Warner Bros. has the infamous history of being bought out by other companies, then quickly finding itself on the market after its new owners realized how difficult it is to capitalize on the assets of a traditional production studio. These challenges are part of what doomed WB’s mergers with AOL and AT&T, which bought the studio in an attempt to reinvent itself. But WB’s latest acquisition deal – this time with Netflix for $83 billion – appears to have the potential to play out differently because of how much the streamer has become a major player in the entertainment industry. It also shows how far Netflix has come: In less than two decades, the streamer has gone from a tech newbie to one of Hollywood’s most storied studios.
Assuming the deal receives regulatory approval, Netflix will soon own all of Warner Bros. (but not Discovery Global), which includes HBO/HBO Max, DC Studios, and the former studio’s television and film production operations. This would make Netflix the headquarters for many more of the world’s biggest entertainment franchises, like Game of Thrones And Harry Potterand gives the streamer a much larger operational footprint as a true studio. Discovery Global – which retains ownership of networks including CNN, Discovery Channel and TLC – is expected to become an independent company by the third quarter of 2026.
This strategic bifurcation and asset sale was obviously WBD’s desired outcome when the company first announced earlier this year that it planned to spin off Warner Bros. and Discovery in two units. At the time, CEO David Zaslav had not yet announced that the company was open to acquisition offers. But you could learn as much by looking at how WBD struggled to turn a profit with its linear cable networks.
Even though WBD managed to pay off a substantial portion of the $55 billion in debt it inherited when Discovery purchased WarnerMedia, the combined company’s declining cable TV assets were a major factor in earning a significantly downgraded credit rating earlier this year. This debt – a legacy of AOL’s disastrous merger with Time Warner – weighed down WBD throughout Zaslav’s tenure as CEO.
A mix of money problems, ill-advised rebranding and multiple rounds of layoffs left WBD in a very precarious position that made selling it to the highest bidder one of its only viable options for appeasing shareholders. These challenges could also be difficult for Netflix to overcome, but this situation looks like it could evolve very differently for a handful of key reasons.
Unlike previous mergers where Warner Bros. has been gobbled up by traditional tech and telecom giants, the new deal comes at a time when Netflix has long established itself as a power player in Hollywood. In addition to acquiring intellectual property that would later become a success, the streamer has built a robust production infrastructure to launch its own entirely original projects. And with many subscriber-generating projects on the platform like Stranger Things And Squid game is coming to an end, it’s easy to understand why he wanted to buy Warner Bros. a large library of films and series. Netflix doesn’t have the greatest track record when it comes to creating its own franchises – remember Rebel Moon? – and that’s exactly what it feels like with WB.
Although Netflix feels like a better acquisition partner than Warner Bros. previous owners, it is still a consolidation and this type of merger always results in losses. And it’s likely we’ll start hearing about layoffs soon as Netflix begins to deal with the internal layoffs created by the absorption of Warner Bros. employees and operations. But what’s much less clear is how the newly merged studio will launch its new projects.
In 2021, at the height of the covid-19 pandemic, WBD’s decision to release films on HBO Max rather than in theaters prompted directors like Christopher Nolan to denounce the company as “the worst streaming service.” Although box office numbers still haven’t returned to pre-pandemic levels, cinemas have reopened and hits like Warner Bros. A Minecraft movie And Superman the features have clearly shown that there is a demand for seeing movies on the big screen. Netflix experimented very limited theatrical releases that read seamlessly like plays to qualify his films for major industry awards. But it’s still primarily a streaming company since it got out of the DVD game.
Unlike MGM, which was in decline when Amazon bought it, Warner Bros. has a very good track record with its recent theatrical releases. Netflix said it “expects” to continue bringing Warner Bros. films in theaters, but co-CEO Ted Sarandos signaled that the company was considering shortening its screening windows in order to “meet audiences where they are faster.”
“I would say right now you should count on anything that’s scheduled to go to theaters through Warner Bros. will continue to go to theaters through Warner Bros. and the Netflix movies will make the same progress as them,” Sarandos said this week on a call with industry analysts.
Netflix has also made it clear that it is willing to reduce production costs by using generative AI. The company hasn’t required its collaborators to use the technology as part of their production workflows, but it’s easy to imagine Generation AI becoming a larger part of the studio now that it has taken on every project that Warner Bros. has.
The most glaring concern emerging from the new merger is the impact it could have on competition between major studios and streaming platforms. Netflix has effectively replaced Warner Bros. as one of the Big Five, which will likely change the power dynamic in the entertainment industry. But streaming customers will likely feel these changes more directly as Netflix and its competitors settle into a new status quo.
Netflix prices could rise further under the assumption that the service has become more premium with Warner Bros. offerings. It remains unclear how Netflix will manage the HBO/Max brands in the long term. The company said it believes “HBO and HBO Max also provide an exciting and complementary offering to consumers,” but it wouldn’t be surprising to see those brands ultimately go the way of Hulu, which has been spun off into a section within Disney Plus.
It’s been years since Netflix was a flashy upstart fighting to be taken seriously. But even though the company has already established itself as the largest television and film broadcaster in the world, this new deal will allow it to reach a different level of notoriety. The Netflix/WBD merger will undoubtedly bring about changes – some of them bad – that will ripple across the entire entertainment landscape.
But as tumultuous as the situation may seem in the immediate future, it seems unlikely that Netflix will end up trying to sell Warner Bros. in a few years. Acquisitions of this magnitude are not the company’s usual way of operating, but it is optimistic about its desire for Warner Bros. since the studio was put up for sale. If the deal goes through, Netflix is undoubtedly in the big leagues – now it needs to prove it belongs.
