Instant View: Netflix to buy Warner Bros Discovery’s studios, streaming unit for $72 billion

Dec 5 (Reuters) – Netflix has agreed to buy Warner Bros Discovery’s TV, film studios and streaming division for $72 billion, a deal that would hand control of one of Hollywood’s most prized and oldest assets to the streaming pioneer.

Buying the owner of marquee franchises, including “Game of Thrones”, “DC Comics” and “Harry Potter”, will further tilt the balance of power in Hollywood in favor of Netflix. But the deal is likely to face strong antitrust scrutiny in Europe and the U.S.

By the numbers:-

— The deal values Warner Bros Discovery at $27.75 a share, or about $72 billion in equity, and $82.7 billion, including debt

— Netflix has offered Warner Bros Discovery a $5.8 billion breakup fee, while Warner Bros Discovery would pay Netflix $2.8 billion if the deal collapses

— Netflix said it expects to generate at least $2 billion to $3 billion in annual cost savings by the third year after the deal closes

LAURA HOULGATTE, CEO OF UNIC, THE INTERNATIONAL UNION OF CINEMAS, EUROPEAN TRADE BODY REPRESENTING CINEMA EXHIBITORS

“This deal represents a double risk. If a studio disappears, that will inevitably mean that cinemas will have fewer films to screen for their audiences, leading to reduced income, significant cinema closures and job losses in the industry.”

“And in many ways, this is worse than the acquisition of one movie studio by another, as we saw with Disney’s acquisition of 20th Century Fox a decade or so ago.”

“Both in its words and actions, Netflix has time and again made it clear that it does not believe in cinemas and their business model. Netflix has released only a handful of titles in cinemas, usually to chase awards, and only for a very short period, denying cinema operators a fair window of exclusivity.”

JASON KILAR, FORMER WARNERMEDIA CEO, ON X

“If I was tasked with doing so, I could not think of a more effective way to reduce competition in Hollywood than selling WBD to Netflix.”

DAVID O’HARA, MKI PARTNERS, NEW YORK

“The review will likely be slow and uncomfortable, but the backdrop is still a crowded market where Disney+, Prime Video, Apple TV+ and others hold real share. The main structural issue sits around HBO and, if pressure intensifies, HBO or a defined streaming package might have to be sold to cut overlap and make clearance easier.”

PAOLO PESCATORE, ANALYST AT PP FORESIGHT, SAN FRANCISCO, CALIFORNIA

“We should expect this to wrangle on given Paramount Skydance’s pursuit for WBD… This is uncharted waters and previous big media acquisitions have been poorly executed. If and once approved, Netflix will need to have a razor sharp focus on integration and execution.”

“Netflix is no longer the new kid on block and entering a new phase of the streaming video revolution!”

MICHAEL ASHLEY SCHULMAN, PARTNER & CHIEF INVESTMENT OFFICER, RUNNING POINT CAPITAL ADVISORS, EL SEGUNDO, CALIFORNIA

“Strategically, they get a deep library including Harry Potter, DC, Game of Thrones, along with some HBO swag. From Disney, Amazon, and Paramount’s perspective, the competitor with the most subscribers just grew stronger and gets closer to Amazon’s total number of titles.”

DAVID MORRISON, SENIOR MARKET ANALYST, TRADE NATION, LONDON

“Paramount Skydance and Comcast were also desperate to get their hands on WBD’s back catalogue and everything else that went with it. So there’s no guarantee that these parties won’t look to challenge the legality of the bidding process.”

“There are also many in the entertainment industry who are very concerned about Netflix buying WBD. The formation of such a large and powerful streaming conglomerate has serious implications for the industry, as it has the potential to block out competition from smaller outfits and price out smaller producers, thereby reducing choice. Viewers could face higher charges in the future.”

ANTHONY SAGLIMBENE, CHIEF MARKET STRATEGIST AT AMERIPRISE FINANCIAL, DETROIT

“This move is a recognition that there’s more optimism about the ability to get deals done. Both companies probably expect that they may need to sell assets to close the deal. And I think there’s more than enough room for them to do that.”

TOM HARRINGTON, HEAD OF TELEVISION AT ENDERS ANALYSIS, GREATER LONDON

“The regulatory possibility of this going through is hard to gauge given that much of it remains stateside and will pivot on the whims of the President… As such there will be resistance from parts of Hollywood and various unions. HBO, the creative jewel, would be terribly exposed within Netflix, although it has survived difficult owners for a lot of its existence.”

“For consumers, this would likely result in rising costs: Netflix would get more expensive and even though HBO Max would be shuttered/become non-essential, the greater penetration of Netflix households would likely mean an increase in total overall subscription revenues.”

KIM FORREST, CHIEF INVESTMENT OFFICER AT BOKEH CAPITAL PARTNERS, PITTSBURGH

“It’s super interesting that the bidding came down to Netflix winning. Now I think it’s going to be a heavy burden to get it passed through the regulators, not just in the United States but also worldwide. It’s going to be an issue, but apparently the companies think that they can overcome that.”

CHRIS BEAUCHAMP, CHIEF MARKET ANALYST AT IG GROUP, LONDON

“Netflix is badly in need of something to pep up its faltering share price, but this deal might not be it. Industry data suggests a wide crossover between those that have Netflix and those with HBO Max, so the immediate benefits are not apparent at present. Plus, the competition angle and a potential White House intervention loom large.”

(Reporting by Foo Yun Chee in Brussels, Harshita Mary Varghese, Anhata Rooprai, Shashwat Chauhan, Twesha Dikshit, Purvi Agarwal, Rashika Singh, Niket Nishant and Arpan Varghese in Bengaluru; Editing by Shinjini Ganguli)

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