Netflix has agreed to purchase the film and streaming businesses of Warner Bros Discovery for $72 billion in a major Hollywood consolidation deal.
The streaming giant emerged as the successful bidder for Warner Bros ahead of rivals Comcast and Paramount Skydance following a prolonged bidding process.
Warner Bros owns major franchises including Harry Potter and Game of Thrones, along with the streaming service HBO Max. The acquisition positions Netflix to significantly expand its content library with some of entertainment’s most valuable intellectual property.
The takeover is set to create a new powerhouse in the entertainment industry, though the deal must still receive approval from competition authorities before closing. Regulatory scrutiny is expected given the transaction’s size and potential market impact.
Some film industry stakeholders, including the Writers Guild of America, have criticized the deal, arguing it would negatively impact workers and consumers through job losses and reduced competition.
Netflix co-chief executive Ted Sarandos said the streamer was “highly confident” it would receive necessary regulatory approval and was running “full speed” toward completing the transaction.
Sarandos stated that combining the Warner Bros library of shows and movies with Netflix’s original series such as Stranger Things would allow the company to “give audiences more of what they love and help define the next century of storytelling.”
“Warner Bros have defined the last century of entertainment, and together we can define the next one,” he said during the announcement.
When asked whether HBO should remain a separate streaming service, co-chief executive Greg Peters said Netflix believed the HBO brand was important for consumers but added it was “quite early to get into the specifics of how we’re going to tailor this offering for consumers.”
Netflix estimates it will realize $2 billion to $3 billion in savings, primarily through eliminating overlaps in support and technology areas of the combined businesses. These cost reductions represent significant operational efficiencies the company expects to achieve post-merger.
Films produced by Warner Bros will continue receiving theatrical releases, Netflix stated, maintaining the studio’s traditional cinema distribution model. Warner Bros television studio will continue producing content for third parties, while Netflix will keep producing content exclusively for its own platform.
Labeling it a “big day” for the companies, Sarandos acknowledged the acquisition may have surprised some shareholders but represented a “rare opportunity” to position Netflix for success “for decades to come.”
David Zaslav, president and chief executive of Warner Bros, said the agreement would combine “two of the greatest storytelling companies in the world.”
“By coming together with Netflix, we will ensure people everywhere will continue to enjoy the world’s most resonant stories for generations to come,” Zaslav stated.
The cash and stock deal values Warner Bros at $27.75 per share, with total enterprise value, including the company’s debts and share value, of approximately $82.7 billion. The equity value, or cash price, totals $72 billion.
The boards of directors from both companies unanimously approved the transaction, indicating strong support from company leadership for the strategic combination.
The Writers Guild of America’s East and West branches issued a joint statement Friday declaring “this merger must be blocked.”
“The outcome would eliminate jobs, push down wages, worsen conditions for all entertainment workers, raise prices for consumers, and reduce the volume and diversity of content for all viewers,” the union statement read.
Michael O’Leary, chief executive of trade organization Cinema United, characterized the merger as posing “an unprecedented threat” to the global cinema business.
“The negative impact of this acquisition will impact theatres from the biggest circuits to one-screen independents in small towns in the United States and around the world,” O’Leary said.
Netflix will complete the takeover after Warner Bros finalizes previously announced plans to separate its streaming and studios division from its global networks division into two companies next year. This restructuring creates clean separation between the assets Netflix is acquiring and those remaining with Warner Bros.
The global networks division will become Discovery Global and will include cable channels such as CNN and TNT Sports in the United States, plus Discovery and free-to-air channels in Europe.
However, TNT Sports International will remain with the streaming and studios division being sold to Netflix, keeping international sports rights with the acquired properties.
Paolo Pescatore, founder and technology media and telecom analyst at PP Foresight, called the sale “a huge statement of intent and underlines Netflix aspirations to be a global leader in the new world order of streaming.”
Pescatore warned that while the “surprising move” made sense for Warner Bros, it could “provide a headache for Netflix” when attempting to integrate the companies given the deal’s massive scale.
While the agreed deal covers part of Warner Bros business, rival Paramount had proposed purchasing the entire company, including cable networks, in October. Warner Bros rejected that approach before putting itself up for sale.
Tom Harrington, head of television at Enders Analysis, said it was difficult to predict whether regulators would approve the takeover, but if completed it would massively impact cinema.
“Were it to go through it would reorient Hollywood,” Harrington stated ahead of the announcement.
Harrington predicted “big reductions” in television and film output from the newly merged company, which would generate resistance from Hollywood stakeholders and relevant unions concerned about job losses and reduced production.
For consumers, Harrington suggested a merger would likely lead to higher subscription prices.
“Netflix would get more expensive and even though HBO Max would be shuttered or become non-essential, the greater penetration of Netflix households would likely mean an increase in total overall subscription revenues,” he explained.
Danni Hewson, head of financial analysis at AJ Bell, said Netflix had “offered an olive branch” to Hollywood by promising continued theatrical releases for Warner Bros films.
“If this deal can clear those significant regulatory hurdles quickly there are likely to be considerable cost savings to be made,” Hewson stated.
“How much of those savings get passed to streaming platform subscribers or whether Netflix will be seen to have too much pricing power is one of the areas that will face a huge amount of scrutiny in the coming months.”
