After a brutal 12 months marked financial inefficiency, studio closureAnd reorganizationat Warner Bros. Games has fallen a new shadow: the prospect of a new corporate owner. The division includes – like an afterthought – upon sale Warner Bros. Discovery for Netflixwhich was later disputed hostile offer from Paramount Skydance. Both potential buyers are courting shareholders, and whoever wins will need regulatory approval, leaving the deal months or years away from closing. Whatever the outcome, there is widespread concern about the impact it will have on Warner's gaming teams.
The firm is the only major Hollywood mega-studio to maintain a strong position in gaming. He owns series of successful mobile games as well as AAA Netherrealm, Avalanche, Rocksteady and TT Games studios and support studios in the US and Canada. Warner's hits include TT's Lego games, Rocksteady's Batman Arkham series and Avalanche's wildly successful Hogwarts Legacy, which has sold over 30 million copies.
Netflix, meanwhile, has yet to make a significant impact on gaming, despite years of trying. After a loud but ultimately a fruitless investment in AAAand decide not to participate in bidding for EA (as reported by Bloomberg), the company refocused on casual games for the second screen, supported by licensed games such as GTA. Head of Games Alain Taskan, an industry veteran with long tenures at Epic and Ubisoft, committed to titles which “use the phone as a controller” with a focus on multiplayer, kids, storytelling and mass appeal, as well as the social layer that Roblox, Fortnite and Minecraft provide.
The company has terminated unannounced publishing deals with outside studios, sources said. GamesIndustry.biz. In public it's malfunction its developer successful mobile game Squid Game And sold Spry Fox's internal team back to its founders. The company also plans to borrow $59 billion to pay Warner. one of the largest such loans ever issuedand will monitor asset sales to reduce this figure upon completion.
At first glance, the prospects for Warner's gaming division under Paramount look brighter. The newly added Skydance subsidiary has published a series of VR games led by David Ellison, who now heads Paramount Skydance, and the company has a long history of licensing its IP to games, from Nickelodeon to South Park to Star Trek. And he says he wants to do more. “During the merger with Skydance, Paramount identified gaming as a potential area for development and growth for the company,” says Piers Harding-Rolls of Ampere Analysis.
“David Ellison has greenlighted, serviced and delivered several Triple A-scale titles to Skydance,” says Raphael Brown of Symbol Zero. “Netflix has yet to greenlight, support or implement a gaming budget of over $5 million for any project. The closest option would be to play Team Blue Triple A, which was canceled. “Netflix has no history of successfully funding and supporting Triple A games.”
Best case scenario
It's optimistic that Netflix will reconsider this approach after the acquisition. Blue Moons' Richard Brown, who served as vice president of Universal's games group before holding executive positions at THQ and Digital Extremes, is optimistic. “I don't think they'll stop publishing AAA games,” he says. “Since Warner Bros. recently restructured to support its core business, much like we did at Universal back in the early 2000s, it is now better positioned to deliver transmedia more consistently. Assuming the division generates positive growth and profits, Netflix would have very little reason to integrate it into an incompatible service or shut it down. You have a AAA industry veteran running Netflix Games, Alain Taskan will be able to utilize and guide him accordingly.”
“Assuming the division generates positive growth and profits, Netflix would have very little reason to integrate it into an incompatible service or shut it down. You have a AAA industry veteran running Netflix Games.”
“WB Games is a collection of the best game studios in the world,” says Cassia Curran of Curran Games, “and they specialize in taking existing intellectual property and transforming it into fantastic, high-quality games. “Netflix can add value to its premium subscription tier by providing access to these games, while also significantly increasing fan engagement and the value of IPs they fully own, like KPop Demon Hunters, with top-notch AAA games created by WB Games studios.”
“This is a great opportunity for Netflix to recalibrate and double down on its games,” agrees Hendrik Lesser, president of the European Game Developers Federation. “The combination of great studios, great IP and the reach of Netflix is one of a kind.”
Others go further. Game studios shouldn't be an afterthought: Game studios should be a key factor in Netflix's continued growth, argues Lirui Ding of gaming venture capital firm Transcend Fund. “They're not just acquiring intellectual property, but a studio system that has proven it can turn world-class franchises into hit games,” he says. “This is important because in games and entertainment more broadly, it is the content that gains long-term value. We've definitely seen this in Transcend's portfolio. Technologies, tools and platforms evolve, but gaming hits extend the lifecycle of intellectual property, deepen engagement and increase the value of media. If handled correctly, games can strengthen the entire franchise ecosystem.”
Darkness is coming
The pessimistic view is that this heralds another round of industry cuts from a company that bought a business it doesn't need. “I think Netflix will first leave the studios alone for the first six to 12 months and then start scaling back,” Brown says, “and then slowly dismantle all WB Games because they don’t want the financial burden of AAA games that they didn’t buy WB for.”
Many see Paramount as a less disruptive prospect. “Skydance will probably value these game studios much more highly,” says Curran. “It's had significant success with VR games like The Walking Dead: Saints and Sinners, and WB Games is making similar games for its Skydance New Media team led by Amy Hennig, which is releasing Marvel 1943: Rise of Hydra next year, so they could easily team up with each other. The acquisition of Skydance will likely eventually become business as usual for WB Games studios.”
“I think WB Games' status quo most likely resulted from the Paramount acquisition rather than Netflix. “I expect Netflix to make more changes, including potentially cutting the number of studios.”
Harding-Rolls agrees. “I think the WB Games status quo was probably a result of the Paramount acquisition rather than the Netflix acquisition,” he says. “I expect Netflix to make more changes, including potentially cutting the number of studios.”
Any such sale would require willing buyers, of which there have been few in recent years. “Sony, Microsoft, Amazon, Google, Embracer, Ubisoft, Electronic Arts, Tencent, Netease, Krafton and Nexon are not willing to buy right now,” Brown says. “The gaming industry is shrinking and everyone is abandoning studios and projects.”
Others are more optimistic. “I think there will be buyers for some studios,” says Harding-Rolls, “but the appetite for deals with AAA studios remains quite weak due to the investment required and the risks involved. The obvious candidates would be Savvy Games, EA (via the Saudi Arabian Public Investment Fund) and console companies.”
Investors see value too. “I think you'll really find a healthy universe of buyers for big World Bank assets like NetherRealm and Avalanche Software,” says Joe Yuan, chief investment officer at Hiro Capital. “Korean strategic companies, including Krafton, Nexon and Smilegate, are quite active in today's market, and private equity has emerged as a new category of buyer looking for established, scalable assets that they can use as an anchor for other acquisitions.”
Solo success?
Yuan also sees the result of studios being able to work alone. “We're seeing more and more management buyouts, so I think for some of these teams this could be a viable route to being able to have a little more control over their destiny and have more financial leverage,” he says. Arc games, Saber InteractiveAnd Toys for Bob found support to break away, and perhaps WB studios could do it too, although investors would need deep pockets.
The prospects are brightest for Avalanche, which is backed by the record-breaking success of Hogwarts Legacy, and Netherrealm, which is supported by stable Mortal Kombat. Rocksteady, weighed down The Expensive Ineffectiveness of Suicide Squadhas a much darker outlook. Still, “studios that have proven their ability to profitably produce AAA games are valuable assets,” says Transcend's Dean. “Strategic buyers, large publishers, platform holders and private equity investors seeking quality earnings are likely to look at the strategic spin-off scenario.”
If Netflix wins, a notable new buyer could be… Paramount. Acquiring WB's game studios could soften the blow of losing the movie studios' assets, although integrating them would be a significant undertaking and would inevitably involve layoffs. “I would expect some optimization in whichever company is acquired,” Harding-Rolls says.
“Netflix is a train wreck of gaming and interactivity. They've been around consistently for ten years. This is not by choice, but because everything is aimed at retaining video subscriptions.”
Brown's prospects remain bleak. “Netflix is a train wreck of gaming and interactivity,” he says. “They have been working steadily for ten years now. This is not by choice, but because everything is aimed at maintaining video subscriptions.”
“Paramount is eager to grow its gaming division, but they can do it without Warner Bros. Meanwhile, Netflix wants video content, but not video games. Both the gaming and film industries will be healthier if neither Paramount nor Netflix buys Warner Bros Digital.”
Transcend Fund's Lirui Dean and Shanti Bergel see a bright future with the rise of transmedia success stories, from Fortnite to the Sonic film series, that fuse gaming and other forms of entertainment. “The biggest opportunity is to demonstrate that gaming is a first-class content pillar, not a side initiative. If Netflix builds on this third chapter and allows studios to operate with the autonomy they need to succeed, it could significantly redefine cross-media franchise creation. If not, others will capture that value by acquiring emerging talents and opportunities. Either way, the long-term winners will be those who understand that content—not just tools or distribution—has the most value.”
