Netflix buys Warner Bros Discovery’s studios for $72 billion
Netflix secured a $72 billion deal to acquire Warner Bros Discovery, gaining control of iconic franchises like ‘Game of Thrones’ and ‘Harry Potter’.
Netflix is on its way to become a Goliath among streaming services now that it’s set to acquired a historic American entertainment company.
The leading global subscription-based streaming service, with over 300 million annual subscribers, announced Dec. 5 that it has entered into a definitive agreement with Warner Bros. Discovery Inc. in which it will acquire Warner Bros., HBO Max, and HBO.
“This acquisition brings together two pioneering entertainment businesses, combining Netflix’s innovation, global reach and best-in-class streaming service with Warner Bros.’ century-long legacy of world-class storytelling.” said Netflix in a press release.
Highly acclaimed titles like Harry Potter, Game of Thrones, The Wizard of Oz, and the DC Universe will soon join Netflix’s extensive entertainment catalog.
According to the press release, the cash and stock transaction is valued at $27.75 (subject to a collar) per Warner Bros. Discovery share, with a total enterprise value of approximately $82.7 billion (equity value of $72.0 billion). The transaction is expected to close after Discovery Global, a division of Warner Bros. Discovery, separates into a new publicly-traded company, which is expected to reach completion in Q3 2026.
Here’s what Netflix subscribers in Tennessee should know about the blockbuster deal.
Who owns Warner Bros. Discovery?
Warner Bros. Discovery was owned by a mix of public shareholders and major investors like John Mallone’s Liberty Media. Its most recent ownership structure involved Discovery’s existing shareholders, who sold the studio and streaming assets to Netflix.
How did Netflix and Warner Bros. Discovery’s deal come about?
Netflix offered Warner Bros. Discovery nearly $28 per share during a weeks-long bidding war for its acquisition, per Reuters. The bid surpassed those of Paramount Skydance, which made a series of unsolicited bids for the whole of the company, including its cable TV assets that were in plans for a spinoff.
“I know some of you are surprised that we’re making this acquisition ― and I certainly understand why.” Ted Sarandos, Netflix Co-CEO, said in a call to investors, per Reuters. “Over the years, we have been known as builders, not buyers…but this is a rare opportunity that’s going to help us achieve our mission to entertain the world and bring people together through great stories.”
What are the terms of the Netflix and Warner Bros. Discovery agreement?
Each Warner Bros. Discovery shareholder will receive $23.25 in cash and $4.50 in shares of Netflix common stock for each share of Warner Bros. Discovery common stock outstanding at the closing of the transaction, according to the terms of the agreement. This transaction values Warner Bros. Discovery at $27.75 per share, and a total equity value of approximately $72.0 billion and an enterprise value of approximately $82.7 billion.
How will the merging with Warner Bros. Discovery change Netflix?
Netflix is expected to maintain Warner Bros. Discovery’s current operations and build on what makes it valuable in the entertainment industry, including theatrical releases for films. The merging will also add the film and TV libraries of Warner Bros., along with HBO Max and HBO programming, so that subscribers get to enjoy even more high-quality titles.
“By offering members a wider selection of quality series and films, Netflix expects to attract and retain more members, drive more engagement and generate incremental revenue and operating income.” said Netflix’s press release.
Netflix also expects to save $2-3 billion per year by the deal’s third year, with transaction accretive to GAAP earnings per share by year two,
Will my Netflix subscription increase with the acquisition?
Reuters reported Dec. 2 that Netflix’s merging with HBO Max may lower the cost of a bundle offering. However, consumer prices could still rise now that competition from others streaming platforms have been significantly reduced.
“They’ll increase the price and you have fewer options. Because if there are only three players, where are you going to go?” Derek Reisfield, consultant on media and tech mergers and founder of Marketwatch, told USA TODAY.
Nina Tran covers trending topics for The Greenville News, part of the USA TODAY Network. Reach her via email at [email protected].
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