By Kayla DeKraker
A Friday agreement between Netflix and Warner Bros. Discovery will reshape the entertainment industry as the streamer acquires Warner Bros., HBO Max, its TV and film studios and gaming business.
The surprising deal comes at a hefty cost: $82.7 billion with an equity value of $72 billion.
In a call with analysts, Netflix co-CEO Ted Sarandos said, “I know some of you are surprised we are making this acquisition.” The company shared that they are going to keep Warner Bros. operations continuing as normal with no major changes other than to “build on its strengths.”
In a statement about the acquisition, Netflix said, “By adding the deep film and TV libraries and HBO and HBO Max programming, Netflix members will have even more high-quality titles from which to choose. This also allows Netflix to optimize its plans for consumers, enhancing viewing options and expanding access to content.”
Warner Bros. and HBO said of the transaction, “This acquisition brings together two pioneering entertainment businesses, combining Netflix’s innovation, global reach and best-in-class streaming service with Warner Bros.’ century-long legacy of world-class storytelling.”
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They added, “Beloved franchises, shows and movies such as THE BIG BANG THEORY, THE SOPRANOS, GAME OF THRONES, THE WIZARD OF OZ and the DC Universe will join Netflix’s extensive portfolio including WEDNESDAY, MONEY HEIST, BRIDGERTON, ADOLESCENCE and EXTRACTION, creating an extraordinary entertainment offering for audiences worldwide.”
Netflix beat out Paramount Skydance and Comcast in the bidding war for Warner Bros.
Forbes explained that “the Warner Bros. Discovery Board of Directors reportedly determined that the Netflix’s offer would effectively value the company at a higher price than Paramount’s offer of $30 a share.”
However, the deal is already stoking controversy on several fronts.
By combining Netflix, the No. 1 ranked streamer, with HBO Max, the No. 4 ranked streamer, the agreement could raise anti-trust red flags, as Netflix would have “too much control over the streaming market,” Fortune reported.
“Netflix will have an uphill climb unless it agrees to divest HBO Max as well as additional behavioral commitments — particularly on licensing content,” said Bloomberg Intelligence analyst Jennifer Rie. “The streaming overlap is significant,” she continued, saying the deal that “the market should be viewed more broadly is a tough one to win.”
Meanwhile, Hollywood creatives sounded the alarm as well, “describing a potential economic and institutional meltdown in Hollywood if Netflix succeeds in its effort to acquire Warner Bros. Discovery” in a letter to congress.
“The producers argued that Netflix would ‘effectively hold a noose around the theatrical marketplace,’ with what they assert would be enough market influence to reduce the footprint of theatrical movies and force down subsequent licensing fees paid in post-theatrical windows,” Variety reported exclusively.
Time will tell if Netflix’s acquisition of Warner Bros. moves forward or if legal concerns stop it.
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