Warner Bros. has a notorious history of being bought by other companies and then rapidly coming back on the market when its new owners realized how difficult it is to capitalize on the assets of a legacy production studio. Those challenges are part of the doom of WB’s merger with AOL and AT&T, which bought the studio in an effort to reinvent itself. But The WB’s latest acquisition deal — this time with Netflix for $83 billion — seems like it’s likely to have a slightly different outcome because of how big a player the streamer has become in the entertainment industry. It also signals how far Netflix has come: In less than two decades the streamer has gone from tech upstart to one of Hollywood’s oldest studios.
Assuming the deal receives regulatory approval, Netflix will soon acquire full ownership of Warner Bros.’ (But No Discovery Global’s) assets, which include the television and film production arms of HBO/HBO Max, DC Studios, and Legacy Studios. This would make Netflix the corporate home of many of the world’s biggest entertainment franchises game of Thrones And harry potterAnd provide the streamer with a much larger operational footprint than a proper studio. Discovery Global – which retains ownership of networks including CNN, Discovery Channel and TLC – is set to become an independent corporate entity by the third quarter in 2026.
This strategic divestment and sale of assets was apparently WBD’s desired outcome when the company first announced earlier this year that it planned to split Warner Bros. and Discovery into two entities. At the time, CEO David Zaslav had not yet announced that the company was open to acquisition offers. But you can learn a lot from the way WBD struggled to make a profit with its linear cable network.
Even though WBD managed to repay a large portion of the $55 billion in debt it inherited after Discovery bought WarnerMedia, the flagging cable TV properties of the merged company earlier this year were a major factor in the significant decline in its credit score. That debt – a holdover from AOL’s disastrous merger with Time Warner – loomed over WBD for Zaslav’s entire tenure as CEO.
A mixture of money problems, misguided rebrands, and several rounds of layoffs left WBD in a very precarious position, making selling itself to the highest bidder one of the only viable options for appeasing shareholders. It may also be difficult for Netflix to deal with those challenges, but it looks like this situation could turn out very differently for a few key reasons.
Unlike previous mergers, where Warner Bros. was gobbled up by traditional tech giants and telcos, the new deal comes at a time when Netflix has long established itself as a Hollywood power player. In addition to acquiring IPs that become hits, the streamer has built a strong production infrastructure to launch completely original projects of its own. And with the platform’s many subscriber-generating projects stranger things And squid game In the end, it’s easy to understand why he wanted to capture Warner Bros.’ Huge library of movies and series. Netflix doesn’t have the strongest track record of creating its own franchises – remember that rebel moon– And that’s exactly how it’s getting with The WB.
However, Netflix feels like a better acquisition partner than Warner Bros.’ According to the previous owners, this is still a consolidation and these types of mergers always come with casualties. And it’s likely we’ll start hearing about layoffs soon as Netflix begins to deal with the internal redundancies created by the absorption of Warner Bros.’ Staff and Operations. But what’s less clear is how the newly merged studios will release their new projects.
During the height of the COVID-19 pandemic in 2021, WBD’s decision to debut films on HBO Max instead of theaters led directors such as Christopher Nolan to condemn the company for becoming “the worst streaming service”. Although box office numbers still haven’t returned to pre-pandemic levels, theaters have reopened, and hit movies like Warner Bros.’ a minecraft movie And superman The features have made it clear that there is a demand to watch films on the big screen. Netflix has done an experiment Very Limited theatrical releases that are transparently read as theatrical releases in order to qualify their films for major industry awards. But it still remains primarily a streaming company since moving out of the DVD game.
Unlike MGM, which was on the decline when it was purchased by Amazon, Warner Bros. has had a very strong track record with its recent theatrical releases. Netflix said it “expects” to include Warner Bros.’ films in theaters, but co-CEO Ted Sarandos has indicated that the company is thinking about shortening its theatrical windows to “meet audiences sooner.”
“I would say right now, you should be confident in everything that’s planned to go into theaters through Warner Bros. going into theaters through Warner Bros. and Netflix movies will make the same progress,” Sarandos said in a call with industry analysts this week.
Netflix has also made it abundantly clear that it is willing to cut production costs by using generative AI. The company hasn’t mandated that its collaborators use the technology as part of their production workflow, but it’s easy to imagine that Zen AI will become a bigger part of the studio now that it has taken over all projects in development at Warner Bros.
A more serious concern with the new merger is that it could affect competition between major studios and streaming platforms. Netflix has effectively replaced Warner Bros. as one of the Big Five, which will likely change the power dynamics of the entertainment industry. But streaming customers will probably feel these changes more directly as Netflix and its competitors settle into a new status quo.
Netflix prices may rise once again as the service becomes more premium with Warner Bros.’ Offering. It’s still unclear how Netflix will handle the HBO/Max brands in the long run. The company has said it believes “HBO and HBO Max also provide a compelling, complementary offering for consumers,” but it wouldn’t be surprising to see those brands eventually go the way of Hulu, which has been turned into a section within Disney Plus.
It’s been years since Netflix struggled to be taken seriously. But even though the company has already established itself as the world’s largest TV/movie streamer, this new deal will take it to a different level. The Netflix/WBD merger will undoubtedly result in changes – some of them bad – that will echo across the entertainment landscape.
But as turbulent as things will be in the near future, it doesn’t seem likely that Netflix will be trying to sell Warner Bros. in a few years. Acquisitions of this scale aren’t the company’s usual MO, but it’s been bullish about what Warner Bros. wants since the studio’s sale began. If the deal goes through, Netflix is undoubtedly in the big leagues – now it has to prove it belongs.
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