Netflix has entered into a definitive agreement to acquire Warner Bros. in a cash-and-stock transaction valued at $72 billion, according to a press release. The deal, which includes assets like the Warner Bros. movie studio and HBO Max streaming platform, will close after parent Warner Bros. Discovery splits off its global networks division, Discovery Global, into a separate publicly traded company. That separation is expected to be completed by Q3 of next year.
Netflix and Warner Bros. together would create a titan in media and entertainment, uniting the owner of streaming mega-hits like “Stranger Things” and “Squid Game” with a studio carrying valuable intellectual property tied to the DC Comics universe, “Harry Potter” and HBO. For Netflix, the acquisition also offers an avenue for ramping up its expansion into advertising, an area where Warner Bros. is active with HBO Max. A combined Netflix-Warner Bros. entity would generate roughly $2.3 billion in U.S. advertising revenue and wield a 10% share of total TV viewing in the region, per estimates by analysts at Madison and Wall.
“This acquisition will improve our offering and accelerate our business for decades to come,” said Greg Peters, co-CEO of Netflix, in a press statement around the news.
Netflix came out on top following a competitive bidding war for Warner Bros. that also featured Paramount Skydance and NBCUniversal parent Comcast. The deal, which carries an enterprise value of approximately $82.7 billion, still needs to receive regulatory approval, a “substantial risk,” according to Madison and Wall. Regulators could be wary of the level of media consolidation the combination would create while the current administration has previously expressed favor toward Paramount. Netflix shares fell Friday following the news.
If the transaction is approved by regulators, it could mark one of the final nails in the coffin for a limping legacy media ecosystem that has been battered by cord-cutting.
“If this deal makes it through regulatory approval, Netflix will cement itself as the Goliath of streaming services now with the combined weight of HBO Max and the content studios behind it all,” said Mike Proulx, vice president and research director at Forrester, over email. “This deal changes the calculus of the streaming wars, representing a seismic shift in the entertainment industry.”
Netflix has long expressed a “build, not buy” attitude, making the acquisition noteworthy in ways that extend beyond its steep price tag. But the streamer was also once averse to the idea of running ads at all, while advertising today is a key part of its future growth agenda.
Netflix is on track to double ad revenue this year and commands 190 million monthly active viewers for its ad-supported tier, which debuted in 2022. The company has also made a push to level-up its sophistication with brands through the rollout of a proprietary ad-tech platform powered by first-party data. A quest for advertising scale has led Netflix to broker more partnerships as well, including with Amazon, otherwise a rival on the streaming content front.
Netflix and Warner Bros. potentially coming together follows a major bit of consolidation on the agency front. Omnicom in late November completed its $13 billion-plus takeover of Interpublic Group, creating the world's largest marketing services provider.
