers will be vital to their long-term success. Third Bridge Forum interviewed a former EVP at MGM to discuss the implications from the growth of D2C OTT on independent studios, and other important industry dynamics. 

First on the agenda was how spending across the various content producers and streamers, such as Netflix and Amazon, is likely to trend. “For the foreseeable future, I think it’s continuing to expand on all fronts,” the expert said. “I do think there will come the time in the next three, five, six, seven years where the question is going to come down to which one of these is profitable?” And as niche players such as A&E and Shudder mature, “it’s going to be much more difficult to justify original productions”. Eventually, the expert sees a wave of industry consolidation.

Original productions are currently the industry’s primary growth driver, according to the Interview. “As you can see, Amazon, Netflix, the Disneys of the world, they’re all moving into not only original but really localising these as they launch into new territories.” However, longer term, the expert is sceptical that it will be economically viable for many of these players to maintain this momentum.  

In turn, pure-play subscription video on demand (SVOD) players such as Netflix could change their business model, potentially pivoting to other revenue sources such as advertising or live sports. “A lot of people are going to want to be affiliated with that tremendous amount of eyeballs, and whether it’s advertisers or leagues or whoever, they will have opportunities to diversify their current model.”

MGM’s quest for a buyer was also discussed, with the expert of the view that an acquisition by Apple would be a “no-brainer”. “My opinion has always been if I’m a digital player like Apple, why wouldn’t I buy them, because here’s the deal, Apple has taken a very organic approach to their SVOD service. They have no volume.”

To access all the human insights in Third Bridge Forum’s MGM Studios – post-coronavirus recovery & strategic optionality Interview, click here to access the full transcript.

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The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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