Netflix on Friday said it is buying Warner Bros. in a deal valued at $82.7 billion, merging the biggest streaming service with a storied studio that has produced films such as “Casablanca” and the “Harry Potter” franchise.
In a statement, Netflix said the deal is expected to close after Warner Bros. Discovery spins off its television networks division, Discovery Global, which is now expected to be completed in the third quarter of 2026.
Netflix said it will buy Warner Bros. for $27.75 per share, giving the deal an equity value of $72 billion and a total enterprise value of $82.7 billion. The transaction is expected to close in 12 to 18 months, Netflix said.
The agreement comes after Warner Bros. Discovery, the parent of Warner, had announced in June that it planned to split in two, dividing its cable networks such as CNN and TNT Sports from its streaming and studios business, including HBO Max and Warner Bros. Television.
But in October, Warner Bros. Discovery said it had attracted interest from companies about buying all or parts of it outright, with the Wall Street Journal reporting that media and entertainment businesses, including Paramount Skydance (the parent company of CBS News) and Comcast Corp., were also pursuing a deal for Warner Bros.
According to media reports, Paramount Skydance was interested in acquiring all of Warner Bros., including its cable assets such as CNN and Discovery.
Why Netflix wants Warner Bros.
Buying Warner Bros.’ studios would mark a major strategic shift for Netflix, experts said. Although Netflix already produces original programming, including hit shows such as “Stranger Things,” the acquisition would boost its ability to create content, while also giving it control of Warner Bros.’ 102-year-old catalogue, analysts noted.
Netflix “will cement itself as the Goliath of streaming,” said Mike Proulx, a vice president of research at Forrester. “This deal changes the calculus of the streaming wars, representing a seismic shift in the entertainment industry.”
The enlarged company’s greater scale could also help Netflix in negotiating with advertisers and partners, market research firm MKI Global said in a report. Adding Warner Bros.’ studio and streaming business would give Netflix “a larger flow of premium films and series, reduces hit-rate risk and gives the combined group firmer control over how each title earns through its cycle,” the market research firm added.
The deal also comes as Netflix competes with streaming rival YouTube, which is growing at a faster pace, according to Lightshed Partners analyst Rich Greenfield.
“Ultimately, investors need to assess whether Netflix is making this deal in a ‘rare opportunity’ to accelerate its growth or if it is truly more of a defensive move to limit its peers from getting stronger and increasing competition,” analysts with MoffettNathanson Research, an investment advisory firm focused on tech, telecom and media, said in a research note.
A streaming app to rule them all?
In a conference call with investors to discuss the acquisition, Netflix executives said the deal will help the company attract more subscribers, while also creating value for shareholders.
“We expect to attract and maintain more subscribers, and drive incremental revenue and operating income,” co-CEO Greg Peters said on the call. “We think it’ll accelerate our business for decades to come.”
Peters was also questioned about his comments at an October conference, when he said that big media mergers “don’t have an amazing track record.” On Friday, the executive said he believed this merger would prove to be different because of Netflix’s expertise in creating content.
“A lot of those failures [are] because the company doing the acquisition didn’t understand the entertainment business,” he said. “We understand the business.”
Analysts said Netflix would benefit by adding Warner Bros.’ extensive streaming and film content.
“The rationale for such a deal stems from merging two overlapping streaming offers into a single flagship Netflix app or a tight Netflix-HBO Max bundle, with one login, one discovery layer and one advertising system,” MKI said.
Potential regulatory hurdles
Under the proposed deal, Netflix pledged to honor any contractual agreements for releasing Warner Bros.’ studio films. Yet the streaming giant could face regulatory hurdles in seeking to complete the deal amid concerns the transaction could weaken competition among theaters, Wall Street analysts said.
“Significant concerns have been voiced over the potential impact to the theatrical market should Netflix take over [Warner Bros.],” analysts with Wedbush Securities said in a note to investors, adding that “concerns remain within the industry and among government officials” about the impact of such a deal.
Some lawmakers on Friday also raised concerns that Netflix’s dominance in streaming could lead to higher prices for consumers.
“Allowing Netflix to buy Warner Bros. and control access to almost half of streaming subscribers means it could get more expensive to watch your favorite movies and shows,” Sen. Elizabeth Warren, a Democrat from Massachusetts, said on social media.
Shares of Warner Bros., whose stock price has more than doubled since this summer as speculation of a possible deal heated up, gained $1.54, or 6.3%, to close the day at $26.08. Netflix shares fell $2.98, or 2.9%, to $100.24.
