Key Takeaways
- Netflix’s co-chief executives, Greg Peters and Ted Sarandos, have expressed confidence in their ability to close a proposed $72-million acquisition of Warner Bros. Discovery.
- The acquisition aims to offer consumers more choice and value, allow the creative community to reach more audiences, and fuel long-term growth.
- Paramount has made a hostile bid of $78 billion for Warner Bros. Discovery, which has sparked concerns among the Hollywood community about the potential impact on job creation and content production.
- Netflix’s proposal has been met with skepticism by the Writers Guild of America West, which fears that the deal will reduce the amount of movies and TV shows created and eliminate jobs.
- The acquisition will require approval from the Department of Justice, which has expressed concerns about Netflix’s large share of the streaming market.
Introduction to the Acquisition
The co-chief executives of Netflix, Greg Peters and Ted Sarandos, have issued a letter expressing confidence in their ability to close a proposed $72-million acquisition of Warner Bros. Discovery. The joint note, filed with the Securities and Exchange Commission, maintains that combining the streaming behemoth with the historic movie and TV studios and its HBO Max service will offer consumers more choice and value, allow the creative community to reach even more audiences with their combined distribution, and fuel their long-term growth. This acquisition has the potential to significantly impact the entertainment industry, and the letter aims to allay fears that the deal will hurt the industry.
The Competition from Paramount
The communication from Netflix’s co-chief executives follows a hostile bid from Paramount, which has offered $78 billion or $30 per share for Warner Bros. Discovery. Paramount is also seeking to acquire WBD’s cable assets, including CNN and Discovery Networks. Warner Bros. Discovery has a massive library of popular and classic films, along with durable TV series such as "Friends," which would fortify Paramount’s own streaming platform, Paramount+. The bid from Paramount has upped the ante, and the company is going directly to shareholders to put pressure on WBD. Paramount executives have accused Warner Bros. Discovery of not engaging meaningfully with multiple proposals it put forth over the course of 12 weeks.
Concerns from the Hollywood Community
The Hollywood community, especially among Guild members, is not enthralled with the Netflix deal, fearing it will reduce the amount of movies and TV shows created and eliminate jobs. Michele Mulroney, president of the Writers Guild of America West, said, "We’ve seen this movie before, and we know how it ends. There are lots of promises made that one plus one is going to equal three. But it’s very hard to envision how two behemoths, for example, Warner Bros. and Netflix… can keep up the level of output they currently have." This concern is echoed by many in the industry, who fear that the consolidation of two major players will lead to a reduction in content production and job losses.
Netflix’s Response to Concerns
Peters and Sarandos counter that their proposal "is pro-consumer, pro-innovation, pro-worker, pro-creator, and pro-growth." The letter points to Nielsen data that shows Netflix would only account for 9% of all TV usage if combined with WBD. YouTube currently has 13% while the potential combination of Paramount and WBD would be 14%. The executives said Netflix expected the hostile bid from Paramount and contend that the company has "a solid deal in place" with the streamer. They also expressed confidence in getting government approval for a deal, addressing the prevailing wisdom that the friendly relationship between President Trump and Paramount Chief Executive David Ellison and his investor father Larry will help grease the wheels for approval.
Government Approval and the Future of the Deal
The deal will need the approval of the Department of Justice, which has expressed concerns about Netflix’s large share of the streaming market. President Trump has said that Netflix’s large share of the streaming market "could be a problem" for the company’s pursuit. Despite these concerns, Peters and Sarandos are confident that they will get the approvals they need to make the deal happen. They said, "We’re confident we’ll get it over the finish line—and we’re genuinely excited about what’s ahead. We believe in this deal—in the value it creates— and we’re confident we’ll get the approvals we need to make it happen." The outcome of this deal will have significant implications for the entertainment industry, and it remains to be seen whether Netflix will be able to successfully navigate the regulatory hurdles and complete the acquisition.