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It’s official: Big Red is buying the back-lot empire home to Batman, Harry Potter, and Tony Soprano. On the heels of weeks of frenzied bidding among rival studio suitors, Netflix announced early on Friday it has bought Warner Bros. Discovery’s studio and streaming assets for $82.7 billion: a blockbuster deal with the potential to reshape Hollywood and the wider media universe, if it can pass significant regulatory hurdles. Pending government approval, the cash-and-stock transaction would close by next fall once Warner Bros. Discovery spins off its cable unit — encompassing CNN, HGTV, Food Network, and Discovery among other channels — into a separate company.
Arriving relatively late to the bidding war in late October, Netflix ultimately bested competing offers from Comcast (the parent company of Universal Pictures that was similarly angling to acquire Warner’s studio and streaming business) and Paramount (headed by upstart mogul David Ellison with the multibillion-dollar backing of his Oracle CEO father, Larry Ellison, and aiming to buy all of Warner Bros. Discovery including the cable channels). By several orders of magnitude, the deal — which shocked Hollywood with its speed and scope, valuing Warner Bros. Discovery at $72 billion, much higher than WBD’s current $60 billion market capitalization — would stand as Netflix’s biggest acquisition to date. More fundamentally, Warner’s foundation in the theatrically distributed movie business stands in diametric opposition to Netflix’s raison d’être as a streaming behemoth.
“I know some of you are surprised that we’re making this acquisition and I certainly understand why. Over the years, we have been known to be builders, not buyers,” Netflix’s co-CEO Ted Sarandos said during a conference call on Friday. “We need to keep innovating and investing in stories that matter most to audiences, and that’s what this deal is all about. The combination of Netflix and Warner Bros. creates a better Netflix for the long run.”
In recent days, as Netflix became an increasingly serious contender to take over the storied, century-old studio home to the The Wizard of Oz, Casablanca, and The Lord of the Rings, the service faced pushback both within Hollywood’s 30-mile zone and inside the Washington beltway.
On Thursday, an anonymous consortium of feature-film producers sent an open letter to Congress describing a cascading series of disastrous outcomes should Netflix succeed in its bid to acquire Warner Bros. Specifically, that Netflix would “destroy” the theatrical-movie marketplace by either compressing or dispensing with the “window” between Warner Bros. films playing at the multiplex before switching to the Netflix-HBO streaming platform. The producers argued Netflix would exercise “monopolistic control” to effectively “hold a noose around the theatrical marketplace” by influencing how many movies reach big screens each year, thereby driving down licensing fees.
Also on Thursday, lawyers for Paramount sent Warner Bros. Discovery’s CEO a letter questioning the “fairness and adequacy” of WBD’s sales process. “WBD appears to have abandoned the semblance of a fair transaction process, thereby abdicating its duties to its stockholders, and embarked on a myopic process with a predetermined outcome to favor a single bidder,” reads the letter.
Thanks to Larry Ellison’s long standing as a major Republican fundraiser — and President Donald Trump’s public support for both Ellisons as “friends” and “supporters” — Paramount was thought to have had an insider advantage in the bidding war. Toward that end, Republican lawmakers have increased antitrust scrutiny of a possible Netflix–Warner Bros. merger in recent weeks with California representative Darrell Issa writing a letter to the Justice Department warning the combined company’s share of the streaming market would be viewed as “presumptively problematic under antitrust law.”
While the Trump administration has previously deployed the FCC to fight culture-war battles against the president’s perceived enemies — pressuring ABC to drop Jimmy Kimmel and threatening ABC’s parent company, Disney — what kind of oversight the White House plans to exercise in the Netflix deal remains for now uncertain.
To sweeten the negotiations, Friday’s deal has an eye-watering breakup fee: If Netflix’s takeover winds up being scuttled for any reason, it must pay Warner Bros. Discovery $5.8 billion. As shock set in around Hollywood on Friday morning, Warner Bros. Discovery’s chief executive, David Zaslav, sought to put a positive spin on the deal. “Today’s announcement combines two of the greatest storytelling companies in the world to bring even more people the entertainment they love to watch the most,” he said in a statement.
Consumer reaction, meanwhile, was more muted.
