What Netflix's deal to buy Warner Bros. means for one of Hollywood's oldest studios

Transcript

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Geoff Bennett: Netflix has struck a nearly $83 billion deal to acquire Warner Bros., beating out Paramount and Comcast after a bidding war. If finalized, it would unite the world’s largest streamer with one of Hollywood’s oldest studios, giving Netflix access to major franchises like the D.C. Universe, “Game of Thrones,” and Harry Potter.

Warner Bros. would spin off cable networks, including CNN, TNT, and TBS before the deal closes. The move raises big questions about the future of theatrical releases and serious concerns about market concentration. It’s expected to face intense antitrust scrutiny from the Trump Justice Department.

Joining us now to break it all down is Matt Belloni, founding partner of Puck and author of puck’s What I’m Hearing newsletter.

Thanks for being with us.

Matthew Belloni, Puck News: Thanks for having me.

Geoff Bennett: So, Netflix built its reputation, it’s prided itself on being a builder, rather than a buyer. So what does it want with Warner Bros., and why now?

Matthew Belloni: I think there’s a couple things.

I mean, Netflix, as prolific as it is, it does not have the intellectual property that has accrued at a 100-year-old studio, everything from Batman and Superman to Harry Potter to all the films that are in the Warner Bros. library. They can both exploit that on their service, put the films directly on the service, and they can also make new films and TV shows based on that I.P.

And for a service like Netflix that’s really only been making original content for about a decade, that is extremely valuable. And on the HBO side, that’s a big competitor. So they take that competitor out, and they also have now a premium version of a streamer to put next to Netflix, where they could use it as an upsell, they could bundle it together, they can get a whole lot of data from it.

They can do a lot of things with that. So it’s really valuable from both streaming and the studio side.

Geoff Bennett: A group of film producers sent an open letter to Congress warning of — this is a quote — “cascading disastrous outcomes if this deal goes through.”

The Writers Guild of America is also opposed to it. They basically see this as giving Netflix monopolistic control over the industry. Do you see those concerns as being valid?

Matthew Belloni: I do.

I think that any time you take a buyer out of the entertainment ecosystem, that’s necessarily going to trickle down to talent. Now, if you ask Netflix, they say they’re going to be making more. They’re going to do more with these assets.

But history has shown that, when you buy something, there are synergies. You don’t compete against each other for talent. And, overall, it helps depress the prices that people are able to get from you. So I do see it.

Now, the extent of those concerns are really what’s at stake here, because it could be a small problem. It could be a catastrophic problem. If HBO Max simply goes away and Netflix kills it, then that’s a huge problem for the talent community. If Warner Bros. stops licensing its films out to other services, or if it stops making TV shows for other services, that’s a big problem for the creative community.

I think there’s a lot of anxiety within Hollywood right now, because we just don’t know what’s going to happen. And that leads all of these organizations to the darkest place. And they’re just trying to plant their flag right now and say, OK, this could be very bad.

Geoff Bennett: What kind of oversight is the Trump administration expected to bring to this deal?

Matthew Belloni: There’s a couple things.

I mean, it’s not the transfer of a broadcast television license, so the FCC does not get involved here. But the Justice Department can sue to block this merger if it feels that it runs afoul of antitrust concerns. That actually happened when this company, Time Warner, was sold two times ago. And the first Trump administration sued to block it. It lasted about two years.

Ultimately, the deal was allowed to go through, but it really hampered that company when it merged with AT&T. Now there’s the added element of politics in here, because the other bidder that did not get this asset is Paramount, which is owned by the Ellison family. And the Ellison family has pretty close ties to Trump.

And when the Ellisons bought CBS earlier this year, they installed some more Trump-friendly figures at that company. So the speculation was that Trump really wanted the Ellison family to buy this company and own CNN, so that it could put their own friendlier people at CNN.

That didn’t happen. And perhaps the Trump administration would intervene here to stop this.

Geoff Bennett: If this merger goes through, what would it mean for CNN and Warner’s other cable assets?

Matthew Belloni: Well, this is the interesting thing.

Netflix is not buying the cable networks. The other suitor, Paramount, wanted to buy everything, but Netflix didn’t. They don’t want to be in the cable television business. So what’s going to happen is, these television assets, including CNN, are going to be spun off into a new company that will debut, they plan, next year.

So when that happens, anyone can come along and buy CNN.Could be the Ellison family that already owns CBS. It could be some other rich person. It could be another company in the media space. But CNN will essentially be up for sale when this spin-off happens.

Geoff Bennett: What are you watching for is this potential merger progresses?

Matthew Belloni: I’m watching to see if the Ellison family, the other suitor, they might go hostile on this merger. They might say that this was a bum deal, that they were not given the opportunity to overpay or outbid the entity that got it, Netflix.

And they could go directly to the shareholders to stop this. They could also sue. Or they could put together a bigger bid and try to steal it away from Netflix. That happened when FOX was sold about a decade ago. Comcast came in and tried to block Disney from buying the FOX assets with a bigger bid, and ultimately made Disney pay more money to acquire FOX than it would have if they had not come along.

So this is the early days of this merger, even though they have a signed deal.

Geoff Bennett: Matt Belloni of Puck, thanks so much for walking us through all this. We appreciate it.

Matthew Belloni: Thank you.