An $82.7 billion deal from Netflix Inc (NASDAQ:NFLX) to acquire the streaming, television and movie assets from Warner Bros. Discovery (NASDAQ:WBD) could make the streaming giant an even bigger player in the overall media sector.
Both companies approved the deal. However, it faces regulation hurdles and pushback from the Trump administration. Movie theaters and Hollywood brass are also in opposition.
The deal could take years to close and ultimately fall apart, never materializing.
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The Netflix, Warner Bros. Deal
Netflix became the winning bidder for Warner Bros. Discovery, who put itself up for sale after being pursued by Paramount Skydance (NASDAQ:PSKY).
The deal will see Netflix acquire Warner Bros. for $27.75 per share in cash and Netflix stock. Warner Bros. must first separate its cable networks, currently set to be completed in the third quarter of 2026.
Warner Bros. attracted multiple interested parties for the entire company or assets in its exploration of bids. Netflix, Paramount Skydance and Comcast Corporation (NASDAQ:CMCSA) were the three finalists in the bidding process.
Trump Administration Favored Paramount Skydance
The Netflix deal now faces potential regulatory hurdles. The White House administration under President Donald Trump, an administration that could ultimately try to block the deal.
"Who owns Warner Bros. Discovery is very important to the administration a senior Trump administration official previously told the New York Post. “The Warner board needs to think very seriously not just on the price competition but which player in the suitor pool has been successful getting a deal done.”
Most investors can read between the lines and realize that this would likely mean Paramount Skydance. After all, the Trump administration approved its recent merger. Also, the senior official explicitly spells it out: “And that points to the Ellisons.”
Paramount Skydance CEO David Ellison and his father, Oracle co-founder Larry Ellison, are longtime allies of Trump.
“Warner really needs to think really hard about the odds of success getting the deal cleared with players outside of Paramount Skydance.”
Observers viewed these comments as a potential warning to bidders outside of Paramount Skydance that they could face potential regulatory hurdles. For Netflix, this could mean ramped-up pressure from regulatory governing bodies about the combination of the streaming platforms.
A merger of Paramount and Skydance previously faced regulatory pressure and took a long time to complete. The deal may have been helped by Paramount paying $16 million to settle a lawsuit brought by the president against the company's "60 Minutes" program.
Sen. Elizabeth Warren (D-Mass.) alleged that Paramount paid a bribe to complete the deal.
Since merging, Paramount Skydance has seemingly made several attempts to appease Trump. For example, it changed the CBS News team, confirmed that Stephen Colbert's late-night talk show will end, and announced plans for a fourth "Rush Hour" movie after Trump said he liked the franchise.
While Trump can't simply strike down the deal, his preference for Paramount could put the combination under pressure.
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Movie Theaters Oppose Deal
Another point of contention is the size and potential competition concerns of combining two streaming platforms: Netflix and HBO Max. Plus, there would be one less pro-movie theater media company.
Netflix has argued that the window between theatrical release and streaming should be significantly shorter.
AMC Entertainment Holdings (NYSE:AMC) recently reached a deal with Netflix on some upcoming releases after previously opposing showing the streamer's titles in theaters.
On the Netflix, Warner Bros. tie-up, theater owners group Cinema United is speaking out already.
"The negative impact of this acquisition will impact theaters from the biggest circuits to one-screen independents in small towns in the United States and around the world," Cinema United president and CEO Michael O'Leary said, as reported by The Hollywood Reporter.
O'Leary said Cinema United will support moves in the sector that give consumers more opportunities at movie theaters.
"But Netflix's stated business model does not support theatrical exhibition. In fact, it is the opposite."
On Friday, Netflix co-CEO Ted Sarandos told investors and the media that the streaming company is not opposed to movies being released in theaters, as Variety reported.
"It's not like we have this opposition to movies into theaters," Sarandos said. "My pushback has been mostly in the fact of the long exclusive windows, which we don't really think are that consumer friendly."
Sarandos said Netflix would keep the Warner Bros. movie theater deal in place. But there will likely be concerns about how long that will last and whether the theatrical release window will shrink in the future.
Hollywood Speaks Out
A UK film producer was blunt in what the deal could mean in comments to Deadline.
"This feels like the death of Hollywood," the producer said.
A British TV producer told Deadline the merger would be "very bad" for the industry, with the potential for job losses.
Separately, Hollywood brass sent a letter to Congress expressing what they felt would be the negative ramifications of Netflix’s Warner Bros. deal, Variety reported. The letter was anonymous.
The letter says Netflix could "destroy" the movie theater sector and eliminate the number of films that play there. The letter also said Netflix would have enough power to change the length of time movies play in theaters, lowering the licensing fees it pays to movie companies.
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