It’s been one bid after another for the company that brought you One Battle After Another. And now a victor has finally been declared: Netflix.

The streaming giant announced Friday morning it had agreed to acquire Warner Bros Discovery’s movie and TV studios as well as its streaming division, HBO Max, in a deal with an enterprise value of about $82.7 billion. If and when the merger gets approved — it’s likely to receive some regulatory scrutiny — the biggest disruption may just be to Netflix’s own business model.

October Surprise

So how did Netflix seal the deal? The company’s final bid is a predominantly cash offer, something WBD was said to favor. A rival bid from Paramount Skydance, meanwhile, was entirely in cash — though it was 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.

In the run-up to Friday’s announcement, Paramount had grown increasingly concerned that its bid was being snubbed: According to a CNBC report on Thursday, attorneys sent a letter to Warner Bros Discovery CEO David Zaslav complaining that his company had “abandoned the semblance and reality of a fair transaction process” to favor a leading bidder. That suitor, of course, was Netflix, which assured WBD it would continue theatrical releases … at least until WBD’s current contractual obligations with theater companies run dry, according to a Bloomberg report in November.

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, the tie-up comes 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 show the Stranger Things finale in 500 theaters nationwide over the New Year’s holiday.

Even Stranger Things: It’s not the only way Netflix will 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 +). Netflix has also rarely pursued acquisitions. As co-CEO Greg Peters recently said, the company has a “deep heritage of being builders rather than buyers.” Is the company now entering its own Upside-Down?

Reality bites for Meta’s virtual worlds.

Executives at the tech giant are considering cutting up to 30% of the budget for its Reality Labs unit, which is building Mark Zuckerberg’s metaverse, Bloomberg reported Thursday.

The Real World: Menlo Park

You might recall that in 2021, Zuckerberg deemed the metaverse so vital to the future that he renamed the entire company after it. The former Facebook Inc. has since poured billions into developing virtual and augmented reality projects and building out a digital ecosystem where people work, play and socialize in virtual worlds. Who can unsee Zuckerberg, using Meta-made headsets, doing press availabilities in the form of his own digital avatar within the company’s Horizon Worlds virtual environment?

But Zuckerberg has said little to nothing about these prior ambitions on recent earnings calls. Meanwhile, Meta has jumped into the artificial intelligence race against other tech leaders. Executives cautioned investors in July that the tech giant would be hiking spending on data centers and AI talent; its most recent high-profile poach is Alan Dye, the head of Apple’s user interface design team, who will soon work on improving AI features in Meta’s smart glasses, VR headsets and other devices.

As for virtual worlds, they will be smaller. The CEO asked his C-suite to scout out 10% across-the-board cuts as part of routine annual budgeting, Bloomberg reported, but requested cuts as much as three times that deep on the metaverse front. In particular, that could impact metaverse-specific projects like Horizon Worlds, rather than Reality Labs’ Quest family of VR headsets and Ray-Ban and Oakley AI smart glasses, which have broader long-term applications.

A Meta source not authorized to speak publicly confirmed the discussions about potential cuts to The Daily Upside, saying they would target operating expenses rather than headcount. Meta did not reply to a request for comment. All told, investors seem just fine with the news:

• Meta shares climbed 3.5% on Thursday after news of the potential metaverse cuts circulated, a sign of confidence that AI is the better investment for now.
• Meta reported Reality Labs lost $4.4 billion in its latest quarterly report, bringing its total losses since late 2020 to more than $70 billion.

Real Savings: TD Cowen analysts affirmed their buy rating on Meta, which is up 13% this year, and said a 30% cut to its metaverse operations could equal up to $6 billion in 2026.

Luxury brands have a new, unlikely competitor for the well-heeled consumer’s wallet: the discount aisle.

Dollar General, the largest dollar store chain in the US, on Thursday reported 2.5% year-over-year increases in same-store sales and customer traffic during the third quarter. A day earlier, rival Dollar Tree reported a similarly rosy picture. Executives said consumer worries about affordability have earned them legions of new customers, especially from higher-earning brackets.

Out with the Old, In with the Nouveau Riche

Rising grocery, shelter and electricity costs helped hold annual inflation at 3% in September, the most recent monthly figure available from the Bureau of Labor Statistics. Consumer sentiment, according to the University of Michigan’s Surveys of Consumers, fell to a near record low in November amid concerns about high prices. The National Bureau of Economic Research estimates that this year’s tariff bonanza hasn’t helped, with import taxes adding 0.7% to the inflation rate between March and August.

Dollar General said Thursday that third-quarter revenue rose 4.6% to $10.6 billion and net profit climbed 44% to $283 million. On an analyst call, CEO Todd Vasos attributed the company’s latest success in part to “disproportionate growth coming from higher-income households,” making the chain the beneficiary of consumers whose tolerance for price hikes is at wit’s end. Dollar Tree made a similar assessment a day earlier, and offered more evidence of the trend:

• Dollar Tree CEO Michael Creedon, whose company reported a 4.2% year-over-year increase in third-quarter same-store sales, said it added 3 million new households to its 100 million-customer base. Of those new shoppers, 60% came from households with annual incomes over $100,000.
• Dollar General shares skyrocketed 14% on Thursday. At $125.29, a single share would buy you a pretty big grocery haul. Dollar Tree rose 2.9%, a day after rising 3.6% on its own results.

Room to Grow: Dollar General, which keeps about 25% of its items at or below $1, hiked its projected annual earnings per share to $6.30 to $6.50 from a previous $5.80 to $6.30 range, and said it expects same-store yearly sales to climb 2.5% to 2.7%, up from 2.1% to 2.6%. Dollar Tree also raised its outlook.