“Netflix and Warner Bros. Discovery’s blockbuster deal announcement early Friday sent a shock wave through the industry. The streamer outbid Paramount and Comcast for Warner Bros. studios and HBO/HBO Max in a deal valued at $82.7 billion, nearly double the price tag of the Warner Bros. Discovery merger less than four years ago. An announcement”, — write: www.hollywoodreporter.com
An announcement, of course, does not mean a done deal, particularly for one of this size. Comments from Netflix co-CEOs Ted Sarandos and Greg Peters and WBD chief David Zaslav in the wake of the morning reveal tended toward the general — as they must in the beginning stages of a mega-merger like this — but that leaves a lot of questions hanging. Here, in relative order of importance, are five of them still waiting to be answered.
Will This Thing Work? Warner Bros. has a — to put it as mildly as humanly possible — fraught history with corporate mergers in the 21st century. In June, WBD announced it would split off its network business (minus HBO and classic-movie channel TCM) into a separate company, marking the start of the third undone merger involving Warner Bros. in less than 20 years. The company previously did ill-fated combinations with AOL in 2009 and AT&T in 2021 — with Discovery taking WB off the latter’s hands.
Netflix and Warners are framing their businesses as complementary, and they’re at least both in the same realm, unlike AOL and AT&T. Just six weeks ago, though, Sarandos and Peters said on Netflix’s third quarter earnings call that they weren’t necessarily interested in doing a big deal. “We’re predominantly focused on growing organically, investing aggressively and responsibly into the growth and returning access to cash flow to shareholders,” Sarandos said. Peters added that “None of those mergers were a fundamental shift in the competitive landscape, and we have also seen a wide range of outcomes from such mergers.”
Will the Deal Pass Regulatory Muster? That’s the $64,000 $83 billion question, and not just in the United States. Netflix and Warner Bros. both have huge international footprints, and regulators from the European Union, Asia and elsewhere will likely weigh in. In the United States, it will be subject to antitrust scrutiny — Democratic Sen. Elizabeth Warren has already called the deal “an anti-monopoly nightmare,” and on the other side of the aisle, Republican Sen. Mike Lee said a deal would raise “serious competition questions.” But as there are no over-the-air broadcast outlets involved in the transaction, the Federal Communications Commission won’t have to approve it. A key tension here is that Netflix is the biggest buyer of films and series from outside studios, and Warner Bros. is among the biggest sellers to other outlets, with currently running shows all over the TV and streaming landscape.
In making its own case for acquiring Warner Bros., Paramount argued it would have an easier regulatory path to approval, but WBD apparently wasn’t swayed by that idea.
How Will It Affect Workers and the Creative Community? Layoffs pretty much always follow a corporate merger, and there’s no reason to expect anything different in this case. The scale of them won’t be determined until (and if) the merger goes through, but Netflix and Warner Bros. both have huge workforces in Los Angeles and around the world, and it’s likely that a lot of people will lose their jobs.
Hollywood’s labor unions have also expressed serious concerns about the deal. The Writers Guild of America said in a statement that “this merger must be blocked” and that “the world’s largest streaming company swallowing one of its biggest competitors is what antitrust laws were designed to prevent.” The Directors Guild of America said the deal raises “significant concerns” for its members, and the Producers Guild of America (a trade group rather than a union) also said it was concerned about potential effects of the deal.
How Will Netflix’s Culture Combine (or Clash) with Those of HBO and Warner Bros.? If the guiding philosophy behind Netflix’s series is “gourmet cheeseburger” — a coinage attributed to Jinny Howe, then a vp and now head of US and Canada scripted series — HBO might be considered fine dining, synonymous as it is with prestige TV. Netflix is primarily in the volume business, producing dozens of shows across just about every TV genre, from drama to true crime to Is It Cake?while HBO takes longer to develop and produce its programming and tends to stick mostly to scripted series and impactful documentaries. One possible commonality is in the evolving definition of an HBO Max original, with an Emmy winner The Pitt — an expertly made, broad-appeal procedural — as the template.
One model Netflix and HBO could look to is FX’s place within Disney. FX serves as the prestige TV brand within the Mouse House, and John Landgraf and Co. are largely left to their own devices to make the shows they want. HBO is an even bigger brand, and probably carries more value in being an add-on to Netflix rather than a subsidiary of it.
The film side of the two companies likely has a wider gulf to bridge. Warner Bros. is naturally focused on the theatrical business with tentpoles like its DC slate, Dune and the upcoming sequel to A Minecraft Movie. Netflix only grudgingly places a handful of its original movies — it released more than three dozen English-language films this year — in theaters, and never for more than a couple of weeks. Speaking about the deal Friday, Sarandos and Peters hinted at shortening theatrical windows for WB films should the deal go through, a line that surely will not play well with theater owners.
Will David Zaslav Have a Role in the Combined Company? Zaslav became a Hollywood villain for his handling of the WB-Discovery merger, his enormous paydays and the very bumpy ride WBD has had in the three-plus years since the transaction was completed. Since he (and the WBD board) hung a for sale sign on the Warner Bros./HBO part of WBD in October, it’s been widely assumed that Zaslav would angle for a top position in whatever company brought the biggest bag of cash to the table.
Netflix, however, already has two well-respected CEOs in Sarandos and Peters who don’t seem likely to be strapping on golden parachutes in the near future. The merger could serve as a cap to Zaslav’s frenetic dealmaking, or he could take on a key board role (Netflix co-founder and former CEO Reed Hastings chairs the board now). Whatever happens, Zaslav will almost certainly make a(nother) pile of money.