Netflix's $82.7 billion purchase of Warner Bros. represents a significant challenge for an already struggling Hollywood. The sector continues to grapple with the aftermath of the COVID-19 crisis, which shut down cinemas and accustomed viewers to home-based streaming options. The 2023 labor actions by the Writers Guild of America and SAG-AFTRA, fueled by worries over studios' focus on AI technologies, disrupted numerous film and television initiatives. Meanwhile, the expansion of digital platforms has prompted media firms to accumulate debt through questionable consolidations, such as Warner Bros. Discovery, resulting in elevated fees for users, staff reductions, and scaled-back content creation.
In the current climate, media enterprises appear to be relying on intensified mergers for viability. The 2022 Amazon acquisition of MGM for $8.45 billion signaled a trend, followed by Skydance's $8 billion purchase of Paramount. However, the Netflix-Warner Bros. transaction takes this further, potentially transforming core aspects of the entertainment world, including cinema attendance and the role of tangible media formats.
Following the planned division of Warner Bros. and Discovery set for next year, Netflix intends to take over Warner Bros.' core holdings—encompassing its production facilities for movies and series, HBO Max, and HBO—for $82.7 billion. Sources cited by Game Developer indicate that Warner Bros. Games, home to studios like NetherRealm behind Mortal Kombat, will join the package.
Even prior to the official reveal, acquiring Warner Bros. was expected to encounter regulatory pushback from multiple angles. Paramount recently issued a communication to Warner Bros. challenging the equity and thoroughness of the sale process, which had Comcast as another contender. The New York Post then disclosed that Paramount's leader, David Ellison—whose father is Oracle chief Larry Ellison, a known supporter of Trump—engaged with government figures to advocate for his interest in acquiring Netflix instead. As of today, sources inform CNBC that the Trump administration regards the Netflix-Warner Bros. arrangement with considerable doubt.
From the Democratic perspective, Massachusetts Senator Elizabeth Warren has labeled the merger a 'monopoly-laden disaster.' She warned that uniting Netflix and Warner Bros. would form a dominant player overseeing nearly 50% of the streaming sector, potentially driving up costs, reducing viewer options for content and platforms, and endangering jobs for U.S. employees.
Whether the deal will overcome regulatory obstacles remains uncertain, though both parties should brace for substantial hurdles in gaining approval.
JustWatch analytics show that merging Netflix and HBO would yield a 33% stake in the American streaming video sector, surpassing Amazon Prime Video's 21%. Regarding integration, Netflix has committed to preserving Warner Bros.' existing operations, covering HBO Max and HBO, cinema distributions for new releases, and ongoing studio activities.
During today's earnings discussion, Netflix co-CEO Greg Peters avoided detailing consumer-facing adjustments when queried about HBO's standalone status. 'It's premature to outline exact modifications to our services,' he noted. 'The HBO name carries strong value and will factor into our consumer strategy, allowing flexibility in bundling to deliver optimal value.'
Consumers can anticipate broader price hikes for both HBO and Netflix offerings. The entity might also introduce bundled packages, akin to Disney's approach with Disney+, Hulu, and ESPN.
The merger spells trouble for traditional cinemas. Past combinations, including Disney's with Fox, have typically reduced big-screen outings rather than expanding them. Netflix, having shifted toward streaming dominance, has prioritized subscriber growth and viewer retention, viewing cinema launches of its exclusives as secondary.
In the same call, co-CEO Ted Sarandos highlighted that Netflix has brought around 30 titles to theaters annually, indicating openness to such distribution. 'Extended exclusive periods in cinemas don't serve audiences well,' he explained. 'We'll uphold the tradition of premiering in theaters for relevant titles, but timelines will adapt to better align with viewer habits.' He further assured that Warner Bros. projects destined for theaters would proceed unchanged, emphasizing delivery of premiere films directly to audiences. Earlier this April at the Time100 event, Sarandos described the cinema framework as obsolete, noting limited access for many Americans to nearby venues.
Cinema United, advocating for more than 30,000 U.S. theater screens, has voiced strong objections to the proposal. 'This Netflix takeover of Warner Bros. endangers the international cinema sector like never before, affecting chains large and small, from urban multiplexes to rural single-screen venues across the U.S. and beyond,' stated president and CEO Michael O’Leary in a release.
'Cinema United backs reforms that boost film output and enhance theater experiences for audiences,' O’Leary continued. 'Yet Netflix's approach fundamentally undermines cinema showings—it's antithetical. Authorities should examine this deal's details and recognize its harm to viewers, exhibitors, and the wider entertainment field.'
Creatives such as writers, filmmakers, and showrunners already face difficulties launching work, and fewer outlets for submissions will exacerbate this. Notable figures like Christopher Nolan, once a Warner Bros. favorite, have outright declined Netflix collaborations.
Screenwriter C. Robert Cargill, known for Doctor Strange and The Black Phone, shared with Engadget: 'These mergers aim to narrow entertainment sources to a few giants, monopolizing our time and spending. This erodes variety and emerging talents, forcing countless professionals—potentially thousands—back home without industry roles, while standardizing movies and shows into generic 'content.'
'Warner Bros. has championed bold decisions lately, with leaders embracing risks that yielded cultural and box-office successes,' Cargill added. 'HBO, despite rebranding efforts, produces top-tier series unmatched elsewhere. Can these innovative settings endure post-merger, or will key talent depart alongside creative teams?'
'Essentially, it's a frightening and poignant era for those in film. No criticism of Netflix staff—it's simply that reduced options in media yield fewer successes and more sidelined individuals.'
The acquisition materials and executive discussions omitted any reference to disc-based media, aside from Netflix's origins in mail-order DVDs. This aligns with Netflix treating physical formats as minor. Select titles, including Roma and Frances Ha via Criterion, plus series like Stranger Things on disc and Blu-ray, are accessible that way.
Netflix pledges to operate Warner Bros. divisions normally if approved, encompassing physical distribution, though such assurances often fade. Warner Bros.' home entertainment arm ties into a 2020 partnership with Universal called Studio Distribution Services, managing discs for Sony Pictures, PBS, and Neon too.
With declining interest in physical products, a unified Netflix-Warner Bros. might phase it out first. Still, growing demand for high-end editions from outfits like Arrow Video suggests possible retention for premium items.