Netflix on Friday agreed to buy Warner Bros Discovery’s TV, film studios and streaming division for $72 billion, a deal that would hand control of one of Hollywood’s most prized and oldest assets to the streaming pioneer.
The deal represents a dramatic plot twist for Netflix, which rewrote the Hollywood script, upending how and when consumers watch movies and television shows. Suddenly, it has become the thing it disrupted – a mainstream studio.
“I know some of you are surprised that we’re making this acquisition – and I certainly understand why,” Netflix Co-CEO, Ted Sarandos said on a call with investors. “Over the years, we have been known as builders, not buyers … but this is a rare opportunity that’s going to help us achieve our mission to entertain the world, and bring people together through great stories.”
The agreement follows a weeks-long bidding war in which Netflix offered nearly $28 per share, eclipsing presumed front-runner Paramount Skydance, which made a series of unsolicited bids to acquire all of Warner Bros Discovery, including the cable TV assets slated for a spinoff.
Netflix, which has spent a decade developing such original series as “Stranger Things,” “Bridgerton” and films like “KPop Demon Hunters,” will gain access to Warner Bros’ vast trove of content, built over the last century, including marquee franchises such as “Game of Thrones” and “Harry Potter,” and DC Comics’ roster of superheroes, including Batman and Superman.
The two companies together will “help define the next century of storytelling,” said Sarandos, who had once said “the goal is to become HBO faster than HBO can become us.”
Warner Bros Discovery shares rose 3.2% to $25.33, while Netflix fell about 0.2% and Paramount 6.1%.
Paramount offered $30 a share for Warner Bros Discovery, CNBC reported. Reuters could not verify the report and it was not immediately clear when the offer was made.
The Netflix deal, however, is likely to face strong antitrust scrutiny in Europe and the U.S. as it would give the world’s biggest streaming service ownership of a rival that is home to HBO Max and boasts nearly 130 million streaming subscribers.
“There will be resistance from parts of Hollywood and various unions,” said Tom Harrington, head of television at Enders Analysis in London. “HBO, the creative jewel, would be terribly exposed within Netflix, although it has survived difficult owners for a lot of its existence.”
David Ellison-led Paramount, which kicked off the bidding war with a series of unsolicited offers and has close ties with the Trump administration, had questioned the sale process earlier this week and alleged favorable treatment to Netflix.
Even before the bids were in, some members of Congress said a Netflix–Warner Bros Discovery deal could harm consumers and Hollywood.
Cinema United, a global exhibition trade association, has said the deal poses an “unprecedented threat” to movie theaters worldwide, while former WarnerMedia, CEO Jason Kilar said he could not think of “a more effective way to reduce competition in Hollywood than selling WBD to Netflix.”
Looking to allay some concerns, Netflix said the deal would give subscribers more shows and films, boost its U.S. production and long-term spending on original content and create more jobs and opportunities for creative talent.
The company argued in deal talks that a combination of its streaming service with HBO Max would benefit consumers by lowering the cost of a bundled offering.
Netflix’s Co-CEO, Greg Peters told investors the company could package the streaming services together in a bundle — or find ways to introduce HBO Max to Netflix subscribers. The streaming service has a long history of building audiences for television series, as it did for “Breaking Bad” or the legal drama “Suits.”
The company has told Warner Bros Discovery it would keep releasing the studio’s films in cinemas in a bid to ease fears that its deal would eliminate another studio and major source of theatrical films, according to media reports.
“In light of the current regulatory environment, this will raise eyebrows and concerns. The combined dominant streaming player will be heavily scrutinized,” said PP Foresight analyst Paolo Pescatore.
“We should expect this to wrangle on given Paramount Skydance pursuit for Warner Bros Discovery.”
Under the deal, each Warner Bros Discovery shareholder will receive $23.25 in cash and about $4.50 in Netflix stock per share, valuing Warner at $27.75 a share, or about $72 billion in equity and $82.7 billion including debt.
Netflix has offered Warner Bros Discovery a $5.8 billion breakup fee, while Warner Bros Discovery would pay Netflix $2.8 billion if the deal collapses.
Netflix said it expects to generate at least $2 billion to $3 billion in annual cost savings by the third year after the deal closes.
