Over the years, Hollywood has produced some amazing plot twists, but this one could be the most expensive one. Netflix is now writing a $72 billion cheque to buy the Warner Bros., who produced such classics as Harry Potter, Friends, The Dark Knight, and many others. Just like any dramatic crossover episode, everyone is watching with popcorn in one hand and antitrust lawyers on the speed dial.
The Deal
Netflix is to buy the Warner Bros. studio and the streaming business from Warner Bros. Discovery, bringing HBO, HBO Max, DC Studios, Warner Bros. Television, and the famous motion picture division all being under one roof. The $72 billion cash-and-stock deal values Warner at $27.75 per share, thus making Netflix the one and only giant of the world for undisputed and unstoppable streaming.
Warner’s cable channels, such as CNN, Discovery, TNT Sports, and others, are not part of this deal. They are going to be combined into a new company, Discovery Global, which is expected to line up in 2026. Warner’s CEO, Zaslav, welcomed the decision and said,
“For more than a century, Warner Bros. has thrilled audiences, captured the world’s attention, and shaped our culture. By coming together with Netflix, we will ensure people everywhere will continue to enjoy the world’s most resonant stories for generations to come”.
While Ted Sarandos, co-CEO of Netflix said,
“Our mission has always been to entertain the world. Merging with Warner will give audiences more of what they love”.
However, the reactions across the entertainment ecosystem is much more complicated.
Industry Impact: How Big Is Too Big?
The shares of Warner Bros. increased nearly 2% after the U.S markets opened Friday, while shares of Netflix fell to nearly 2%. Also, Paramount fell nearly 6%. The merger of Netflix and HBO Max will immediately result in the largest and the most powerful streaming service in the world, one that can control the pricing, dominate the licensing and overshadow the small players.
Analysts are of the opinion that such mergers eliminate diversity of content as few big studios are left to decide what should be produced, who gets to work in the film industry, and who gets to see the films.
The Cinema United, which represents more than 56,000 movie screens worldwide, has called the merger an “unprecedented threat” to theaters and argued that Netflix’s limited presence in theaters would hurt the venue businesses, the local community and jobs. Michael O’Leary, CEO of Cinema United said,
“Netflix’s stated business model does not support theatrical exhibition. In fact, it is the opposite. Theatres will close, communities will suffer, jobs will be lost.”
It is quite ironic that Warner Bros., a studio that is known for fighting for longer theatrical releases, is merging with a company that has been designed to put an end to these releases.
The antitrust review process is expected to be very tight. If the regulators give a green light to the merger, Netflix will no longer be just one of the streamers but the entertainment industry’s core.
A Shift in Netflix’s Identity
The merger with Netflix means that the company had “no interest” in old-fashioned entertainment infrastructures. However, the slow growth, fierce competition, and high costs of in-house production have forced the company to unlock its long-standing content ownership and to protect itself against the stagnation of its subscriber base.
Netflix’s advertisement-supported option is gradually gaining popularity among users, but market experts believe that it will not be a significant source of income until next year.
The company’s aspirations in gaming have been uncertain, but the inclusion of Warner Bros. Games provide a real boost to this department, where its Harry Potter title “Hogwarts Legacy” generated more than $1 billion in revenue.
The Future of Streaming: Bundles, Battles, and a Bigger War
If Netflix keeps HBO Max as a distinct platform, viewers might find themselves offered the option of bundled subscriptions, cross-platform promotions, or sharing of content libraries.
The outcome for consumers might be more high-quality choices, or less so as the big players join forces and the competitive pressure decreases.
For competitors like Disney+, Amazon Prime Video, Peacock, and Paramount’s new merged Skydance structure, it is a big change. Paramount’s proposal was rejected, Comcast did not reach an agreement, and Netflix ended up taking home the studio’s priceless asset.
This merger is definitely not just another one. It is the time when one of the companies can significantly claim to have won the battle over streaming services.
What’s Next?
Regulatory scrutiny, content reorganization, theatrical commitments, and consumer reaction to the formation of the world’s most massive streaming library, are the aspects that will probably become the main focus of the industry when the deal is finally closed in the next 12 to 18 months. HBO Max and Netflix may still be distinct for the time being, but bundling is definitely on the horizon.
At the same time, Warner’s cable networks are set to part ways with Discovery Global by 2026, thus breaking the company into two forthcoming areas, one of which is streaming superiority and the other one is broadcast and sports survival.
The streaming wars are not over, they are changing forms and Netflix might have rewritten the whole scenario.
Netflix has played its cards right by being the last boss of the streaming world, who is mighty, rich, and willing to modify Hollywood by its conditions. However, the kingdom comes with a price.
If this merger is approved by the antitrust authorities, then the industry has to prepare for a future where only a few of the largest platforms control the making of art, its distribution, and its pricing. Good for business? Yes, no doubt. But what about good for creativity and competition? The answer is still not clear, and perhaps never will be.
