Two of the world’s biggest creators of scripted drama are set to create one of the biggest shows the corporate world has ever seen, with streaming giant Netflix set to snap up iconic production house Warner Brothers Discovery in a multi-billion dollar deal.
In a flip of the script, the streaming giant will buy some of Warner Bros most valuable portfolio — including its film and TV studio, cable giant HBO and streaming service HBO Max — in what it says will further its ability to “entertain the world”.
The $US83 billion ($125b) deal still needs regulatory approval but if allowed promises to shake up the future of entertainment in a rapidly shifting media landscape. To that end, Netflix has offered a $US5.8b breakup fee should the deal fall apart as a result of antitrust or other legal challenges.
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But Hollywood is already up in arms, with giants including Titanic and Avatar director James Cameron and Oscar winner Jane Fonda suggesting it should be blocked. Bodies like the Writers Guild of America fear what it would mean for the future of cinema given Netflix’s track record of shunning theatrical releases for its titles.
As part of the deal, Netflix co-chief executive Ted Sarandos has promised Warner Bros. will continue to release moves in theatres. But the guild has painted a bleak picture for the industry, concerns echoed by producers and directors groups.
“The outcome would eliminate jobs, push down wages, worsen conditions for all entertainment workers, raise prices for consumers, and reduce the volume and diversity of content for all viewers,” the guild said, while cinema groups were also wary.
“The proposed acquisition of Warner Bros. by Netflix poses an unprecedented threat to the global exhibition business,” Michael O’Leary, chief executive officer of the theatrical trade group Cinema United, said. “The negative impact of this acquisition will impact theaters from the biggest circuits to one-screen independents.”
The buyout “would be a disaster,” Cameron said late last month in a podcast interview addressing rumours of the deal. “Sorry Ted, but jeez. Sarandos has gone on record saying theatrical films are dead.”
Fonda, star of Netflix show Grace and Frankie, spoke out before the deal was announced: “Consolidation at this scale would be catastrophic for an industry built on free expression, for the creative workers who power it, and for consumers who depend on a free, independent media ecosystem to understand the world.”
The worries raised by the movie and TV industry’s biggest trade groups come against the backdrop of falling US movie and TV production, slack ticket sales and steep job cuts in Hollywood. Another legacy studio, Paramount, was sold earlier this year.
If the Netflix-Warner Bros deal is approved by regulators, Mike Proulx, research director for the business research firm Forrester said, Netflix would “cement itself as the Goliath of streaming services now with the combined weight of HBO Max and the content studios behind it all”.
“This deal changes the calculus of the streaming wars, representing a seismic shift in the entertainment industry,” he said.
As The Washington Post pointed out, many industry analysts and observers view the deal as a major departure from Netflix’s previous business strategy, but in actual fact, its most-watched shows have long included reruns, such as The Office, Friends (now streaming on HBO Max), Grey’s Anatomy and Suits.
Netflix’s most-watched shows have long included reruns, such as Friends (now streaming on HBO Max). Credit: Getty Images/Getty Images
Stranger Things dominates now, but many Netflix originals flop and industry chatter about how few of its originals are renewed for subsequent seasons is on the rise.
The paper added that Netflix’s speciality has always been delivers, not content creation. First with DVDs in the mail and then with streaming, the company changed the way people watch movies, not the movies themselves.
Stranger Things’ final season premiered on November 27. Credit: Supplied./TheWest
Mr Sarandos acknowledged a raft of surprise at the deal, but added it was “a rare opportunity”.
He added his company’s resistance to releasing films in cinemas was mostly tied to “the long exclusive windows, which we don’t really think are that consumer friendly”, referring to the length of time films were in cinemas before being released elsewhere.
Netflix said it will continue to release Warner Bros movies in cinemas and produce the studio’s TV shows for third parties — two major changes in how it does business. The company was a little short on details of exactly how it will integrate the different businesses, but Netflix said it expects to maintain Warner Bros’ current operations and build on its strengths.
The deal will allow Netflix to “significantly expand” US production capacity and invest in original content, which will create jobs and strengthen the entertainment industry, the company said. The combination is also expected to create “at least $US2b-$3bn” in cost savings per year by the third year.
With the purchase, Netflix becomes owner of the HBO network, along with its library of hit shows like The Sopranos and The White Lotus.
The White Lotus season three. Credit: HBO
Warner Bros assets also include its sprawling studios in California, along with a vast film and TV archive that includes Harry Potter and Friends.
Warner Bros put itself up for sale in October after receiving three acquisition offers from Paramount, which were rejected, opening the door for Netflix and fellow US media giant Comcast.
