Listen to this article
Estimated 5 minutes
The audio version of this article is generated by text-to-speech, a technology based on artificial intelligence.
Netflix has agreed to buy Warner Bros. Discovery’s TV and film studios and streaming division for $72 billion US, a deal that would hand control of one of Hollywood’s most prized and oldest assets to the streaming pioneer that has upended the media industry.
The agreement announced Friday follows a weeks-long bidding war where Netflix seized the lead with a nearly $28-a-share offer that eclipsed Paramount Skydance’s nearly $24 bid for the whole of Warner Bros. Discovery, including the cable TV assets slated for a spinoff.
Buying the owner of marquee franchises including Game of Thrones, DC Comics and the Harry Potter franchise will further tilt the power balance in Hollywood in favour of the streaming giant that built its dominance without major acquisitions or a large content library, helping its efforts to ward off competition.
“Together, we can give audiences more of what they love and help define the next century of storytelling,” Netflix co-CEO Ted Sarandos said in a statement.
But the deal will likely face strong antitrust scrutiny in Europe and the U.S. as it would give the world’s biggest streaming service ownership of a rival that is home to HBO Max and boasts nearly 130 million streaming subscribers.
The water tower of Warner Bros. studios is shown on Nov. 18 in Burbank, Calif. (Mike Blake/Reuters)
Cinema United, a global exhibition trade association, said in a statement on Friday the deal poses an “unprecedented threat” to movie theatres worldwide.
“In light of the current regulatory environment this will raise eyebrows and concerns. The combined dominant streaming player will be heavily scrutinized,” said PP Foresight analyst Paolo Pescatore.
Pledge to maintain cinema showings
Warner Bros. Discovery had reportedly also received offers from Paramount Skydance and Comcast. Paramount and Comcast did not immediately respond to requests for comment.
David Ellison-led Paramount, which kicked off the bidding war with a series of unsolicited offers and has close ties with the current administration — his father, Oracle co-founder Larry Ellison, is a longtime friend of Donald Trump — questioned the sale process earlier this week in a letter alleging favourable treatment to Netflix.
To ease concerns about market concentration, Netflix argued in deal talks that a potential combination of its streaming service with HBO Max would benefit consumers by lowering the cost of a bundled offering, Reuters reported on Tuesday.
The company has also told Warner Bros. Discovery that it would keep releasing the studio’s films in cinemas in a bid to ease fears that its deal would eliminate another studio and major source of theatrical films, according to media reports.
Analysts have said Netflix is driven by a desire to lock up long-term rights to hit shows and films and rely less on outside studios as it expands into gaming and looks for new avenues of growth after the success of its password-sharing crackdown. The company has leaned on its ad-supported tier to drive growth, but that is not expected to become a major revenue engine until next year.
Warner Bros. Discovery was created just three years ago when AT&T spun off WarnerMedia, which was merged with Discovery Communications in a $43 billion deal.
Group of Hollywood creators reportedly concerned
Under the deal, each Warner Bros. Discovery shareholder will receive $23.25 in cash and about $4.50 in Netflix stock per share, valuing Warner at $27.75 a share, or about $72 billion in equity and $82.7 billion, including debt.
The deal is expected to close after Warner Bros. Discovery spins off its global networks unit, Discovery Global, into a separate listed company, a move now set for completion in the third quarter of 2026.
Back in June, Warner Bros. Discovery outlined plans to split its cable and streaming offerings — with HBO, HBO Max, as well as Warner Bros. Television, Warner Bros. Motion Picture Group and DC Studios, to become part of a new streaming and studios company. Meanwhile, networks like CNN, Discovery and TNT Sports and digital products such as the Discovery+ streaming service and Bleacher Report would make up a separate cable counterpart.
Some Hollywood stars have opposed a Warner acquisition:
It’s not clear how approval of Netflix’s bid would ultimately affect Canadian viewers, if at all. Warner Bros Discovery licenses HBO content to Crave, with that subscription service offered by Bell Media heralding an exclusive, multi-year deal in 2024.
A consortium of leading film industry figures urged U.S. Congress to intervene and oppose a Netflix acquisition, Variety reported on Thursday.
In an email to members of Congress, the consortium, calling themselves “concerned feature film producers,” said they left their letter unsigned out of fear of retaliation, citing Netflix’s significant clout both as a buyer and distributor, according to Variety.
Reuters could not independently verify the report.