The battle for control of Warner Bros is hotting up, but Pivotal Research Group, a New York-based equity investment house, has firmly downgraded its view on Netflix from ‘Buy’ to ‘Hold’. Analyst Jeff Wlodarczak summed up its position saying it is concerned that short-form content (from the likes of TikTok, Instagram, X, YouTube and Snap) is “doing to streaming what streaming has done to traditional TV”.

Netflix is bidding $82.7 billion to acquire the Hollywood studio. Paramount has counter-offered an all-cash deal (including the Global Networks segment, which Netflix doesn’t want) worth $108 billion.

The report by Pivotal would not be so important but for the fact that it is Wall Street’s biggest fan – and investor. It is telling clients that it has slashed its share price target from $160 to just $105. Netflix shares are down from around $110 ahead of the deal’s announcement, to $100.24 on December 8th.

Wlodarczak also expresses concerns over the deal passing regulatory permissions, and the very real threat of a bidding war from other parties which would take the acquisition price even higher.

Pivotal added: “While we still think it is early, time spent by consumers is migrating from traditional multichannel TV to streaming and now to social media platforms. Flat to declining engagement, arguably, is a precursor to subscriber weakness and difficulty taking price, and Netflix is doing an extremely expensive content acquisition deal to at least temporarily offset this, but we believe this trend is likely set in stone.”

Meanwhile, Michael Nathanson of MoffettNathanson – who worked at Time Warner in the years 1992-1998 – said in his note to clients that this was a deeply personal end to what was once a great, yet incredibly disappointing, media conglomerate.

“The sale of Warner Bros studio and HBO is the last chapter of the headline grabbing 1989 merger between Time Inc. (home of HBO) and Warner Communications (Warner Bros Studio), which was formed to merge the libraries and production assets of Warner Bros. with the emerging premium network of HBO. The idea was that the combination would turbocharge the growth of HBO by adding unfettered access to the best theatrical and TV content,” stated Nathanson.

“Last week’s [proposed] sale to Netflix is seen, by me, as a failure in so many ways. At the same time, NFLX’s Warner Bros deal will make an incredibly strong hand even stronger and should crumble the hopes and dreams of Paramount+ and Peacock,” Nathanson added.

He was more upbeat about the Netflix move, saying: “Netflix boldly staked the claim to challenge HBO in 2013 and HBO shrugged. Truth be told, many media analysts (myself included) and almost every media executive laughed it off at the time as incredible hubris. Netflix had some library content, one original show, no production studios and limited resources. What they did have was a singular vision, an incredibly determined management team, and a low-priced product that could be only cannibalistic to the Pay TV model if their competitors agreed to license them their best content… and, of course, they foolishly did.”

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