Netflix has become the frontrunner among the media giants seeking to acquire Warner Bros Discovery (WBD). According to reports, WBD has now entered into exclusive talks to sell its streaming and studio businesses – including the likes of HBO Max, the Harry Potter Universe and DC Comics – to Netflix.

Whilst Comcast and Paramount Skydance are still in contention to acquire WBD, Netflix is offering a $5 billion (€4.29bn) breakup fee if the deal fails to gain regulatory approval in the US, according to Bloomberg, which first reported the exclusive talks – with the incentive putting them in pole position.

WBD shares are currently at around $24, giving it a market value of some $60 billion. Netflix is said to have offered between $28 and $30 a share, suggesting its bid could be worth over $70 billion.

Cinema owners were swift to voice their displeasure at the news, calling it an “unprecedented threat” to the movie business.

“The proposed acquisition of Warner Bros by Netflix poses an unprecedented threat to the global exhibition business. The negative impact of this acquisition will impact theatres from the biggest circuits to one-screen independents in small towns in the United States and around the world,” said Cinema United President and CEO Michael O’Leary said in a press statement. “Cinema United stands ready to support industry changes that lead to increased movie production and give consumers more opportunities to enjoy a day at the local theatre. But Netflix’s stated business model does not support theatrical exhibition. In fact, it is the opposite.”

The Directors Guild of America (DGA) – whose president is Hollywood director Christopher Nolan – also reacted negatively to the update, and said in a statement: “The news that Netflix had secured exclusive rights to negotiate for WBD raises significant concerns for the DGA. We believe that a vibrant, competitive industry – one that fosters creativity and encourages genuine competition for talent – is essential to safeguarding the careers and creative rights of directors and their teams. We will be meeting with Netflix to outline our concerns and better understand their vision for the future of the company. While we undertake this due diligence we will not be commenting further.”

Additionally reacting to the news, Guy Bisson, Executive Director at Ampere Analysis – in comments posted on LinkedIn – said: “The benefits [to Netflix] are obvious. Netflix has for several years been reengineering itself into a vertically integrated studio operation, but snagging WBD gets it a volume of IP that it would take years, if not decades, to build on its own. That alone is a compelling case for the acquisition. Add to that major studio operations, the entire back catalogue of HBO shows (that have been performing very well for Netflix when licensed) and WBD’s suite of premium US sports rights through TNT and you have a no-brainer acquisition […] For the whole entertainment industry, the deal is an existential one. As Hollywood struggles to find its path in a challenging environment, the Silicon Valley disruptor cements itself in the Heart of Burbank; there is one certainty: things are going to change.”

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Categories: Business, Headline, M&A

Tags: netflix, paramount, WBD