Netflix has agreed to buy Warner Bros.' TV and film studios and streaming division. Discovery for US$72 billion. The deal will hand control of one of Hollywood's most valuable and oldest assets to the streaming pioneer that has disrupted the media industry.
The agreement, announced Friday, follows a weeks-long bidding war in which Netflix seized the lead with an offer of nearly $28 a share, eclipsing Paramount Skydance's nearly $24 offer for all of Warner Bros. Discovery, including cable television assets slated for spinoff.
Warner Bros. stock Discovery rose 6.3 percent in Friday trading, Netflix shares closed down 2.9 percent and Paramount Skydance shares fell 9.8 percent.
Buying the owner of outstanding franchises, including Game of ThronesDC Comics and Harry Potter the franchise will further shift the balance of power in Hollywood in favor of the streaming giant, which has achieved dominance without major acquisitions or a large library of content. Throughout the history of Warner Bros. has produced several Academy Award Best Picture winners, including Casablanca, My fair lady, Unforgiven And Gone.
“For over a century, Warner Bros. captivates audiences, captures the world's attention and shapes our culture,” David Zaslav, CEO of Warner Bros., said in a statement. Discovery. “By teaming up with Netflix, we will ensure that people around the world continue to enjoy the world's most resonant stories for generations to come.”
But the deal is likely to face tough antitrust scrutiny in Europe and the United States because it would give the world's largest streaming service ownership of a rival that is home to HBO Max and has nearly 130 million streaming subscribers.
Cinema United, the global exhibition trade association, said in a statement Friday that the deal poses an “unprecedented threat” to movie theaters around the world.
“In light of the current regulatory environment, this will cause confusion and concern. The combined dominant streaming player will come under scrutiny,” said PP Foresight analyst Paolo Pescatore.
Promise to maintain theatrical releases
It is reported that Warner Bros. Discovery also received offers from Paramount Skydance and Comcast. Paramount and Comcast did not immediately respond to requests for comment.
David Ellison-led Paramount, which started the bidding war with a series of unsolicited offers and has close ties to the current US administration (his father, Oracle co-founder Larry Ellison, is a longtime friend of Donald Trump), questioned the sale process earlier this week in a letter that claimed favorable treatment of Netflix.
To ease concerns about market concentration, Netflix argued in deal talks that a potential combination of its streaming service with HBO Max would benefit consumers by lowering the cost of the bundled offering, Reuters reported on Tuesday.
According to media reports, the company also told Warner Bros. Discovery that it will continue to release the studio's films in theaters to allay concerns that its deal would eliminate another studio and a major source of theatrical films.
“We have a lot of confidence in the regulatory process. This deal is about consumers, about innovation, about workers, about creators, about growth,” Sarandos said on a call after the deal was announced.
Analysts say Netflix is driven by a desire to lock up long-term rights to shows and movies and rely less on third-party studios as it expands into gaming and seeks new growth paths after success in cracking down on password sharing.
The company is relying on its level of advertising support to drive growth, but it is not expected to become a major source of revenue until next year.
Warner Bros. Discovery was created just three years ago when AT&T spun off WarnerMedia, which was merged with Discovery Communications in a $43 billion deal.
The $72 billion U.S. deal is likely to face antitrust criticism in Europe and the U.S. because it gives Netflix ownership of one of its biggest rivals, HBO Max.
Trump has a history dating back to his first term of being involved in major media mergers and influencing one party. He lobbied his Justice Department aggressively to stop AT&T's $85 billion purchase of Time-Warner, raising concerns about media concentration.
Lawmakers from both parties expressed concern this week.
“Netflix-Warner Bros.” “will create one massive media giant that controls nearly half the streaming market, threatening to force Americans to raise subscription prices and reduce choice in what and how they watch, while putting American workers at risk,” said Democratic Sen. Elizabeth Warren of Massachusetts, who supports tough antitrust enforcement.
Utah Republican Sen. Mike Lee said Wednesday that “increasing Netflix's dominance in this way would mean the end of the golden age of streaming for content creators and consumers.”
Netflix can counter this by pointing to changing media habits and Alphabet's YouTube leadership among streaming apps. in terms of time spent I watch on TV.
The Justice Department's antitrust division is headed by Gail Slater, a former Fox Corp. executive. and Roku, and later economic advisor to Vice President J.D. Vance.
A group of Hollywood creators are reportedly concerned
Under the terms of the deal, each shareholder of Warner Bros. Discovery will receive $23.25 in cash and about $4.50 per share in Netflix stock, valuing Warner at $27.75 per share, or about $72 billion in equity and $82.7 billion including debt.
The deal is expected to be completed after Warner Bros. Discovery will spin off its global networking division Discovery Global into a separate listed company. The move is now scheduled to be completed in the third quarter of 2026.
Back in June, Warner Bros. Discovery has outlined plans to split its cable and streaming offerings into HBO, HBO Max, and Warner Bros. Television, Warner Bros. Motion Picture Group and DC Studios to become part of a new streaming and studio company. Meanwhile, networks such as CNN, Discovery and TNT Sports, as well as digital products such as streaming service Discovery+ and Bleacher Report, will make up a separate cable counterpart.
Some Hollywood stars opposed the Warner acquisition:
It's unclear how Netflix's approval of the proposal will ultimately impact Canadian viewers, if at all. Warner Bros. Discovery licenses HBO content to Crave, with subscription service offered by Bell Media announcing exclusive multi-year deal in 2024.
A consortium of leading film industry figures has called on the US Congress to intervene and oppose Netflix's acquisition, Variety reported on Thursday.
In an email to members of Congress, the consortium, which described itself as “concerned feature film producers,” said it left its letter unsigned out of fear of retaliation, citing Netflix's significant influence as both buyer and distributor, Variety reported.
Reuters could not independently verify this information.
