As you may have seen in the news, Netflix has agreed to acquire Warner Bros, including its film and television studios, HBO, and HBO Max, for an implied equity value of $72 billion and an enterprise value of $82 billion. That is a significant premium for a just part of company that was worth about $26 billion a year before. Of course, the deal must still receive regulatory approval and will take a year to 18 months to come into effect. Netflix once said its job was to become HBO faster than it became Netflix. Now it looks like it has.
Netflix beat Paramount Skydance and Comcast to seal the deal with Warner Bros, in what could be a definitive moment in the movie business. Assuming the deal receives approval on competition grounds, which is far from certain, it will reshape Hollywood.
Paramount Skydance is calling foul. Sky, which is owned by Comcast, must be wondering what it means for its offering, as it is already due to lose the rights to HBO shows.
Warner Bros Discovery was formed through a $43 billion mega merger in 2022. It has 128 million online video subscribers across HBO Max, HBO, and Discovery+. There are no recent public figures for how many of those are for HBO Max, although it had 43 million in June 2021.
There is some overlap between the subscriber base of HBO and Netflix, which has over 300 million subscribers worldwide. Netflix still seems to be thinking about how it might be able to bundle them together, assuming that is allowed.
Netflix is not only gaining access to the massive library of Warner Bros movie assets, but it will also prevent others from getting hold of them, limiting the threat of competition, at least for a while.
The transaction is expected to close after the previously announced separation of WBD’s Global Networks division, Discovery Global, into a new publicly traded company, which is due to be completed in the third quarter of 2026. That will include CNN, TNT Sports in the United States, Discovery, and free-to-air channels across Europe, which are not part of the deal. TNT Sports International is included in the Netflix acquisition.
“Our mission has always been to entertain the world,” said Ted Sarandos, co-chief executive of Netflix. “By combining Warner Bros.’ incredible library of shows and movies—from timeless classics like Casablanca and Citizen Kane to modern favourites like Harry Potter and Friends — with our culture-defining titles like Stranger Things, KPop Demon Hunters and Squid Game, we’ll be able to do that even better. Together, we can give audiences more of what they love and help define the next century of storytelling.”
“I know some of you are surprised that we’re making this acquisition, and I certainly understand why. Over the years, we have been known to be builders, not buyers”, he told analysts.
“This acquisition will improve our offering and accelerate our business for decades to come,” said co-chief executive Greg Peters. “Warner Bros. has helped define entertainment for more than a century and continues to do so with phenomenal creative executives and production capabilities. With our global reach and proven business model, we can introduce a broader audience to the worlds they create — giving our members more options, attracting more fans to our best-in-class streaming service, strengthening the entire entertainment industry and creating more value for shareholders.”
Some might remember that the Warner business has been passed around through major media mergers several times since the infamous Time Warner merger with AOL at the turn of the millennium, destroying billions of dollars in value in the process. So, will it be any different this time?