Netflix’s $72bn takeover of Warner Brothers is a blockbuster in every sense.
It is less than 30 years since Reed Hastings and Marc Randolph began their mail order DVD rental business, barely 20 since Netflix began streaming content online, and just over a decade since its first wave of original content, including House Of Cards.
Yet, if approved, this deal will see the upstart swallow one of the giants of Hollywood’s Golden Era. Warner Brothers, the studio that made Casablanca, finds itself a subplot in the dramatic transformation of 21st-century entertainment, working title: The Triumph Of The Streamers.
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The deal will bring together Netflix’s existing content, technology, and a subscription base of more than 300 million people generating close to $40bn of annual revenue, with Warner’s deep library of beloved movies and TV shows, and the studios and production capacity to make more of the same.
As well as a movie catalogue that includes the Harry Potter and DC Universe franchises, Netflix is buying HBO, the standout television production house responsible for The Sopranos, Game Of Thrones and Succession, and its streaming service HBO Max, due to launch in the UK next spring.
Netflix will hope HBO can add creative depth to a portfolio which churns out remarkable volume and has triumphed in the teen market with hits such as Stranger Things.
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The tie-up will give Netflix extraordinary muscle in the entertainment industry, bringing together the first and third-largest streaming service in the US, and two of the largest creators of original content.
Little wonder that the creative branch of Hollywood has enormous misgivings. In a letter to industry bible Variety, leading industry producers and directors, writing anonymously for fear of repercussions, have warned of an “institutional crisis” for Hollywood.
They may be fighting yesterday’s battles. This deal reflects a fundamental change in the way we consume entertainment. The in-person event of going to the cinema still has its place but, like linear television it has been usurped by the convenience and mind-boggling choice offered online.
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Legacy studios and broadcasters have in turn found themselves trying to compete not just with Netflix, but the financial might of Amazon and Apple. In that environment size matters, leaving even Warner Brothers to conclude they were not big enough to fight alone.
The deal may yet be challenged. Netflix defeated Comcast, owners of Universal Studios and Sky, and Paramount Skydance, in a three-way bidding war, and CNBC reports that Paramount, backed by Larry Ellison’s billions, may complain about the process.
US regulators will inevitably scrutinise the deal, though quite where regulatory power lies in Donald Trump’s America is moot, given his willingness to leverage presidential influence over major deals.
