‘A seismic shift’: Netflix’s deal to acquire Warner Bros will remake the entertainment industry
Netflix has reached an agreement with Warner Bros Discovery (WBD) to purchase Warner Bros and its film and television studios, including HBO Max and HBO.
The transaction, valued at $82.7bn (including debt) is expected to close by Q3 2026, after Warner Bros Discovery carves out its linear TV businesses into a new company, Discovery Global.
The deal comes just hours after it was reported Netflix had entered into an exclusive period of negotiation with Warner Bros Discovery. Other bidders included Comcast, which similarly sought to buy WBD’s streaming businesses and studios, and Paramount, which sought to purchase the whole company inclusive of its cable business.
Warner Bros Discovery president and CEO David Zaslav said that “by coming together with Netflix, we will ensure people everywhere will continue to enjoy the world’s most resonant stories for generations to come”.
The acquisition, assuming it receives approval from US regulators and a Trump administration that had appeared to openly support Paramount’s bid, would create a streaming behemoth by joining much of film and TV’s most popular franchises and original IP.
“Our mission has always been to entertain the world,” commented Netflix co-CEO Ted Sarandos. “By combining Warner Bros’ incredible library of shows and movies — from timeless classics like Casablanca and Citizen Kane to modern favourites like Harry Potter and Friends — with our culture-defining titles like Stranger Things, KPop Demon Hunters and Squid Game, we’ll be able to do that even better.”
Fellow co-CEO Greg Peters added the acquisition will “improve our offering and accelerate our business for decades to come”.
He continued: “With our global reach and proven business model, we can introduce a broader audience to the worlds [Warner Bros] create — giving our members more options, attracting more fans to our best-in-class streaming service, strengthening the entire entertainment industry and creating more value for shareholders”.
Analysis: A ‘Goliath’ in the streaming wars
From mailing DVDs to buying the most prestigious film and TV studio in Hollywood. Much has changed for Netflix since the entertainment business was founded in 1997.
The deal is the latest and largest example of consolidation in a TV industry that has been turned on its head by audiences’ switch to streaming.
Madison & Wall media industry analyst Brian Wieser previously estimated the combined Netflix-WBD entity would drive $2.3bn in US ad revenue, maintain a 10% share of total US TV viewing, and spend $13.4bn on annual US-based content production (equivalent to 17% of video expenditure excluding YouTube).
Mike Proulx, VP research director at market research company Forrester, told The Media Leader: “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,”
“This deal changes the calculus of the streaming wars, representing a seismic shift in the entertainment industry”.
Still, outbidding Comcast and Paramount comes at a hefty price. Netflix generated $43.4bn in the past four quarters — a bit more than half of what it will take to purchase Warner Bros’ assets.
The streaming giant is effectively betting that increasing the scale and quality of its output will give Netflix a substantial leg up against other competitors in streaming. It will also likely give the company leeway to further increase its prices by arguing it has increased the value of its product.
Driving ad revenue growth
But while Netflix may be able to take share from streaming competitors, the wider streaming market has effectively plateaued. A record one-fifth of Brits now openly admit to churning through streaming service subscriptions, and decelerating subscriber growth led Netflix to halt reporting on total subscribers this year and turn to an ad-supported model.
As of last month, Netflix’s ad tier reached 190m monthly active viewers across its 12 markets, including 12.1m users in the UK. Its commercial team has spent the past year launching and innovating its in-house adtech stack, positioning its ad offering as a way for advertisers to recapture otherwise hard-to-reach audiences in the streaming era.
Netflix has not publicly revealed ad revenue figures, but the company’s leaders have repeatedly stated it expects to “more than double” ad revenue this year from an unspecified base, with programmatic revenue driving growth.
With Warner Bros’ library included, the streamer will likely make the case to advertisers it is now the can’t-miss platform in the growing streaming ad market.
Other considerations: cinema, HBO Max, Big Tech
However, Netflix will also need to reconsider how it works with cinemas, with fans of tentpole franchises keen to view films on the big screen rather than just at home. Netflix has generally sought to keep theatrical releases of films limited to fewer cinemas and for short timeframes, and it’s likely this tactic will adjust when it owns such large and sought-after IP.
The deal raises additional questions for the future of HBO and HBO Max. The streaming service will complete its launch rollout in Europe on 13 January — apart from in the UK and Ireland, where the end of its carriage deal with Sky Atlantic has been delayed the launch until March at the earliest.
But it’s not clear whether Netflix will look to continue operating HBO Max as a standalone streaming service, integrate it into Netflix, or otherwise launch a bundle allowing consumers to subscribe to both for a lower combined price.
Whatever it decides will have implications for Sky, which had long relied on HBO programming to drive value for its subscription package. Sky currently offers access to Netflix as part of its Essential TV subscription package, and had previously struck a deal with Warner Bros Discovery to be able to offer access to HBO content through Sky after the launch of Max in the UK and Ireland.
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Kate Scott-Dawkins, WPP Media’s global president of business intelligence, told The Media Leader that, setting aside whether Netflix will receive regulatory approval for the deal, the acquisition “speaks to the theme of consolidation”.
“Netflix now finds itself in the same position as all the legacy businesses that it was disrupting years ago,” she said, noting that tech companies like Amazon and Alphabet increasingly own the hardware and operating systems underlying TVs, desktops and phones. Netflix, she continued, will still need to decide whether it leans into Big Tech, such as by cutting a deal with Amazon to be included in its demand-side platform, or if it tries to “go it alone and maintain the direct customer relationship”.
Scott-Dawkins concluded: “A bigger scale gives them greater opportunity, but the challenges remain even for a combined entity.”