Netflix to buy Warner Bros film and streaming businesses for $72bn

Netflix has agreed to buy Warner Bros Discovery’s film and streaming business for $72bn (£54bn) in a major Hollywood deal.

The streaming giant has emerged as the successful bidder for Warner Bros ahead of rivals Comcast and Paramount Skydance after a long battle.

Warner Bros. owns franchises including Harry Potter, Game of Thrones and the streaming service HBO Max.

The takeover is set to create a new giant in the entertainment industry, but the deal still needs to be approved by competition authorities.

Some in the film industry, including the Writers Guild of America, criticized the deal, saying it would negatively impact workers and consumers.

Netflix co-CEO Ted Sarandos said the streaming company is “very confident” it will get the regulatory approval it needs and is working “full speed” to make it happen.

By combining the library of Warner Bros. shows and movies with streaming platform series like Stranger Things, “we can give audiences more of what they love and help define the next century of storytelling,” he said.

“Warner Bros. defined the last century of entertainment, and together we can define the next,” he said.

Asked whether HBO should remain a separate streaming service, co-CEO Greg Peters said Netflix believes the HBO brand is important to consumers, but added: “We think it’s too early to get into the details of how to tailor this offering to consumers.”

Netflix estimates it will find $2 billion to $3 billion in savings, mostly by eliminating overlaps in support and technology areas across companies.

Films produced by Warner Bros. will continue to be shown in cinemas, and the Warner Bros. TV studio will still be able to produce for third parties, she added. Netflix will continue to produce content exclusively for its own platform.

Sarandos, who called it a “great day” for the companies, acknowledged that the acquisition may have surprised some shareholders, but it was a “rare opportunity” to set Netflix up for success “for decades to come.”

David Zaslav, president and CEO of Warner Bros., added that the agreement will bring together “two of the greatest storytelling companies in the world.”

“By collaborating with Netflix, we will ensure that people everywhere will continue to enjoy the world’s most resonant stories for generations to come,” he said.

The cash and stock deal is worth $27.75 per Warner Bros. share, and the total enterprise value – which includes the company’s debt and the value of its stock – is about $82.7 billion. The value of the shares, or cash price, is $72 billion.

The boards of directors of each company unanimously approved the deal.

Some in the film industry criticized the agreement.

The Writers Association, with its eastern and western branches in America, issued a joint statement on Friday, saying, “This merger must be prevented.”

“The result will eliminate jobs, cut wages, worsen conditions for all entertainment workers, raise prices for consumers, and reduce the volume and diversity of content for all viewers,” she added.

Michael O’Leary, chief executive of trade body Cinema United, said the merger poses an “unprecedented threat” to the global cinema business.

“The negative impact of this acquisition will impact theaters from the largest circuits to single-screen independent theaters in small towns in the United States and around the world,” he said.

Netflix will complete the acquisition after Warner Bros. finalizes its previously announced plans to separate its streaming and studio division from its global networks division into two companies next year.

Its global networks division will become Discovery Global and will include its cable channels such as CNN and TNT Sports in the United States, as well as Discovery Channels and free-to-air channels in Europe.

However, TNT Sports International will remain with the broadcast division and studios sold to Netflix.

Paolo Pescatore, founder and technology media and communications analyst at PP Foresight, said the sale was “a huge statement of intent and underscores Netflix’s aspirations to become a global leader in the new world order of streaming.”

But he warned that while the “surprise move” makes sense for Warner Bros., it could “pose a headache for Netflix” when trying to merge the two companies given the size of the deal.

While the agreed-upon deal is for a portion of Warner Bros.’s business, rival Paramount made a bid to buy the entire company, including its cable networks, in October.

Warner Bros. rejected the move before putting itself up for sale.

Before the deal was announced, Tom Harrington, head of TV at Enders Analysis, said it was difficult to gauge whether the acquisition would be approved by regulators, but if it did, it would have a huge impact on cinema.

“If it passes, it will redirect Hollywood,” he said.

Harrington said there would likely be “significant cuts” to television and film production from the newly combined company, which could lead to resistance to the move from parts of Hollywood and related unions.

For consumers, Harrington said the merger would likely lead to higher prices.

“Netflix will become more expensive, and although HBO Max will close/become non-essential, greater penetration of Netflix households will likely mean an increase in overall overall subscription revenue.”

Danny Hewson, head of financial analysis at AJ Bell, said Netflix had “offered an olive branch” to Hollywood with a promise to continue releasing Warner Bros. films on the big screen.

“If this deal can quickly clear those significant regulatory hurdles, significant cost savings are likely to be achieved,” she said.

“How much of these savings are passed on to subscribers of the streaming platform or whether Netflix will be seen as having too much pricing power is one area that will face a great deal of scrutiny in the coming months.”

With additional reporting from Natalie Sherman