Picture Credit: Alamy
Since Netflix’s announcement with Warner Bros. Discovery that it’d be acquiring the studio and streaming assets, including the movie and TV division, plus HBO and HBO Max, there’s been a lot of twists and turns in the story. This week will be one of the most important yet, though, as Warner Bros. is going back to the negotiating table with Paramount to receive their best and final offer. Netflix isn’t done, though, and is on a charm offensive, with Ted Sarandos setting out plans and making his arguments on The Town with Matthew Belloni. We’ll cover what was said, plus some additional thoughts below.
In a fiery new interview, with much more substance than the clown show that was the DC hearing, Netflix co-CEO Ted Sarandos defends the company’s bid for Warner Bros. Discovery, attacking the rival Paramount offer as “risky” and promising to keep movies in theaters. Sarandos didn’t mince words, characterizing the rival Paramount bid as a “leveraged buyout” that would lead to billions in cuts, while framing the Netflix acquisition as a growth engine for the industry.
One of the biggest concerns about Paramount’s integration was how it would play out, suggesting that most assets under Netflix would remain independent and additive. While Paramount has acknowledged at least $6 billion in savings to be made, Sarandos estimates the figure would be much higher, suggesting it could reach $16 billion to make the leverage deal work.
The State of the Deal
Despite believing the deal was “sewn up” in December, Netflix is still not over the line with Paramount, having launched a hostile bid that has yet to be resolved.
- Netflix’s Offer: $27.75 per share (all cash) for the studio and HBO, with WBD shareholders retaining “Discovery Global” (the remaining TV unit).
- The Paramount/Ellison Offer: Reportedly $30 per share for the whole company, with rumors it could go to $31, and some even suggesting it could go above $35.
When asked why Netflix agreed to this seven-day extension, Sarandos claimed it wasn’t out of weakness, but to provide clarity against “misinformation” coming from the Paramount camp. “It’s giving the Warner Bros. Discovery shareholders exactly what they deserve, which is clarity,” Sarandos said, stating that Paramount has been “flooding the zone with a bunch of false information about the deal… It feels like just a lot of whining.”
Why does Netflix want Warner Bros? According to Sarandos, it’s not so much a need as a want, saying, “We do think that it’s an accelerant to an already successful business model.”
Continuing, “It ensures our continued growth into the next century with Netflix. It’s a combination of their IP. We’ve been doing it [Original programming] for about a decade. They’ve been doing it for about a century. So I think that putting those assets together and putting them to work to create more jobs, more series, more films.”
The “HBO” Brand Will Stay Distinct & Why The Deal Works As A Merger
For fans of prestige TV, Sarandos offered some relief regarding HBO. He spoke about the decision to blend HBO into “Max,” suggesting he would return the brand to its premium roots.
“I think one of the challenges they’ve had over the last couple of years is trying to be jammed into becoming a general entertainment brand, which they really aren’t,” Sarandos noted, implying a desire to simplify the branding back to just HBO. He also pushed back on the idea that Netflix would slash HBO’s marketing budget, stating he wants HBO to operate “largely as it is today” and continue to compete against Netflix for projects.
What about the future of HBO Max? No word on exactly what the plans are there.
Sarandos characterized Netflix as a service defined by “high engagement, low churn”—a daily utility that subscribers rarely cancel. In contrast, he described HBO Max and just HBO as having “low engagement, high churn,” a model driven by specific “event” programming where subscribers sign up for a hit show and often leave once it concludes. By combining these assets, Sarandos argued that Netflix can stabilize HBO’s volatile subscriber base, providing a permanent home where prestige content can find consistent, daily engagement between seasons. All along, executives for both Netflix and Warner have re-iterated 80% of HBO subscribers already have a Netflix subscription, suggesting the merger would simply unify the viewing experience for a shared audience rather than reducing consumer choice. Whether that means they’ll operate seperately indefinitely or be merged into one, remains unclear.
Warner Bros. Movies Will Have 45-Day and PVOD Windows
One of the biggest fears regarding a Netflix takeover of Warner Bros. is the potential death of the theatrical window. Netflix has historically favored putting movies directly on streaming. However, Sarandos made his strongest commitment yet to maintaining the traditional movie model. Sarandos confirmed that if the deal closes, Netflix will honor a traditional 45-day theatrical window for Warner Bros. films. That’s in addition to comitting to robust marketing campaigns.
“We’re buying a business model, and we’re going to continue to invest in it and grow it, not to kill it,” Sarandos told Belloni. He outlined a strategy that includes 45 days in theaters, followed by a PVOD (transactional) window, before landing on Max/Netflix. He added, “If we’re going to get into the theatrical business, we want to win.”
However, when pressed, Sarandos admitted he would not put this commitment in writing as a condition of the deal, arguing that there is no legal remedy required because Netflix does not present a “concentration risk” in the theatrical market.
Our Take
Anyone who can tell you what’s going to happen in the next week or so doesn’t really know; the ultimate decision is with a handful of people, then shareholders next month on March 20th, and then a long march to completion. While Ted certainly made some good arguments about Warner Bros.’ future under its banner, most of them amount to emotional arguments, given that hard, cold cash will almost certainly be the deciding factor in the outcome. Unfortunate, but that’s the way of the world. Paramount’s pockets (or, more pertinently, Larry Ellison’s) are deep, and at some point, Netflix will be foolish to keep chasing a deal that’s even more wildly overvalued than it already is.
Like many, the best option here isn’t on the table: Warner Bros. Discovery remaining independent. But increasingly, for various reasons, including some political ones, there is a growing consensus that Netflix is the best home for these assets, particularly given the level of cuts envisioned by Paramount, if Sarandos’s number is accurate.
Getting some minor clarity on the future of HBO will put some minds at ease, as will the theatrical and PVOD window commitments, even if they’re not in writing. What happens to HBO Max in the long term remains unclear. The only comparison we really have in this space is Disney+ and Hulu, which has an asterisk because Hulu has no significant presence outside the US. Still, Hulu and D+ have been slowly merging into a unified platform, and that would appear to be a blueprint here.
The biggest concern for me, at least, is that Netflix has no experience with an acquisition of this scale, and those it has made in the past have been modest successes at best, if not outright failures. Two of the game studios it bought have either shut down (Boss Fight) or been sold back to the owners (Spry Fox). The Millarworld acquisition is one of the oldest and has resulted in some pretty poor movie and TV titles releases, and despite the promise of upwards of a dozen upcoming projects, most are now stalled or outright canceled. Then, when Netflix has explored new genres and content types or businesses, it’s often been messy (like games in the 2020s and animation in the late 2010s, arguably – verdict is out on sports and podcasts), where they’ve invested a bunch upfront with boundless optimism only to rethink and restructure later down the line, which means canceled projects and a general pullback when data and the “experiment” doesn’t go as originally planned.
If left to its own devices, Warner Bros. could thrive under Netflix. If it’s like some of their prior expansions, however, it could be a slow-moving car crash.
What do you think – would Warner Bros. future be brighter under Paramount or Netflix? Let us know in the comments.
