Netflix agreed on Friday to buy Warner Bros. Discovery's television, movie studio and streaming division for $72 billion. This leaves the streaming pioneer with one of Hollywood's most valuable and oldest assets.
The deal marks a dramatic twist for Netflix, which has rewritten the Hollywood script and upended how and when consumers watch movies and TV shows. Suddenly, it became something that disrupted mainstream studios.
“I think some people are surprised that we're making this acquisition, and we certainly understand why,” Netflix co-CEO Ted Sarandos said on a conference call with investors. “For many years, we have been known as builders, not buyers…but this is a rare opportunity to help us fulfill our mission of entertaining the world and bringing people together through great stories.”
The deal comes after a weeks-long bidding war in which Netflix offered nearly $28 a share, beating out likely front-runner Paramount Skydance, which had made a series of unsolicited bids to buy all of Warner Bros. Discovery, including its cable TV assets, which it plans to spin off.
Netflix, which has spent a decade developing original series such as “Stranger Things'' and “Bridgerton'' and films such as “KPop Demon Hunters,'' will now have access to Warner Bros.' vast amount of content built over the past century, including iconic series such as “Game of Thrones'' and “Harry Potter,'' as well as the DC Comics superhero slate, including Batman and Superman.
Together, the two companies will “help define the next century of storytelling,” Sarandos said. “The goal is to become HBO faster than HBO becomes us,” Sarandos once said.
Warner Bros. Discovery stock rose 3.2% to $25.33, while Netflix fell about 0.2% and Paramount fell 6.1%.
Paramount and a third suitor, Comcast, did not immediately respond to requests for comment.
CNBC reported that Paramount is considering offering Warner Bros. Discovery $30 per share and making a direct takeover offer to WBD shareholders. Reuters was unable to verify the report, and it was not immediately clear when the offer was made.
likely to be subject to strong antitrust laws
But the deal with Netflix is likely to come under increased antitrust scrutiny in Europe and the United States, as it would give the world's largest streaming service ownership of a rival that is home to HBO Max and boasts nearly 130 million streaming subscribers.
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“There will be resistance from parts of Hollywood and various trade unions,” said Tom Harrington, head of television at Enders Analysis in London. “HBO, a creative jewel that has survived under difficult owners throughout its existence, will be exposed within Netflix.”
David Ellison's Paramount, which launched a bidding war with a series of unsolicited offers and has close ties to the Trump administration, questioned the sale process earlier this week, claiming it favored Netflix.
Even before bidding began, some lawmakers said the Netflix-Warner Bros. Discovery deal could hurt consumers and Hollywood.
Cinema United, a global exhibition industry group, said the deal posed an “unprecedented threat” to movie theaters around the world, and former WarnerMedia CEO Jason Killer said he could think of “no more effective way to reduce competition in Hollywood than selling WBD to Netflix.”
Seeking to allay some concerns, Netflix said the deal will give subscribers more shows and movies, increase long-term spending on U.S. production and original content, and create more jobs and opportunities for creative talent.
During contract negotiations, the company argued that combining its streaming service with HBO Max would lower the cost of the bundled service and benefit consumers.
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Netflix co-CEO Greg Peters told investors that the company could package its streaming service as a bundle or find a way to introduce HBO Max to Netflix subscribers. The streaming service has a long history of winning over viewers for TV series like “Breaking Bad” and the legal drama “Suits.”
According to media reports, the company told Warner Bros. Discovery that it would continue to release the studio's films in theaters, allaying concerns that the deal would eliminate another studio and major source of theatrical films.
PP Foresight analyst Paolo Pescatore said: “Given the current regulatory environment, this will raise eyebrows and raise concerns. Any dominant streaming player that consolidates will come under intense scrutiny.”
“Given Warner Bros. Discovery's pursuit of Paramount Skydance, we should expect controversy to arise in this matter.”
The deal for a third suitor, Comcast, was little changed.
Under the deal, each Warner Bros. Discovery shareholder will receive $23.25 in cash and approximately $4.50 in Netflix stock per share, valuing Warner at $27.75 per share, or approximately $72 billion in equity and $82.7 billion including debt.
The deal represents a 121.3% premium to Warner Bros. Discovery's closing price on September 10, before the first reports of a potential acquisition emerged.
The transaction is expected to close after Warner Bros. Discovery spins off its global networks division, Discovery Global, as a separate publicly traded company, a move currently scheduled to close in the third quarter of 2026.
Netflix has offered Warner Bros. Discovery a $5.8 billion penalty, but if the deal falls through, Warner Bros. Discovery will have to pay Netflix $2.8 billion.
Netflix said it expects to save at least $2 billion to $3 billion a year by the third year after the deal closes.
Analysts say Netflix is driven by a desire to secure long-term rights to hit shows and movies and reduce its dependence on outside studios as it looks to expand into gaming and find new avenues of growth following its success in cracking down on password sharing.
The company's stock is up just 16% this year after soaring more than 80% in 2024. Investors are worried that the company's impressive growth will slow, especially after it stopped disclosing subscriber numbers earlier this year.
The company has relied on its ad-supported tier to fuel growth, but while that is not expected to become a major source of revenue until next year, analysts say the company's foray into video games has stumbled amid a shift in strategy and executive departures.
But acquiring Warner Bros. could deepen its bet on gaming. WBD is one of the few entertainment companies to have had major successes in this field, including the Harry Potter title Hogwarts Legacy, which generated over $1 billion in revenue.
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