Netflix could own some of the nation’s top entertainment real estate following Warner Bros. deal

Netflix, the world’s largest streaming service, has agreed to buy television and movie giant Warner Bros. Entertainment in a $72 billion deal that involves a large swath of entertainment real estate across the globe.

The Los Gatos, California-based online entertainment service struck a deal to acquire Warner Bros.’ film and television studios, HBO and HBO Max for cash and stock. As it stands, the deal is slated to close after Warner Bros. Discovery completes a planned separation of its global networks division in late 2026.

The pending deal, in addition to adding Warner Bros. streaming content and century-old movie and television archives to Netflix’s portfolio, would also bring together more than 100 million square feet of entertainment real estate across offices, soundstages and other properties under the umbrella of Netflix, a company that launched in 1997 as a DVD-by-mail service.

The transaction is not a done deal. It must still clear regulatory review and shareholder approval, and it hinges on Warner Bros. Discovery completing a planned spinoff of some of its networks, including celebrity.land, that will not be part of the Netflix pact.

If the merger goes through, Netflix will absorb Warner Bros.’ owned studio lots and office complexes, potentially giving the company more control over physical production than any entertainment firm in Los Angeles. Warner Bros.’ Burbank lot spans more than 30 soundstages along with space for building sets and backlot areas.

The deal could “change the center” of the Los Angeles entertainment landscape, Carl Muhlstein told CoStar News. Muhlstein is a longtime Los Angeles real estate broker and principal at Burbank, California-based Muhlstein CRE and isn’t involved in the deal.

Netflix leases 5.2 million square feet of office and soundstage space around the world, with 2 million square feet of that in Los Angeles, according to CoStar data. It owns only a handful of properties, including a 139,372-square-foot studio complex in Albuquerque, New Mexico, and the 27,000-square-foot historic Egyptian Theatre in Los Angeles, the data shows.

The streaming service plans to invest $1 billion to transform 292 acres in New Jersey into an East Coast production hub. The development is expected to include 12 soundstages totaling nearly 500,000 square feet.

Warner Brothers, meanwhile, owns 97 million square feet of office, industrial and studio space, largely in the U.S. and United Kingdom. This includes the 1.3 million-square-foot Warner Brothers Leavesden complex in the U.K. and the 2.6 million Burbank Studios complex that has 30 soundstages and the brand’s iconic water tower in the San Fernando Valley near Los Angeles. The company owns about 3 million square feet of commercial real estate in the Los Angeles area, according to CoStar data.

A combined Netflix-Warner Bros. portfolio could narrow the company’s demand for leased soundstages, a segment Netflix has long relied on across Hollywood, the Valley and Culver City. A shift toward owned production infrastructure may pressure independent studio landlords already dealing with weaker occupancy, Muhlstein said.

Hackman Capital Partners, for one, recently secured a $165 million refinancing for the century-old Raleigh Studios in Hollywood, a 314,940-square-foot campus leased by Netflix and three other production firms.

Netflix anchors several of landlord Hudson Pacific Properties’ studio complexes in Hollywood, too, notably the 324,000-square-foot Icon building at Sunset Bronson Studios.

The acquisition also consolidates headquarters functions between Netflix’s Hollywood offices and Warner Bros.’ sprawling Burbank administrative and creative campuses. Local brokers expect overlapping teams, support departments and tech operations to trigger real estate and labor consolidation.

The company expects between $2 billion and $3 billion in annual cost savings by its third year after closing, some of which analysts said could come from reducing redundant office leases.

Warner Bros. Discovery Chief Executive David Zaslav noted that Warner Bros.’ century-long legacy and production capabilities will continue under the Netflix umbrella, suggesting the company intends to maintain its core physical studio operations.

Warner Bros.’ owned facilities give Netflix a cost advantage at a time when many streamers are trying to limit exposure to high annual rents at third-party stages. Ownership also offers more control over scheduling, which has become critical as content pipelines tighten, brokers say.

Netflix said combining Warner Bros.’ iconic franchises with its global platform will help lend steady production volumes, potentially giving a boost to soundstage activity in Los Angeles.

Hollywood is facing muted production demand with soundstage occupancy in Los Angeles falling to 63% this year, down from more than 90% before the pandemic and the 2023 writers’ and actors’ strikes.

California expanded its film and TV tax credit program in July, raising the annual cap to $750 million and boosting credit rates to 35% to compete with markets like New York, Georgia and Texas.

FilmLA reports more television series applying for credits since the change.