The acquisition of Warner was disrupted! Netflix (NLFX.US) urgently appeases many parties: promises cinema distribution, no layoffs, mergers, and no monopoly risks
The Zhitong Finance App learned that after Netflix's (NFLX.US) competitor Paramount Sky Dance (PSKY.US) issued a hostile takeover offer of $108 billion against Warner Bros. Discovery (WBD.US), and US President Trump raised potential antitrust concerns about Netflix's plan to acquire Warner Bros. Discovery, the two CEOs of the streaming media giant explained the reasons for the acquisition of Warner Bros. Discovery in an employee letter to try to calm the industry's concerns about layoffs and the end of cinema distribution.
Greg Peters and Ted Sarandos said they promised to release the Warner Bros. Discovery movie in theaters. Earlier, there were concerns that Netflix would adopt a streaming-first model, and Sarandos also described going to the cinema to watch movies as an “outdated” experience. The two co-CEOs said in an employee letter: “We didn't prioritize theatrical screenings in the past because that wasn't Netflix's business. When this deal is completed, we will enter this business area.”
At the same time, outsiders are worried that in the media industry, which has already been affected by the rise of streaming platforms and artificial intelligence, Netflix's acquisition of Warner Bros. Exploration's huge deal will lead to layoffs. In response, Greg Peters and Ted Sarandos promised that “there will be no business overlap or studio closure.” They said, “This deal is about growth. We're strengthening one of Hollywood's most iconic studios, supporting employment, and ensuring a healthy future for film and TV production.”
On December 5, Netflix announced the acquisition of Warner Bros. Discovery's film and television production division, HBO Max, and HBO businesses with a corporate value of $82.7 billion. However, Paramount Tianmu then launched a hostile takeover of Warner Bros. Exploration, planning to buy all of Warner's issued shares at a cash price of $30 per share, which meant that Warner Bros. Exploration's corporate value reached 108.4 billion US dollars. Paramount said that compared to Netflix's plan, this offer is more attractive to shareholders and more likely to pass regulatory scrutiny. Paramount also said that its offer “provided an additional $18 billion in cash compared to the price offered by Netflix.” Trump also raised potential antitrust concerns about Netflix's planned acquisition of Warner Bros. Exploration, pointing out that the market share occupied by the merged entity could cause problems.
Despite this, Greg Peters and Ted Sarandos expressed full confidence in the $82.7 billion agreement. When talking about the Paramount Sky Dance offer, they said, “It was completely unexpected. However, we already have a solid deal arrangement.”
One of Netflix's concerns is whether regulators will approve any deals. Massachusetts Democratic Senator Elizabeth Warren called the Paramount Sky Dance offer a “five-level alarm antitrust fire.” She previously referred to Netflix's takeover attempt as an “antitrust nightmare.” Wall Street analysts say Netflix must prove to regulators that the deal will not give it an unfair competitive advantage in the streaming market.
Greg Peters and Ted Sarandos quoted Nielsen's ratings share data, which showed that Netflix and Warner Bros. Discovery's combined viewership percentage would be less than YouTube, or smaller than Paramount Sky Dance and Warner Bros. Discovery's viewership share after a potential merger.