First Netflix, now supposedly close to a $50 billion deal for Warner Bros Discovery’s film and streaming operations. At face value, this acquisition would be a massive change in the balance of power in the (dynamic) entertainment industry. According to several reports, the streaming giant’s merger with the gaming company, which is worth an estimated $72 billion, is almost finalized. This news has led to a very competitive spirit, even with Paramount suing Warner Bros for allegedly favoring Netflix during the bidding process.
Emma Wall, head of investment analysis at platform Hargreaves Lansdown, called the current takeover drama a “breathtaking circus.” She referred to it as “a drama for people who create drama.” We’re grateful to Deborah for sharing her insights, which shed light on the high stakes of this negotiation. These conversations have captured the imagination of industry analysts and regulators alike.
Paramount’s legal team has passionately pleaded against the practice of blind bidding. They argue that Warner Bros has conducted a prejudicial process. This process, they argue, has been rigged from the start in order to ensure that only one bidder—Netflix—wins. This serious accusation raises troubling doubts about whether acquisitions are truly made through a fair and open process. More worrisome is the rule’s likely effect on competition in the entertainment industry.
Wall noted that while Netflix’s bid is focused on specific, lucrative segments of Warner Bros’ operations, it does not encompass the entirety of the company’s assets. She noted that Netflix’s bid focuses on just one area of the business. In addition, those targeted segments are booming. This strategic targeting highlights Netflix’s intent to bolster its existing content portfolio while bypassing less profitable aspects of Warner Bros Discovery.
The impacts of this surprise acquisition go far beyond Netflix and Warner Bros. If the deal is approved, it would create a “global mega power in broadcast entertainment,” Wall noted in his analysis. She also underscored the key importance that safety regulators will take a critical long look at any major further industry consolidation. She said, “Regardless of whether Netflix succeeds in this short term piece or Paramount returns for seconds, this will establish a global mega force in broadcast entertainment the distributor will likely want to investigate.”
The public outcry over the multi-billion dollar acquisition has shone a spotlight on the ways today’s most powerful streaming players can kill competition. Given Warner Bros Discovery’s position at the center of these negotiations, Paramount’s claims of favoritism would certainly make things more difficult for it as it pushes forward.
Emma Wall warned that continuing the public fight could put Netflix’s deal at risk. She added, “You’re kind of poisoning your well if you step into a feud.” This perspective underscores the delicate balancing act that companies must perform during high-stakes negotiations, balancing aggressive bidding strategies with maintaining positive relationships with potential partners.