Netflix in Talks for Warner Bros. Discovery in Streaming Mega-Deal
Reports of a mostly-cash offer for studio and streaming assets send Netflix shares lower amid concerns over debt and regulatory hurdles.
Netflix is in exclusive talks to acquire the studio and streaming assets of Warner Bros. Discovery, a potential landscape-altering deal that would unite two of Hollywood's biggest players and create a content library of unparalleled scale.
Reports that Netflix has emerged as the leading bidder for a portfolio that includes HBO, the Warner Bros. film and television studio, and prized intellectual property like the Harry Potter and DC Comics franchises, sent a tremor through the media industry on Wednesday. The move signals a dramatic escalation of the streaming wars, with Netflix considering a blockbuster acquisition to secure its market leadership for the next decade.
Investors, however, reacted with caution to the prospect of the streaming giant taking on a massive debt load to finance the transaction. Shares of Netflix (NASDAQ: NFLX) traded down approximately 0.7% to $103.22 in afternoon trading. Meanwhile, shares of Warner Bros. Discovery (NASDAQ: WBD) were relatively flat at $24.54, suggesting the market is still pricing in the uncertainty of a successful agreement and the significant regulatory battle that would inevitably follow.
Details of the offer, first reported by Bloomberg, indicate a substantial, mostly-cash proposal that values the assets significantly above Warner Bros. Discovery's current market capitalization of roughly $61 billion. To mitigate the risk of regulatory rejection, Netflix has reportedly offered a hefty $5 billion breakup fee, payable to WBD if the deal is blocked on antitrust grounds.
For Netflix, which has a market value of around $440 billion, the acquisition would represent a strategic pivot. After years of focusing primarily on building its own slate of original content, the purchase would instantly bring a century's worth of iconic films and television shows under its roof. Owning content outright, rather than licensing it, has become increasingly critical as legacy media companies pull their top titles for their own streaming services.
The potential sale is seen as a strategic imperative for Warner Bros. Discovery CEO David Zaslav, who has been aggressively cutting costs and seeking ways to pay down the mountain of debt the company took on following the 2022 merger of WarnerMedia and Discovery, Inc. Selling the core entertainment assets would rapidly de-lever the company's balance sheet, though it would leave its future centered on a smaller portfolio of cable networks and unscripted programming.
The negotiations have not been without conflict. Rival bidder Paramount has reportedly voiced strong objections to the process, sending a letter to Zaslav complaining that the sale has become "tilted and unfair" in favor of Netflix. This suggests a heated bidding war preceded the exclusive talks and could signal potential legal challenges ahead.
Even if a friendly deal is reached, the path forward is fraught with challenges. A merger of this magnitude would undoubtedly face intense scrutiny from the Department of Justice and the Federal Trade Commission. Antitrust regulators under the Biden administration have taken a notably aggressive stance on corporate consolidation, and a deal combining the world's largest streaming service with one of the most storied Hollywood studios would be a prime target. Industry observers are already warning of an "economic and institutional crisis in Hollywood" and calling for the highest level of regulatory intervention.
The coming days will be critical in determining whether Netflix and Warner Bros. Discovery can finalize terms on a deal that would not only reshape their respective companies but also redefine the global entertainment landscape for years to come.