Netflix has struck a deal to acquire Warner Bros. Discovery for a staggering $83 billion. What unfolds next will be critical in finalizing the agreement.
Reports surfaced that Netflix outmaneuvered Paramount Skydance and Comcast Universal in a competitive bidding process with Warner Bros., potentially merging two entertainment giants—HBO and Netflix.
Once the merger is finalized, Netflix is set to gain control over many of today’s beloved movie franchises, including Harry Potter, Batman, and Game of Thrones. This move would plunge Netflix deeper into theatrical releases.
However, the merger requires regulatory approval in both the US and Europe before it can be executed.
Initially, Warner Bros. will separate its publicly traded division next summer, allowing Netflix to acquire its movie and streaming operations while spinning off its Discovery Global division, which encompasses media outlets like CNN.
Netflix co-CEO Ted Sarandos admitted on a call with analysts that the acquisition surprised quite a few people.
“I think some folks are taken aback by our decision to make this purchase, and I get it. Traditionally, we’ve been known more for building rather than buying,” Sarandos mentioned. “Yet, this is a unique chance to advance our mission of entertaining audiences and connecting people through compelling stories.”
He acknowledged that many previous media mergers had faltered, but expressed confidence that this deal would not follow suit.
“Many failures in the past stemmed from acquirers lacking a solid understanding of the entertainment industry and the assets they were obtaining. We know exactly what we’re acquiring,” he noted.
He pointed out that prior mergers were often undertaken by companies that were already struggling, whereas Netflix is currently thriving.
Regardless of the merger’s outcome, it first needs to clear scrutiny from U.S. regulators. Some officials, including U.S. Senator Mike Lee (R-Utah), have already raised concerns. On social media, he stated that the deal “should trigger alarm bells for antitrust officials worldwide.”
And it’s not just U.S. regulations at play. The deal must also pass regulatory reviews in the European Union.
However, the EU may not present a significant hurdle. Reportedly, several experts believe that while they might demand some concessions, the EU is unlikely to block the deal entirely.
“The EU doesn’t typically obstruct these kinds of agreements. They usually seek access remedies,” said European competition economist Christina Caffara. “I’m not saying it’ll be smooth sailing, but we can expect some negotiations.”
Regardless, the European authorities will need to give a nod before proceeding. The initial news of the deal has only just surfaced, so no proposals have been presented to the EU yet.
The EU will require a “second stage” investigation, which can take around 90 days after the final details are submitted.
Within the entertainment sector, there’s also a sense of trepidation surrounding the merger. Recently, actress Jane Fonda shared her views, arguing that the Warner Bros. deal poses threats to free speech and democracy.
Others have expressed concern too. According to CNN, Cinema United, a group representing theater owners, warned that the deal “represents an unprecedented risk to the global exhibition industry,” given Netflix’s previous stance against theatrical releases.
Regardless of how things unfold with the Netflix and Warner Bros. merger, it will undoubtedly be scrutinized from multiple angles before everything is finalized.
