Making sense of the risky Netflix-Warner Bros. deal
Whether or not Netflix’s $82.6 billion acquisition of Warner Bros. goes through, the deal encapsulates a fraught moment for Hollywood, as the entertainment business is increasingly overshadowed by tech giants.
A Consolidated Market
On the latest episode of the Equity podcast, Kirsten Korosec and I discussed the deal’s implications, both for Netflix and the larger Hollywood ecosystem.
Kirsten noted that it’s just the latest move bringing more consolidation to the media business, and she wondered whether it’s “too big a risk” for Netflix.
The Analysts’ Dilemma
Meanwhile, I discussed a call with Netflix executives where Wall Street analysts also seemed to be struggling to wrap their heads around the deal.
And then of course there’s Paramount’s competing hostile bid — whatever happens, Warner Bros.’ days as a standalone company seem to be numbered.
Symbolic and Substantive Change
Kirsten: I remember when Netflix was just a little baby startup and I got their [DVDs] in the mail.
Here they are, all grown up, bidding for a legacy company. Did that run through your head when you saw the news?
Anthony: Certainly symbolically, it’s this moment where the upstart has eaten Hollywood.
Risks and Rewards
But then again, they have to execute on [running] an even bigger company than ever before.
And so I guess my third thought on this is: Should they be buying this? Is this what it takes for them to expand? Is it a risk for them to take on so much?
A Good Deal for Netflix?
Anthony: I can see how it makes sense for Netflix.
It’s a way to take a [content] library that is already quite large, and they’ve obviously had some very successful TV shows — less so on the movie side — [but] potentially, they just become so much stronger on the content side.
Implications for Hollywood
And so I think there’s A) Is this a good deal for Netflix? And B) is this a good deal for the entertainment business?
I don’t have a good answer for either, [but] I think it’s more likely to be a good deal for Netflix than it is to be a good deal for the entertainment business.
A Disappointing Outcome
Though again, part of what to keep in mind as people weigh those options or think about possible outcomes here, is that because of the way that Paramount has forced Warner Bros. to consider these acquisition offers, it seems unlikely that Warner Bros. is going to be able to continue as an independent company — which, if you’re not a fan of media consolidation, that is disappointing.
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