In a move that is likely bigger than the average person is expecting, Netflix just announced they plan to acquire WB which includes IP from multiple major brands.
Did you ever think HBO and Netflix would become one service? Well that’s an idea on the board for Netflix as they announced a massive $82.7 Billion (with a B) deal. The mostly cash and stock deal was the most enticing big for Warner Bros with 3 giants all competing to finalize a deal. The stock value at trade will be around 27 dollars a share, which will be about 23 dollars per unit pay out for shareholders, and 4 dollars in netflix stock per unit, with some leniency on the value of Netflix at time of closing.
The other two finalists in the bidding war were Comcast and Paramount. Several other majors companies like Apple and Amazon floated rumors of eventually jumping in too, however bids from these companies were not confirmed.
The deal will finalize next year in Q3, right after the plans to split WB from its global networks division. The global network side will include several assets including : CNN, TNT Sports in the U.S., Discovery, TBS, and various free-to-air channels in Europe, as well as Discovery+, which was recently somewhat merged into HBO Max.
Interestingly enough, the official announcement from Netflix only highlights the fact that their deal consists of buying WB, HBO, HBO Max and the television studios. Several outlets then followed up to confirm the deal does indeed involve the gaming studios as well. Up till this point the only real confirmation of the gaming division being included was a quick 5 second slide showcasing the Mortal Kombat logo. Studios included in the deal includeNetherrealm Studios (Mortal Kombat), Avalanche (Harry Potter), Rocksteady (Batman Arkham series), and TT Games (Lego titles).
Further down in the announcement, Netflix confirms that the deal also consists of the entire library of DC Comics, which we can assume means the comic book side of business also. It’s just rather odd that Netflix isn’t pumping up shareholders by highlighting all the assets included in the deal, and is a bit worrying if Netflix has any plans to utilize these assets to expand their business to other mediums. They recently tried to create a gaming streaming platform, but it hasn’t been doing too well.
Also interesting is the fact Paramount sweetened their bid a bit by offering mandatory allotment of WB movies to be released in theaters yearly, if their deal were to go through. The deal would have kept WB as a separate entity under Paramount and offer 12-15 movie releases annually, a promise to ease the anxiety of struggling movie theaters and creative teams.
Netflix doesn’t appear to have a similar deal. Netflix does intend to keep WB operating as a stand alone business, but will be utilizing the IP and content to make Netflix offerings more robust. Recent reports also state that Netflix plans to keep theatrical releases for WB properties, but the release window between theater and streaming will be significantly shorter. There also does not appear to be any similar guarantee of an allotment of movies, other than Netflix promising to keep WB operating as normal.
Then there is also the hurdle of regulatory approval by the government. Netflix eases some of the concern by allowing WB to follow through with splitting their global networks brand, removing control of news stations and networks. However the bigger concern is the fact Netflix is the leading streaming service provider and second is HBO Max, which means the deal combines the two biggest streaming platforms into one, making competition a struggle for other platforms.
The deal likely will also impact Disney, which currently has a massive bundle deal with HBO to boost their numbers a bit. Paramount planned to utilize HBO to boost their Paramount + service into equal ground as well. So the combination of HBO Max and Netflix is by far a major threat to the streaming landscape.
But things can get a bit complicated for other reasons too. Paramount is already upset about the Netflix announcement and is rumored to be suing for unfair practices in the bidding war. Combine that with the fact that the Paramount CEO has been rather “close” with the current administration, and there could be some issues with getting the deal approved by regulatory review. The argument that HBO Max and Netflix making it nearly impossible to compete in the streaming wars will without a doubt be the major talking point amongst them.
Included in the deal is a breakup aspect as well. If the deal cannot be completed then Netflix will have to pay WB 5.8 Billion dollars. And if WB backs out of the deal for any reason, they will pay Netflix 2.8 Billion dollars. It was hinted this aspect of the bid is what set Netflix over the other two bidders, as neither of the other major bidders wanted to agree to similar terms.
Interesting to note is something a bit more historical and fun to think about. When Netflix first started, they simply looked to change the landscape of how renting a movie would work. You might remember the days of sitting by your mailbox waiting for the red envelope, and inside it was the latest movie you planned to watch all weekend. Well they succeeded in doing just that, but once they created a proof of concept they attempted to sell themselves to Blockbuster for a whopping $50 million dollars. The deal was simple, Netflix operated the movies by mail, and Blockbuster continued to charge you late fees when you didn’t return a weekend movie to a store. Blockbuster iconically laughed Netflix out of the room, and well now Netflix is buying Warner Bros for over 80 Billion dollars and Blockbuster is a meme on social media. Crazy, isn’t it?
