By Brian Stelter, NCS
This is a David and Goliath story – with a twist. Almost precisely 15 years in the past in the present day the proprietor of Warner Bros. and HBO pushed again on Hollywood and Wall Street hype a few streaming upstart named Netflix.
The 2010 quote from Jeff Bewkes in The New York Times is now notorious: “It’s a little bit like, is the Albanian army going to take over the world? I don’t think so.”
Well, as LightShed Partners analyst Rich Greenfield mentioned Friday, “the Albanian army just took over the world.”
Here’s what you need to know about Netflix’s $72 billion deal for Warner Bros. and HBO.
What’s the deal?
Warner Bros. Discovery, which owns NCS, is transferring ahead with its plans to cut up into two publicly traded firms.
Once the cut up takes impact, doubtless someday subsequent summer season, Netflix intends to purchase the Warner half. The different half, Discovery Global, will home NCS and different channels.
Netflix, already the streaming king, says “this acquisition will improve our offering and accelerate our business for decades to come.”
But first, Netflix has to persuade governments world wide to OK to deal. The regulatory evaluation course of goes to take a very long time – within the US, EU and elsewhere.
How will this variation my streaming expertise?
Most individuals who have the HBO Max streaming service even have Netflix. It is unclear what’s going to occur to HBO Max, however historical past means that it is going to be folded into Netflix’s service in a method or one other.
Netflix says that “by adding the deep film and TV libraries and HBO and HBO Max programming, Netflix members will have even more high-quality titles from which to choose.”
Some lawmakers and regulatory consultants are already expressing concern that Netflix will move alongside greater prices to customers.
How did we get right here?
Warner Bros. Discovery put itself up on the market a few months in the past after Paramount made unsolicited bids for your entire firm. Then Netflix and Comcast emerged as rival bidders for the studio and streaming belongings.
Paramount was thought to be the frontrunner within the public sale. Paramount CEO David Ellison’s allies exuded confidence about their merger proposal – and their mutually helpful relationship with President Donald Trump. But issues clearly modified in current days.
Paramount’s December 3 letter to the WBD board expressing “grave concerns” concerning the public sale course of was a doable precursor to a hostile-takeover play.
Officially, Paramount will not be commenting on the Netflix deal. Unofficially, Paramount is plotting how to battle again.
What occurs subsequent?
Every mega-deal like this will get carefully scrutinized. This one most likely extra so.
On Friday CNBC quoted an nameless senior administration official saying the Trump administration is viewing the take care of “heavy skepticism.”
Netflix’s plans could possibly be held up for months, and even years, in Washington, DC, both by Trump loyalists finishing up his needs or by bureaucrats with real objections to media consolidation.
Trump could make the method extra painful, however he doesn’t get a literal veto. Remember when the Justice Department in 2017 sued to cease AT&T’s acquisition of the aforementioned Time Warner? The firms fought the case in courtroom and prevailed.
Netflix appears keen to abdomen the same authorized battle. Or, on the very least, keen to undergo the motions – and maintain Warner Bros. out of Paramount’s and Comcast’s arms for an extended whereas.
Indeed, the Trump administration intervention in 2017 had the impact of slowing down HBO at a time when it desperately wanted to velocity up its competitors with Netflix.
Also: The US is only one of many markets that may take an in depth take a look at the transaction. European regulators additionally could have so much to say.
What will Netflix inform regulators?
Netflix will argue that it’s actually not a Goliath in any respect, not in a Big Tech setting comprised of gamers like Google and Amazon.
Netflix views Google’s YouTube as a main rival for consideration now, and for good motive, provided that YouTube viewership has been rising by leaps and bounds.
“With Google increasingly entering the market, this deal may serve as a strategic blocking and tackling maneuver,” Melissa Otto, head of analysis at S&P Global Visible Alpha, identified.
Netflix will even declare that it’s creating “more opportunities for the creative community,” although many in Hollywood gained’t purchase that.
More virtually, folks on Netflix’s aspect may say that additional trade consolidation is inevitable, given altering client habits and shifting enterprise fashions for old-line media firms.
What does this imply for NCS?
WBD is transferring forward with its breakup plan, which signifies that NCS will turn into a part of a newly shaped firm referred to as Discovery Global subsequent yr.
Channels like TNT, Discovery and free-to-air channels throughout Europe will even be a part of Discovery Global. And they’ll function individually from Warner Bros., which is the aspect of the home that Netflix intends to purchase.
“We’ll continue to work with future Discovery Global CEO Gunnar Wiedenfels and the rest of his team to make sure that the new company gets off to a flying start,” NCS CEO Mark Thompson mentioned in a memo on Friday.
Thompson mentioned each WBD CEO David Zaslav and Wiedenfels “are firm backers” of NCS’s technique, together with the current rollout of the NCS All Access subscription service. “We’ve already agreed to a 2026 budget which includes increased investment for the plan,” Thompson mentioned.
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