For $72 billion, Netflix will acquire Warner Bros.' film and streaming businesses.

 

Credit: Bloomberg via getty image/bbc

In a significant deal in Hollywood, Netflix has agreed to acquire Warner Bros. Discovery's film and streaming businesses for $72 billion (54 billion pounds). After a lengthy negotiation, the streaming giant prevailed over rivals Comcast and Paramount Skydance to win the bid for Warner Bros. Harry Potter and Game of Thrones, as well as the streaming service HBO Max, are owned by Warner Bros. Despite the fact that the deal still needs to be approved by competition authorities, the takeover is expected to establish a new entertainment industry giant.

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Ted Sarandos, Netflix's co-chief executive, stated that the streaming service was "highly confident" it would obtain the necessary regulatory approval and was proceeding "full speed" in this direction. He stated that "we can give audiences more of what they love and help define the next century of storytelling" by combining the streaming platform's series like Stranger Things with the library of Warner Bros. films and shows. He stated, "Warner Bros. have defined the last century of entertainment, and we can define the next one together." "We think it's quite early to get into the specifics of how we're going to tailor this offering for consumers," Netflix co-chief executive Greg Peters said when asked if HBO should remain a separate streaming service. However, he added, "We think it's quite early to get into the specifics of how we're going to tailor this offering for consumers." Netflix anticipates saving between $2 billion and $3 billion, primarily through the elimination of overlaps between the support and technology departments. It stated that Warner Bros films will continue to be released in theaters, and the company's television studio will continue to produce for third parties. Netflix will continue to exclusively produce content for its own platform.

Warner Bros owns the rights to the Harry Potter films. Image Credit: murray Close/Getty Image/BBC

Mr. Sarandos acknowledged that the acquisition may have surprised some shareholders, but that it was a "rare opportunity" to position Netflix for success "for decades to come," calling it a "big day" for the companies. David Zaslav, president and chief executive of Warner Bros, added the agreement would combine "two of the greatest storytelling companies in the world".

 He stated, "We will ensure people everywhere will continue to enjoy the world's most resonant stories for generations to come by joining forces with Netflix." The cash and stock deal has a total enterprise value of approximately $82.7 billion, which includes the value of the company's shares and its debts. Each Warner Bros. share is worth $27.75. $72 billion is the equity value, or cash price. The deal was approved unanimously by each company's boards of directors. Cinema United's chief executive, Michael O'Leary, stated that the merger posed "an unprecedented threat" to the global movie industry. He stated, "This acquisition will have a negative impact on theatres from the biggest circuits to one-screen independents in small towns in the United States and around the world." After Warner Bros. finalizes its previously announced plans to split its global networks division into two companies next year, Netflix will complete the acquisition. Its cable channels like CNN and TNT Sports in the United States, as well as its Discovery and free-to-air channels in Europe, will be part of its global networks division, which will be called Discovery Global. TNT Sports International, on the other hand, will remain with the streaming and studios division that Netflix is selling.

Hollywood shake-up

"A huge statement of intent and underlines Netflix aspirations to be a global leader in the new world order of streaming," said Paolo Pescatore, founder and technology media and telecom analyst at PP Foresight. However, despite the fact that the "surprising move" made sense for Warner Bros., he warned that the deal's size could "provide a headache for Netflix" when attempting to combine the two businesses. Even though the agreement only covers a portion of Warner Bros., a rival, Paramount, had put off in October an offer to buy the entire company, including its cable networks. Before putting itself up for sale, Warner Bros. rejected this move. Tom Harrington, head of television at Enders Analysis, stated prior to the deal's announcement that it was difficult to determine whether regulators would approve the takeover, but that if it went through, it would have a significant impact on the film industry. He stated, "If it were to pass, it would reorient Hollywood." Mr. Harrington stated that a newly merged company would likely experience "big reductions" in television and film output, which would result in opposition to the move from relevant unions and portions of Hollywood. Mr. Harrington stated that a merger was likely to result in higher prices for consumers. "The greater penetration of Netflix households would likely mean an increase in total overall subscription revenues," according to the report. "Netflix would become more expensive, and even though HBO Max would be shuttered or become non-essential." AJ Bell's head of financial analysis, Danni Hewson, claimed that Netflix had "offered an olive branch" to Hollywood by promising to continue showing Warner Bros. films on television. She stated, "There are likely to be significant cost savings to be made if this deal can clear those significant regulatory hurdles quickly." "One of the areas that will face a lot of scrutiny in the coming months is whether Netflix will be seen to have too much pricing power or how much of those savings get passed on to streaming platform subscribers."

Source: BBC