Key Takeaways:
- Netflix co-CEOs Ted Sarandos and Greg Peters believe their deal to buy Warner Bros. and HBO Max will withstand a counterattack by Paramount Skydance.
- The deal has an enterprise value of $82.7 billion, while Paramount’s current offer has a $108.4 billion enterprise value.
- Sarandos and Peters are confident that they will get the regulatory approvals needed to close the deal.
- The co-CEOs plan to keep Warner Bros. movies in theaters and see the deal as a win for the entertainment industry, not the end of it.
- Netflix will continue to focus on its organic growth and delivering for its members, with a small team working on the Warner Bros. deal.
Introduction to the Deal
The recent announcement of Netflix’s megadeal to buy Warner Bros. studios, HBO, and HBO Max has sent shockwaves through the entertainment industry. The deal, which has an enterprise value of $82.7 billion, was announced on December 5. However, just three days later, Paramount Skydance went hostile, with David Ellison announcing that the company was taking its $30/share offer for all of Warner Bros. Discovery directly to shareholders. Paramount’s current offer has a $108.4 billion enterprise value, making it a significant competitor to Netflix’s bid.
Netflix’s Confidence in the Deal
In a memo to Netflix staff, Sarandos and Peters expressed their confidence in the deal, stating that it was "entirely expected" that Paramount would make a hostile bid. However, they believe that their deal is "solid" and will ultimately prevail. The co-CEOs also reiterated their commitment to keeping Warner Bros. movies in theaters, citing the importance of the theatrical experience to the studio’s legacy and value. They also emphasized that the deal is about growth, with Warner Bros. bringing new businesses and capabilities to Netflix, and that there will be no overlap or studio closures.
Regulatory Approvals
Sarandos and Peters also addressed the issue of regulatory approvals, stating that they are confident that they will get the necessary approvals to close the deal. They pointed out that the deal is pro-consumer, pro-innovation, pro-worker, pro-creator, and pro-growth, and that the facts speak for themselves. They also noted that even if the deal is approved, Netflix’s market share would still be relatively small, at around 9% in the US, compared to YouTube’s 13% and a potential Paramount/WBD combination’s 14%.
The Future of Theatrical Releases
The co-CEOs also addressed the issue of theatrical releases, stating that they are committed to preserving the theatrical model as part of Warner Bros.’ distribution strategy. They noted that theatrical releases are an important part of Warner Bros.’ business and legacy, and that they don’t want to change what makes the studio so valuable. They cited the success of recent hits like "Minecraft" and "Superman," which premiered on the big screen, as examples of the importance of theatrical releases.
The Impact on the Entertainment Industry
Sarandos and Peters also addressed the concern that the deal marks the end of Hollywood, stating that they see it as a win for the entertainment industry, not the end of it. They believe that the deal will strengthen one of Hollywood’s most iconic studios, support jobs, and ensure a healthy future for film and TV production. They also noted that the deal is about growth, with Warner Bros. bringing new businesses and capabilities to Netflix, and that there will be no overlap or studio closures.
Next Steps
The co-CEOs concluded by stating that they have a small but mighty team of experts working on the deal, and that the rest of the company should remain focused on delivering for its members and realizing its organic growth potential. They also noted that they will continue to update employees and the public on the progress of the deal through their Take 5 blog and other channels. Overall, Sarandos and Peters expressed their confidence in the deal and their commitment to making it a success, and they urged employees to stay focused on their goals and continue to deliver for Netflix’s members.