On Friday, Netflix announced that it is purchasing Warner Bros. for $82.7 billion, combining the largest streaming service with a legendary studio that has made movies like "Casablanca" and the "Harry Potter" series.
According to a statement from Netflix, the acquisition is anticipated to be finalized in the third quarter of 2026 following Warner Bros. Discovery's separation of its television networks division, Discovery Global.
With an equity value of $72 billion and an enterprise value of $82.7 billion, Netflix announced that it will purchase Warner Bros. for $27.75 a share. According to Netflix, the deal is anticipated to close in 12 to 18 months.
The deal follows Warner Bros. Discovery, Warner's parent company, announcing in June that it would split in two, separating its streaming and studios division, which includes HBO Max and Warner Bros. Television, from its cable networks, including CNN and TNT Sports.
However, Warner Bros. Discovery announced in October that it had drawn interest from businesses interested in purchasing all or a portion of it outright.
The Wall Street Journal reported that media and entertainment companies, such as Comcast Corp. and Paramount Skydance, the parent company of CBS News, were also pursuing a deal for Warner Bros.
Media reports state that Paramount Skydance expressed interest in purchasing Warner Bros. as a whole, including its cable properties, including CNN and Discovery. The reasons Netflix desires Warner Bros.
According to experts, Netflix would make a significant strategic change by purchasing Warner Bros.' studios. Despite the fact that Netflix already generates original content, including popular series like "Stranger Things," analysts pointed out that the acquisition would increase Netflix's capacity to produce content and give it authority over Warner Bros.' 102-year-old library.
Netflix "will cement itself as the Goliath of streaming," according to Forrester vice president of research Mike Proulx. "This deal changes the calculus of the streaming wars, representing a seismic shift in the entertainment industry."
According to a report by market research firm MKI Global, the expanded company's larger scale may also boost Netflix in negotiations with partners and advertising.
According to the market research firm, Netflix would gain "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" by acquiring Warner Bros.
According to Lightshed Partners analyst Rich Greenfield, the agreement also occurs as Netflix faces competition from YouTube, a streaming competitor that is expanding more quickly.
In a research note, analysts at MoffettNathanson Research, an investment advisory firm that focuses on tech, telecom, and media, stated, "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."
Netflix executives stated that the acquisition will increase the company's subscriber base and provide value for shareholders during a conference call with investors to discuss the deal.
During the call, co-CEO Greg Peters stated, "We expect to attract and maintain more subscribers, and drive incremental revenue and operating income." "We think it'll accelerate our business for decades to come."
Additionally, Peters was questioned regarding remarks he made at a conference in October in which he stated that large media mergers "don't have an amazing track record." The executive stated on Friday that he thought Netflix's experience in content creation will make this merger unique.
"A lot of those failures [are] because the company doing the acquisition didn't understand the entertainment business," he stated. "We understand the business." Warner Bros.' vast streaming and film portfolio would be advantageous for Netflix, according to analysts.
"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 stated.
Netflix promised to uphold any contractual obligations for the release of Warner Bros. studio films as part of the proposed arrangement.
However, Wall Street analysts warned that the streaming behemoth may encounter regulatory obstacles in its efforts to finalize the merger due to worries that it would reduce competition among theaters.
In a note to investors, Wedbush Securities analysts stated that "significant concerns have been voiced over the potential impact to the theatrical market should Netflix take over [Warner Bros.]," adding that "concerns remain within the industry and among government officials" regarding the impact of such a deal.
On Friday, some lawmakers expressed worries that Netflix's hegemony in the streaming market would result in increased costs for customers.
Sen. Elizabeth Warren, a Democrat from Massachusetts, posted on social media that "it could get more expensive to watch your favorite movies and shows if Netflix is allowed to buy Warner Bros. and control access to almost half of streaming subscribers."
Warner Bros. shares climbed $1.54, or 6.3%, to end the day at $26.08. The company's stock price has more than doubled since this summer as rumors of a potential deal intensified. Netflix's stock dropped $2.98, or 2.9%, to $100.24.
