Netflix announced plans on Friday to acquire Warner Bros. Discovery’s studio and streaming business, in a deal that will send shock waves through Hollywood and the broader media landscape.
The cash-and-stock deal values the business at $82.7 billion, including debt. The acquisition is expected to close after Warner Bros. Discovery carves out its cable unit, which the companies expected to be completed by the third quarter of 2026. That means there will be a separate public company controlling channels like CNN, TNT and Discovery.
Netflix is already the world’s largest paid streaming service, with more than 300 million subscribers. Bulking up with Warner Bros. Discovery assets would create a colossus with greater leverage over theater owners and entertainment-industry unions. It could force smaller companies to merge as they scramble to compete.
The acquisition would also complete the conquest of Hollywood by tech insurgents. Instead of acquiring studios, tech companies have mostly grown under their own steam in Hollywood. In 2022, Amazon closed its $8.5 billion acquisition of Metro-Goldwyn-Mayer, home to James Bond and Rocky franchises.
“In a world where people have so many choices, more choices than ever on how to spend their time, we can’t stand still,” Ted Sarandos, Netflix’s co-chief executive, said on a conference call. “We need to keep innovating and investing in stories that matter most to audiences, and that’s what this deal is all about. The combination of Netflix and Warner Bros. creates a better Netflix for the long run.”
The deal came after a bidding war that pitted Netflix, Comcast and Paramount against one another. The three companies submitted additional bids this week. Netflix offered mostly cash.
Comcast has also been bidding for Warner Bros. Discovery’s studios and HBO Max streaming service. David Ellison, the Paramount chief executive armed with billions from his father, has been trying to buy all of Warner Bros. Discovery, including traditional television channels like CNN and TNT.
The pitch from Netflix was notable in part because it included a pledge to continue theatrical releases for movies from Warner Bros. Discovery. That is a significant development for Netflix, which pioneered at-home viewing and has so far avoided going all in at the box office.
Netflix has never tried an acquisition even remotely close to this size.
The emergence of Netflix as a formidable bidder for Warner Bros. Discovery’s assets surprised many in the industry because of the way it contradicts the streaming giant’s ethos as a company. “We come from a deep heritage of being builders rather than buyers,” a co-chief executive, Greg Peters, said in October at the Bloomberg Screentime conference in Los Angeles.
Mr. Peters admitted on the conference call to not being an expert at doing “large-scale” deals but added that it’s yet another evolution for a company that has changed tremendously since it mailed its first DVD in 1998.
“Whether it’s going from DVD to streaming, or U.S. to global, or licensing to originals,” he said, “all those are examples of us getting in, sorting it out, and ultimately being able to deliver on the promise of the opportunity that we see,” he said.
Any deal would need approval from federal regulators. How the Trump administration evaluates antitrust concerns in any of the proposed deals will depend in part on how it defines the key participants in a media industry that is rapidly evolving as technology giants like Apple and Amazon become rivals to legacy players. Part of Netflix’s argument in pursuing Warner Bros is that the market for consuming content is far bigger than just the streaming industry. It is also expected to argue that combining Netflix and Warner Bros. streaming platforms is a better deal for the many consumers who now pay for both.
The deal also needs approval in Europe, where antitrust experts expect the deal to face scrutiny.
On Thursday, a group of anonymous feature film producers sent a letter to Congress with “grave concerns” about Netflix’s buying Warner Bros. Discovery. “Netflix views any time spent watching a movie in a theater as time not spent on their platform,” the letter said. “They have no incentive to support theatrical exhibition, and they have every incentive to kill it.”
The letter also voiced worry about “monopolistic control” of the streaming market. The producers said they didn’t sign their names to the letter out of “fear of retaliation.”
If the deal falls through because of a failure to get the necessary approvals, Netflix would pay a $5.8 billion break fee to Warner Bros. Discovery, according to documents filed with federal regulators. It is among the largest of such fees in recent deals.
The deal terms also include a provision that would prevent Warner Bros. Discovery from trying to elicit higher bids from Paramount and Comcast. But if those companies lob unsolicited bids the Warner board deems superior and choose to go with, it would owe Netflix $2.8 billion, according to the documents.
More than any movie company, Warner Bros. symbolizes the romance of Old Hollywood. Bette Davis and James Cagney acted on its soundstages. Its 100-year-old library includes “Casablanca,” “The Maltese Falcon,” “Bonnie and Clyde,” “Dirty Harry,” “The Shining” and “Chariots of Fire.” As a result of deal making in the 1990s, Warner Bros. also controls MGM classics like “The Wizard of Oz” and “Gone With the Wind.”
Over the spring and summer, Warner Bros. had one of the most successful box office runs in its history, delivering eight hits in a row, including Ryan Coogler’s “Sinners” and Paul Thomas Anderson’s “One Battle After Another,” both of which are expected to be a force at the coming Academy Awards.
HBO has long been the No. 1 premium television operation in Hollywood. Its roster of current hits includes “Euphoria,” “The Gilded Age” and “The White Lotus.”
By swallowing all of this and more — Warner Bros. also controls Bugs Bunny and television colossuses like “Friends” and “Game of Thrones” — Netflix would greatly strengthen its content hand.
Netflix has shown that it can create hits like “Stranger Things” and “KPop Demon Hunters” from unproven intellectual property. But it has lacked the kind of “enduring, multigenerational franchises that drive recurring engagement from both first-time and longtime viewers,” Robert Fishman, a MoffettNathanson analyst, wrote in a report last month.
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