“Lots to process for sure. I had to sit down when I saw the news,” as one executive put it.
Netflix’s decision to throw its hat in the ring for the Warner Bros sale emerged in November but no amount of time could prepare the global film and TV industry for the news today that Netflix, the US streamer that has repeatedly recoiled away from any theatrical commitments, has acquired one of the biggest theatrical players in the world, Warner Bros.
The $82.7bn deal, announced today, sees Netflix in line to officially acquire Warner Bros, including its film and television studios, HBO Max and HBO, but not Discovery Global. The deal is still subject to required regulatory approvals.
The industry has questions. Why has Netflix done the deal? What will be the impact on the global theatrical business in the short and long term? What could it mean in Australia and the European territories where Netflix is subject to a levy on its annual turnover? What is next for the physical studio spaces and post facilities owned by Warner Bros.
Screen is updating the story with international industry reactions as they come in.
“Trump is a wild card”
Some say they saw it coming.
“I thought Netflix would be the winner after Sarandos said back in October during the analyst conference for the Q3 results that when they ‘look at M&A, a key question is whether the IP strengthens Netflix’s entertainment offering and whether there is additional value in ownership’,” said Guy Bisson, executive director at UK-based market research firm Ampere Analysis.
“Warner Bros, of course, does just that at a scale that would take Netflix decades to build on its own, if it ever could at all. It’s also well known that HBO content that has been licensed to Netflix does really well for [Netflix].
“The wider impact on the industry is fundamental. Netflix has been the disruptor that ultimately has driven Hollywood and the whole ‘legacy’ business to the challenging position it now finds itself in. Now it will be taking over the keys to a huge ‘legacy’ studio operations in the heart of Burbank [California],” Bisson continued.
”This isn’t a case of the upstart growing up and becoming the old man because Netflix will surely still now shake up the whole traditional value chain from the cinema onwards. But it does show the power of the vertically-integrated studio model of content plus distribution, a model Netflix has been slowly building within its existing operations.
”The studios that have been (very successfully) reengineering themselves to streaming-first operations with a production powerhouse as a base, have suddenly all been leapfrogged in one move.”
Could regulatory approvals in the EU and US prove sticky?
“I really can’t see how a vertical deal of this case can raise major objections,” said Bisson. “Netflix is not dominant in the production/studio space. Obviously, [US President Donald] Trump is a wild card, and that aspect is completely unpredictable. The only area I can see that could raise concerns would be the control of HBO Max. But that would be easily solved by offloading those operations, and I can see Comcast/NBCU happy to buy that up.”
Others admitted being blindsided by the deal. “Surprised” was Jack Davison’s first reaction. The executive vice-president at UK-based consultancy 3Vision said: “Everyone who was talking to me about it [thought] Paramount was a shoo-in.”
He added Netflix’s strategy is rather simple: “It kills the competition… Does it mean Netflix is untouchable? Probably does.”
Dane Phillips, media partner at London-based m&a specialist Pura Advisory, noted: “It’s a retention tool for Netflix, to keep eyeballs in the platform, and will be able to increase prices, the perception that Netflix is ‘the one stop shop’.”
“A handful of platforms on a global scale is an oligopoly”
European film executives who spoke to Screen on the condition of anonymity did not hide their concern at what they see as a severe contraction of the market.
”Streaming is becoming dead,” said one. “In reality, there will be only three to five companies. Globally! Not four to six in the US and four to six in the EU, and maybe one or two small, local players. The fact there are some niche services known only to fans of 70–80-year-old Italian cinema, or platforms that 99% of people have never heard of, is irrelevant. A handful of platforms on a global [Western] scale is a real oligopoly. And what’s worse, these platforms are not competing with the studios. They are acquiring them, becoming the owners of IP, brands, film franchises, characters.
A second European exec added: ”All these market mergers reduce competition between platforms and reduce diversity. If Netflix were to take over Warner Bros (and thus absorb HBO, which was already swallowed by WBD), it would mean that film and TV production on the market will have to follow Netflix’s viewership algorithms. Everything will be cut from the same mould, under the command of one boss.”
UK TV producers
But will this benefit producers? A leading UK TV indie executive is sceptical.“The bit that gives me pause is what happens when a few major players start to hold most of the cards,” they told Screen’s sister publication Broadcast. “Scale can be useful, but once you drift towards a de facto monopoly the whole ecosystem tightens.”
Fewer commissioners with real power mean fewer routes in for new talent, less space for odd, brilliant ideas, and a greater likelihood that audiences end up with a thinner diet of the same familiar flavours.”
They acknowledged there is a clear upside for audiences, with people “tired of juggling subscriptions” and so having all the shows in fewer places will “feel like a breather”.
The key to this deal succeeding is to continue being expansive, the exec believes. “We’re moving away from bragging rights about who owns what, and towards questions of reach, relevance and sustaining quality over the long haul,” they said. “The thing we all need to hold on to is ambition. As the platforms grow closer, the work mustn’t get smaller.”
3Vision’s Davison suggested Netflix’s acquisition of Warner Bros could pose more of a threat to third-party activity and partnerships than a deal with Paramount would have done. “Are they going to take [all that Warner IP] in and do more content on their own? Are they going to limit co-pros? Or will they be out there sharing and licensing content rather than taking content off other people?
”A lot of people will be thinking, ’What’s happening to my partnership with WBD?’ There are some homes of HBO out there that have been holding onto those relationships for ages. The flip side of that is Netflix has been shrewd in how they’ve spent recently. They know they’re not immune to the vagaries of content economics. They’d be in a strong position to partner with people but have a bit more control.”
Davison also hoped it could spell an uptick in investment to flagship brand HBO, which has been “sad to watch” in recent years as WBD has tried to “control costs and sort out P&L”.
“The pipeline for HBO in terms of scripted series has been tiny,” he said. “Netflix is not buying a massive pipeline, but it would be mad to lose the HBO brand.”
“Rising tide lifts all boats”
Some see silver linings in the news.
“The Netflix–Warner Bros deal is a reminder that the centre of gravity in our industry has shifted,” said UK producer Oliver Roskill, of Record Player Films and member of Producers Anonymous. “When a streamer buys a century-old studio, it tells you two things: legacy scale isn’t enough anymore, and global reach has become the real currency. For UK indies, it’s both a warning and an opportunity. The middle ground will keep shrinking, but the appetite for bold, distinctive stories will grow, because that’s the one thing the giants can’t manufacture overnight.”
“It’s massive and exciting. It’s big, it’s game-changing,” said one senior TV executive at a UK-based streaming platform. “It opens up so many different new possibilities in terms of content. How will they do it and franchise it? It’s massive and wow… Rising tide lifts all boats. Everyone will raise their game and work harder.”
A second UK TV streaming executive added: “My genuine feeling as a ‘rival’ streamer is that I worry, will it make Netflix lose what made it special? It had a very distinctive tone and offering. How will that change and what will it mean for UK indies? And that could take time and slow its momentum in the UK? I look at the positive of that question as an opportunity for my team and me to continue to grow and offer opportunities to producers for adult-focused content, which is exciting for us.”
“Reduced income and significant cinema closures and job losses”
The European exhibition sector has issued a stark warning. “Were it to be allowed to go ahead, this deal represents a double risk,” said Laura Houlgatte, CEO of European cinema trade body UNIC. “If a studio disappears, that will inevitably mean that cinemas will have fewer films to screen for their audiences, leading to reduced income and significant cinema closures and job losses in the industry.”
Phil Clapp, president of UNIC and chief executive of the UK Cinema Association, added: “Beyond their direct contribution to GDP, job creation, taxes and rental payments, cinemas also create immeasurable value for the entire film industry…. Any reduction in the diversity and quality of content arising from this acquisition, combined with the potential loss of cinemas and jobs, would have a profoundly damaging impact on Europe’s cultural landscape.”
Cathy Sweet, head of film and TV at UK actors’ union Equity, said: ”This latest shift in the film, TV and streaming landscape highlights how important it is that Equity’s agreements are fit for purpose. While company ownership shifts, Equity contracts which underpin the pay, conditions and secondary payments for our members, endure. That’s why it’s so important for us to secure AI protections in our agreements for performers – something we’re currently balloting our members on.
“We welcome the commitment to maintaining cinema theatre releases and the commitment to invest in original content, which must be a positive step for jobs and pay for performers and all in the entertainment industry.
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