Netflix and Warner Bros. Discovery have reached a deal that will change the entertainment industry as we know it.
On Friday, Dec. 5, Netflix announced its purchase of Warner Bros., including its film and TV studios, HBO Max, and HBO. According to the companies, the total enterprise value of the deal is $82.7 billion, with an equity value of $72 billion.
The announcement comes after a weeks-long bidding war in which Paramount Skydance and Comcast also vied to obtain the entertainment conglomerate. Netflix won the day, to the surprise of many.
“I know some of you are surprised we are making this acquisition,” Netflix co-CEO Ted Sarandos said during a Friday call with analysts, per Variety.
In a statement, Sarandos said that Netflix’s mission “has always been to entertain the world.” He noted that “combining Warner Bros. incredible library of shows and movies” with Netflix’s “culture-defining titles” will “give audiences more of what they love and help define the next century of storytelling.”
The deal, which is expected to close in the next 12-18 months, consists of both cash and stock and is valued at $27.75 per share of Warner Bros.
Warner Bros. was founded in 1923. Its library includes the DC universe, the “Harry Potter” film series, the “Lord of the Rings” movie franchise, and iconic films including “Casablanca” and “Citizen Kane.” Netflix began as a by-mail movie rental service in 1997 before launching its streaming platform in 2007.
Keep scrolling for the answers to all your burning questions about how Netflix’s acquisition of Warner Bros. will impact viewers and subscribers.
What will happen to HBO and HBO Max?
It’s still a bit unclear what will happen to HBO and its streaming platform, HBO Max. According to Variety, Netflix suggested that it will keep HBO Max as a distinct platform. However, the HBO library will also live on Netflix once the deal goes through.
“Beloved franchises, shows and movies such as ‘The Big Bang Theory,’ ‘The Sopranos,’ ‘Game of Thrones,’ ‘The Wizard of Oz’ and the DC Universe will join Netflix’s extensive portfolio including ‘Wednesday,’ ‘Money Heist,’ ‘Bridgerton,’ ‘Adolescence’ and ‘Extraction,’ creating an extraordinary entertainment offering for audiences worldwide,” the companies said in a statement.
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It seems that Netflix’s acquisition of HBO will be similar to Disney’s purchase of Hulu. For now, Hulu is still a standalone app, although its content library is also available on Disney+ and Hulu.
Will Netflix prices go up?
In a press release, Netflix said it expects $2-3 billion of annual cost savings by the third year after the deal closes. Shareholders will get a piece of that, but will the cost savings be passed down to subscribers?
According to Reuters, Netflix argued during negotiations that combining its content library with HBO Max would benefit subscribers by lowering the cost of a bundled streaming platform.
Netflix has not yet shared if and how the deal with Warner Bros. will impact subscription prices. If it follows in Disney+’s footsteps, consumers will still be able to purchase standalone Netflix and HBO Max subscriptions, or pay more for a bundle that includes both.
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Will Warner Bros. movies still be in theaters?
Some consumers have concerns about how Netflix’s purchase of Warner Bros. will impact the movie theater business. In a press release, Netflix said it “expects to maintain Warner Bros.’ current operations and build on its strengths, including theatrical releases for films.”
During a Friday call with Wall Street analysts, Sarandos pointed out that Netflix has had several theatrical releases this year.
“It’s not like we have this opposition to movies in theaters,” the Netflix co-CEO said, per Deadline. “My pushback has been mostly in the fact of the long, exclusive windows, which we don’t really think are that consumer friendly.”
Sarandos’ comments suggest that we’ll see more instances of films debuting in theaters but becoming available on Netflix shortly thereafter.
What are critics of the Netflix Warner Bros. deal saying?
Prominent voices in the entertainment industry, including Cinema United President and CEO Michael O’Leary, have expressed concerns about the deal.
“The proposed acquisition of Warner Bros. by Netflix poses an unprecedented threat to the global exhibition business. The negative impact of this acquisition will impact theatres from the biggest circuits to one-screen independents in small towns in the United States and around the world,” O’Leary said in a statement.
“Cinema United stands ready to support industry changes that lead to increased movie production and give consumers more opportunities to enjoy a day at the local theatre. But Netflix’s stated business model does not support theatrical exhibition. In fact, it is the opposite. Regulators must look closely at the specifics of this proposed transaction and understand the negative impact it will have on consumers, exhibition and the entertainment industry,” he continued.
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An anonymous group identifying themselves only as “concerned feature film producers” sent an email to congress on Friday, outlining their fears that the proposed deal means Netflix could “effectively hold a noose around the theatrical marketplace” by reducing the amount of time that Warner Bros. movies spend in theaters before hittng Netflix.
Sarandos attempted to quell such fears on Friday, noting that he “wouldn’t look at this as a change in approach for Netflix movies or Warner movies,” per Deadline.
“I think over time the [theatrical release] windows will evolve to be much more consumer friendly … but I’d say that right now you should count on everything that has planned on going to the theaters through Warner Bros. will continue to go to the theaters through Warner Bros,” Sarandos said.
Will the Netflix deal with Warner Bros. even go through?
Netflix’s acquisition of Warner Bros. still needs government approval before it becomes official. It could face opposition over antitrust concerns, but economist Cristina Caffarra, who has experience advising companies like Amazon on antitrust issues, doesn’t think the deal will be blocked.
“The [European Union] never stops these deals. They always do access remedies,” Caffarra told Deadline. “I’m not saying it will sail through, [but the process will be] saber rattling, remedy, clear.”
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Some consumers have wondered if President Donald Trump will oppose the deal, but Nicolas Petiti, a professor of competition law at the European University Institute, pointed out to Deadline that it wouldn’t be wise for the president to block a merger involving two U.S. companies.
“The geopolitics of prohibiting a merger between two purely U.S. firms would be very tricky with all the trade war talk,” Petit said.
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