There were reports earlier today that Netflix had submitted the highest bid for just the Warner Bros. Studios and HBO streaming assets of Warner Bros. Discovery. This evening, those reports came to fruition as Netflix entered exclusive negotiations with Warner Bros., beating out rival bids from Paramount Skydance, and Comcast. Any deal would still need regulatory approval, which may be difficult considering recent comments by the Department of Justice.
Bloomberg broke the story first.
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This news will no doubt cause panic in exhibition circles, and the global theatrical marketplace should be genuinely concerned. Warner Bros. has grossed over $4 billion so far this year worldwide. It’s tentpoles such as “Superman,” “Sinners,” “Weapons,” and “The Conjuring: Last Rites,” among other titles, powered cineplexes around the globe. Moreover, CEO Ted Sarandos has said for years that Netflix will not release movies in theaters traditionally. It should be noted, however, that he never said an entity they owned, such as Warner Bros., wouldn’t do so. And, more importantly, a quick history lesson about Netflix’s public statements over the years.
Netflix said it was never going to integrate an ad-supported content or tier. Netflix said it had no interest in live programming. Netflix said it was not interested in live sports. All three scenarios came to fruition much faster than any industry analyst expected. Today, ad revenue is a major income driver for Netflix, live events are part of the service’s regular content offering, and the streamer has made long-term deals with the WWE and Major League Baseball.
Not only will Sarandos and Netflix face major political and industry pushback if they do not commit to releasing films in theaters, but significant regulatory hurdles. And not just from the U.S. government, either. Overseas approval will also be needed. Netflix would not exert all this energy in a political environment where the current administration favors the Paramount owners if they were not prepared for the compromises and changes they would need to make. Whether that means the studio will commit to a 45-day release commitment, such as Universal Studios, or longer remains to be seen. But the 45-day window would likely be a regulatory starting point.
As for HBO, how Netflix will run the entity and the future of its longtime Chairman and CEO, Casey Bloys, is a bigger question. Will Netflix let it operate independently in a set-up similar to FX at Disney? Or will it fold completely into Netflix, and the valuable brand be discarded? Do you spend over $80 billion to give up such a valuable marketing tool? Is the acquisition only about franchises such as“Game of Thrones,” “The White Lotus,” and “True Detective”? Will Netflix decrease its originals spend with such a valuable library thrown into the algorithm?
The exact nature of Netflix’s bid was not completely known, but they reportedly offered $28 a share for just Warner Bros. and HBO’s streaming assets. Comcast and Paramount offered less for the entire company. This allows WBD to sell off the other assets separately. In theory, and in the short term, it should mean fewer layoffs than if the other two bidders won.
There were no public statements or confirmations from either Netflix or Warner Bros. Discovery about the negotiating period at publication.
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