(Image source from: Bloomberg.com)
Netflix Inc. has decided to purchase Warner Bros. Discovery Inc. in a historic merger, bringing together the leading paid streaming platform in the world with one of the oldest and most respected studios in Hollywood.
According to the announcement made on Friday, shareholders of Warner Bros. will get $27.75 for each share in the form of cash and Netflix stock. The total value of this deal amounts to $72 billion, with the overall enterprise value being approximately $82.7 billion. Before finalizing the sale, Warner Bros. will go ahead with its planned separation from cable channels such as CNN, TBS, and TNT. This acquisition signifies a significant change in strategy for Netflix, which has never engaged in a deal of this magnitude. The streaming company rose to become the most valuable in Hollywood, even without owning a content library or studio, by acquiring programs from other creators and later branching out into producing original material.
With this acquisition, Netflix will own the HBO channel, along with its collection of popular shows like The Sopranos and The White Lotus. Warner Bros. also possesses its large studios located in Burbank, California, and an extensive archive of films and television, including franchises like Harry Potter and Friends. Warner Bros. made itself available for sale in October after attracting interest from multiple buyers. Besides Netflix, Paramount Skydance Corp. and Comcast Corp. also expressed interest. The bidding process became competitive, with Paramount accusing Warner Bros. of conducting an unfair process that favored Netflix. The conventional television industry is currently experiencing a significant reduction as viewers are moving towards streaming services, an area where Netflix is a leader. Recently, Warner Bros.' cable television division noted a 23% drop in revenue, as subscribers canceled their services and advertisers sought other options.
Originally started nearly thirty years ago as a DVD rental service that sent movies to people by post, Netflix ended 2024 with $39 billion in earnings. Warner Bros., established in the 1920s, also exceeded $39 billion in sales.
The well-known content from Warner Bros. provides Netflix with strong programming that helps maintain its edge over competitors such as Walt Disney Co. and Paramount. The transaction will undoubtedly be examined for antitrust concerns in both the US and Europe, and it has already raised some alarms. California Republican Darrell Issa has written to US regulators expressing opposition to any potential deal involving Netflix, claiming it could negatively impact consumers. However, Netflix has pointed out that its major rival is actually Alphabet Inc.'s YouTube. The interest from Netflix in Warner Bros. has also created anxiety within Hollywood. The company has mostly resisted letting its films be shown in theaters, occasionally allowing its original productions limited theatrical releases.
