If Netflix Buys Warner, Who Changes Whom?

It’s been one bid after another for the company that brought you One Battle After Another. And the endless process appears to be wearing on one interested party.

According to a CNBC report on Thursday, attorneys for David Ellison’s Paramount Skydance have sent a letter to Warner Bros Discovery CEO David Zaslav complaining that his company has “abandoned the semblance and reality of a fair transaction process” to favor a leading bidder, which would be Netflix. If the streaming giant were to acquire the legendary Hollywood studio, however, the biggest disruption could be to Netflix’s own business model. 

October Surprise

So what puts Netflix in the lead? The company’s latest bid is an 85% cash offer, something WBD is said to favor. Paramount’s bid, meanwhile, is entirely in cash — though it is reportedly backed in part by money from Middle Eastern sovereign wealth funds, just weeks after the company “categorically denied” trade reporting that it was seeking such foreign aid. Speaking of promises, Bloomberg reported in November that Netflix assured WBD it would continue theatrical releases … at least until WBD’s current contractual obligations with theater companies run dry.

Theatrical releases would mark a major second-act twist for Netflix. On the other hand, investors seem mildly wary of the streaming platform’s slowing growth, and the company has never had its hands on platinum box-office intellectual property like WBD’s Batman and Minecraft. Either way, a potential tie-up would come at an interesting crossroads for the theatrical industry and its upstart nemesis:

• Domestic box office revenue fell to a 27-year low in October, according to Comscore, and that’s not adjusted for inflation. But fortunes can turn fast: Disney has scored more than $600 million in Zootopia 2 ticket sales in just a week, while WBD has been on a hot streak, debuting a record seven consecutive movies to at least $40 million.
• Netflix, meanwhile, has toyed more with the box office this year, bringing animated smash hit Kpop Demon Hunters to theaters after its successful streaming debut, with plans to bring the Stranger Things finale to 500 theaters nationwide over the New Year’s holiday.

Even Stranger Things: It’s not the only way Netflix would be going out of character with a WBD acquisition. Netflix keeps all Netflix-produced content on its own streamer, while WBD’s TV unit does big business producing and licensing shows to air outside of the company’s own distribution networks. For instance, WBD is behind both The Bachelor, which airs on Disney’s ABC, as well as Ted Lasso, which streams on Apple TV (no longer +). As co-CEO Greg Peters recently said, Netflix has a “deep heritage of being builders rather than buyers.” Which is why if it wins the bidding war, Netflix will be entering its own Upside-Down.