Last week, Netflix announced a blockbuster deal to purchase Warner Bros., including the film studio, the HBO MAX streaming service, and HBO, for $72 billion, to solidify its already dominant position in premium streaming with an impressive 300 million subscribers worldwide.
Since its inception, Netflix has built its enormous business organically rather than through acquisitions. This deal is their first foray into a big-time, public acquisition battle. It is why their aggressive offer was such a surprise. The Netflix deal is far from done.
The Netflix offer beat out bids from Comcast Universal and David Ellison, the ultimate nepo baby son of Oracle billionaire founder Larry Ellison (3rd richest man in the world). David Ellison’s media company, Skydance, recently acquired National Amusement and Paramount for $8 billion, and needs Warner Bros. content assets to compete with the big boys – Netflix, Amazon, Apple, and Disney. Otherwise, it is a weaker player with a lot of debt, and traditional assets like CBS Network, sports entertainment, UFC, a damaged Paramount Skydance studio, a bunch of dying cable TV channels (i.e., Nickelodeon, MTV, Comedy Central), and other properties few want.
Netflix’s surprise bid has truly screwed up Ellison’s grand vision to become the newest media grand pooh-bah. The Ellisons have been kissing Trump’s ass for months to gain favor. His buttocks smooches include settling Trump’s 60 Minutes defamation lawsuit for $16 million, the firing of Stephen Colbert, and the controversial hiring of Bari Weiss to lead a more MAGA-friendly CBS News, and other assorted payoffs to disgustingly gain favor. Trump never lets a good grift opportunity pass him by, so get ready for more donations to Trump’s favorite projects.
I assume the Ellisons have reached out to Trump, urging him to get his Department of Justice (DOJ) to kill the Netflix deal. US Attorney General Pam Bondi is likely waiting for the President’s call and marching orders. Trump has several cards to play. He can direct Bondi to kill the deal, claim it is anti-competitive, and go to court to stop it and try to redirect it to Ellison. No doubt that an agreement with Ellison/Skydance has an easier regulatory path. However, Ellison may have overplayed his hand with his heavy-handed pressure campaign to get Warner Bros. CEO David Zaslav to sell the company to him.
Media outlets have reported that Ellison has boasted that he is Trump’s preferred buyer and that he should even receive a discount because that relationship ensures the deal will close. Zazlav, his Board, and his media mogul mentor, John Malone (Warner Bros. Discovery Chair Emeritus), are not people who like being bullied and are focused on getting the best price.
Trump could also direct Bondi to extract bigger concessions from Netflix to secure the deal. For example, a more sticky commitment for WB and other Netflix movies to have a theatrical release. What about a Netflix commitment to freeze monthly streaming rates for a period of time? Trump can then claim that he is doing concrete things to keep media “affordable” for consumers while kidnapping a favorite Democrat theme. This is my idea and not something being discussed in the media.
If the DOJ cannot cut a deal with Netflix, it will tell Netflix that it intends to sue to stop the deal. Netflix will then have to choose between fighting it out in court or walking away from the deal. The Netflix deal reportedly also has a $5.8 billion breakup fee to keep Warner Bros. and Netflix from getting cold feet. This battle will get dirty with various players unleashing their lobbyists, lawyers, and PR firms on regulators, shareholders and the public.
Another factor is time. It could take up to a year to litigate this matter. I have lived this experience. Warner Bros. will be frozen for a year, limiting dealmaking and risking the loss of senior executives unless they are incentivized to stick around through the process. Netflix (or anyone else) must get a deal done before 2028, when Democrats might take over, and they will definitely kill the deal.
There are many legitimate reasons to challenge the Netflix deal on antitrust grounds. The deal is for the #1 US premium streaming service (Netflix) to acquire the #3 streaming service (HBO MAX) and its vast library of movie and TV content. It will also result in the elimination a major competitor. There are also far fewer people in the US and abroad, in favor of the deal as opposed to it, which includes: movie theater owners, the Hollywood creative community, unions, and anti-big tech politicians and regulators worldwide.
According to Forbes, Netflix will argue that its real digital video competitor for consumers’ streaming attention is YouTube, which, according to Nielsen, accounts for about 13% of all streaming compared to 8% for Netflix and 1.3% for HBO MAX, although YouTube does not stream premium movie content.
Any Warner Bros. sale will likely trigger manic media acquisition activity as the boards of directors for the other media titans absorb the ramifications of the shrinking media landscape. They may decide they also need to get bigger to compete, and the purchase window is closing. For example, is Disney/ABC now in play? A clear target for Apple and others.
On a practical basis, how will the Warner Bros. sale affect you based on who the buyer is?
Winner Netflix. Warner Bros. content will be absorbed into the Netflix platform. This includes the HBO MAX streaming service, which will eventually be shut down. Warner Bros. currently makes content for other services. For example, Warner Bros. TV is involved in popular Apple TV shows Ted Lasso and Shrinking. I assume these kinds of deals will end after their current contracts expire if Netflix prevails. Netflix will not acquire Warner Bros. cable properties (CNN, TNT, and HGTV). Before a Netflix deal closes, these properties will be spun off into a separate company, Discovery Global. I would not be surprised if they are sold off.
Winner Ellison/Skydance: Warner content will be absorbed into their Paramount+ streaming service. The name will likely change, since Warner Bros. and HBO are stronger brands than Paramount+, and the newly bulked-up streaming service name might need to reflect that. The cable properties will be absorbed and added to its existing portfolio of underperforming cable assets caused by cord-cutting. CNN would likely report to Bari Weiss, who runs CBS News operations, and undergo a painful purge and MAGAfication to appease Trump further. So long, Jake, Anderson, etc.
Winner Comcast Universal: You will see a similar dynamic. Warner Bros. content would be integrated into the Universal Peacock streaming brand, recently bolstered by a 5-year, $1 billion deal between NBC Universal and Taylor Sheridan, the red-hot creator of Yellowstone and Tulsa King, whom they recently poached from Paramount. Comcast also plans to spin off its struggling cable properties, especially liberal MSNow (formerly MSNBC), which Trump hates; the goal is to isolate and protect its valuable Trump-regulated core assets like NBC and its TV stations from potential Trump retaliation.
In all these scenarios, expect big layoffs and monthly streaming rates to rise a year after a deal closes.
UPDATE: This morning, David Ellison’s company launched an all-cash hostile tender offer for $30 per share for all of Warner Bros., above Netflix’s $27.75 share bid — Stay tuned!
Hugh Panero, a tech and media entrepreneur, was the founder and former CEO of XM Satellite Radio. He has worked with leading tech venture capital firms and was an adjunct media professor at George Washington University. He writes about Tech, Media, and other stuff for the Spy.
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