If sony buys MGM it would create a movie business big enough to rival America's entertainment giant, Time Warner. That would be something of a triumph; in 1994 Sony was the laughing stock of Hollywood after writing off $2.7 billion of reckless spending at its movie division. With its film business now earning solid profits, it has made a preliminary bid of $5 billion for MGM, jointly with two private equity firms, Texas Pacific Group and Providence Equity Partners, who would put up a lot of the money. The bid could yet turn into a fight: both Time Warner and NBC, General Electric's media division, are also said to be interested in MGM. MGM offers a vast library of more than 4,000 films, which include "Dr Zhivago", the James Bond and Pink Panther series, 19 Woody Allen movies and over 200 Academy Award winners. The studio already earns hundreds of millions of dollars by recycling these titles via pay television and DVDS. If Sony and its partners do get MGM, they will be betting that demand for old movies will grow further as cable and satellite firms get better at delivering on-demand video services to the home. On top of likely cost savings from combining MGM'S film distribution with that of Sony Pictures Entertainment, having the biggest film library could become even more of a goldmine if customers can be persuaded to replace existing DVDS with new high-definition ones. Yet MGM'S billionaire owner, Kirk Kerkorian, has sold and later bought back the studio twice before, and his price demands-and habit of selling at the top of the market-may yet scare off Sony and partners.
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