PLEASE HELP, NEED ANSWER!

Amazon is supposedly discussing the acquisition of MGM film studios. MGM would give Amazon more clout in the streaming wars. Neither Amazon nor MGM would comment on the deal, but several sources confirmed the discussions. MGM produced numbers of iconic films over the years including the James Bond series. Sources value MGM between $7 and $10 billion.

The deal would give Amazon more content to put on its streaming platform which now has over 200 million paid subscribers. Video streaming is also up by 70% year over year. Competitors such as Netflix and WarnerMedia are expanding content and offering viewers larger libraries of viewing options. Amazon needs to expand content in order to compete.

While the price paid for MGM appears significant it is not much more than Amazon earned in the first quarter of 2021. Amazons market capitalization is now almost $1.7 trillion. However, Amazons most expensive deal to date was the $13.7 billion it paid for Whole Foods in 2017 so this acquisition is not insignificant.

Answer the following:

1. How does option value factor into this decision to acquire MGM?
2. What factors should Amazon consider when bidding on MGM?
3. How does competition affect Amazons decision to acquire MGM?