Future of risks

Why Did Amazon Buy MGM Studios? Can The OTT Platform Outperform Television?

We can purchase almost anything and everything on Amazon. And Amazon can purchase almost anything and everything. Recently, Amazon purchased the MGM (Metro Goldwyn Mayer) the iconic Hollywood studio for $8.5 billion.

The question here is WHY?

Well, Jeff Bezos, the founding father of Amazon, once said this while discussing Prime Video, “When we win a Golden Globe, it helps us sell more shoes.”

Amazon is known for its e-commerce shopping and digital streaming. However, it is also known for embracing risk, risk mitigation, and imagining what customers want next even before they know it.

Amazon struggles with a lot of competition in these fields. The sole way to earn consistent and more profits is when there’ll be customer loyalty. As people now have an access to almost every platform, loyalty might not come that easy.

So, what to do now? The only way in which amazon can gain customer loyalty is by giving customers tons of perks. Amazon does this by leveraging Amazon prime membership. After taking the membership customers can get fast delivery, free shipping on some products, and many other perks. Therefore, the Amazon Prime Video business model is a hybrid TVOD (transactional video on demand) and SVOD (subscription video on demand). But this much isn’t easy to urge you to shell out Rs 1000 per annum.

So, Amazon also offers access to its Amazon prime video but only after taking the membership. The Amazon prime video includes tons of the latest movies, exciting series, informative documentaries, and plenty of other content. The basic motive here is that if Amazon is successfully ready to produce a movie that wins the golden globe, then it can win tons more Prime subscribers. This will maybe help them sell more shoes, as well. Get it?

To make the Amazon prime video more appealing it needs tons of the latest content. That’s the only way they’re going to stay competitive. The MGM studios- well it is a perfect opportunity. The studio contains a treasure of content — Thousands of television episodes and many blockbuster movies also as a powerful catalog of film franchises along with access to MGM’s intellectual properties. And this led to MGM studio’s risk assessment as they were already facing a liquidity risk of $2.3 billion in long-term debt, leading to credit risk analysis.

Unfortunately, this didn’t pan out well for the company. MGM knew that the cash was just too good this time around, especially considering the impact Covid has had on traditional movie studios. Considering Amazon’s ambition and how expensive it’s to make or acquire content, $8.5 billion for a century’s worth of films and TV shows doesn’t appear to be a bad deal.

OTT vs Television

Over the last two to three years, there has been a brand-new global trend of digital consumption, especially during the pandemic period. People at their homes all day, they’re checking out ways of entertainment to stay themselves occupied. A present-day trend of ‘me time’ while watching content has evolved that has been supported by digital platforms. There has been a 200% increase in time spent on OTT and therefore the subscription revenues have gone up. Earlier, almost everybody used to visit the theatres for movies. Now with the shutdown of theatres the sole option they’re left with is that the OTT platform. But pandemic isn’t the sole reason for an increase in OTT platforms- In India, three factors are expanding this growth. The primary trigger was the Jio phenomena, data filtration, and reduction in pricing. These factors are continuously paving the way for digital growth. There has also been a shift from traditional televisions to smart TVs. This shift has given an increase to the coexistence of television with digital platforms. One of the main reasons for this shift was because now the sole thing viewers are concerned is about the ‘quality of content’.

Content has become vital. Everyone has their own and a special choice of content that they want to check out regularly. Digital platforms and OTT are successfully ready to provide this flexibility and a spread of content to every viewer. This has given them a robust footing in terms of audience traffic. In this way, they’re ready to cater to various groups of audiences with different preferences, tastes, and ages. As per reports 74% of subscribers, just buy the premium for a specific series. People are choosing shows in line with their content preferences. Today, with the availability of both traditional and digital platforms, audiences are served with a spread of content from everywhere the globe and across channels. With these options at the consumers’ disposal, within the upcoming days, brands got to analyze the persisting audience behavior shifts, the consumption trends across both traditional and digital channels, and therefore the evolution of content types to maximize all emerging opportunities. OTT brings more flexibility and choices to the people in certain scenarios – a feature that brands closely follow to create their audience strategies round the table. Earlier there was no sort of genre, for instance, horror. But now there has been an introduction of the many sub-genres, the selection of the buyer is additionally changing rapidly. OTT gives consumers the choice to decide what content is required to be targeted by their advertisers, on the growing diversity of content that OTT helps advertisers align with. Adding to accountability in terms of media investment that brands are now making and measuring the effectiveness of content with the information availability plays a crucial role while searching for advertising. This doesn’t mean brands can rule out TV and traditional platforms from the equation completely. However, there’s an opportunity that with time OTT platforms can increase the watchable of consumers more than the TV channels can. Therefore, if brands want to maximize their visibility to the entire spectrum of viewers, they need to complement the utilization of OTT platforms more, instead of spending their marketing money on television because OTT platforms can provide tons of more exposure and young consumers attention.

Of course, modern content strategies, regional language choices, granular content categories, and personalized experiences will still open new opportunities in advertising for both OTT and television. During this mix, brands must keep a balanced focus on the advantages of both traditional and digital channels

Blog Published by: Kajal Jani, Student Risk Committee Member 

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