Understanding the risky Netflix-Warner Bros. deal | TechCrunch

Or the takeover of Warner Bros. by Netflix worth $82.6 billion Whether or not it goes through, the deal marks a fraught moment for Hollywood as the entertainment industry becomes increasingly overshadowed by technology giants.

On the latest episode of the Equity podcast, Kirsten Korosec and I discussed the implications of the deal, both for Netflix and the larger Hollywood ecosystem. Kirsten noted that this is just the latest move bringing more consolidation to the media world, and she wondered if this is “too big of a risk” for Netflix.

Meanwhile, I discussed a call with Netflix executives, where Wall Street analysts also seemed to be struggling to get the deal done. And then of course there’s the competing hostile bid from Paramount – whatever happens, Warner Bros.’ Its days as an independent company seem to be numbered.

You can read an edited preview of our conversation below.

Kirsten: I remember when Netflix was just a little baby startup and I got them [DVDs] in the mail. Here they are, all grown up, bidding on an old company. Was that what went through your mind when you saw the news?

Anthony: Certainly symbolic is this moment when the upstart ate Hollywood. There have been articles, even before this deal, that said, “Netflix is ​​eating Hollywood, Netflix is ​​transforming Hollywood.” Regardless of whether this deal goes through or not, Netflix will have transformed Hollywood, but this seems like the biggest – both symbolically and substantively – one of the most dramatic things that could happen.

Then there are all these other questions: Will Netflix get regulatory approval? Will Paramount’s hostile bid succeed?

What you noticed was that you were catching up, Kirsten?

Kirsten: Well, the first thing I thought was: could there be any more consolidation in this market? I mean, that was the big one for me because if I’m correct, Warner Bros. Already gone through this consolidation with Discovery, right? So here we are again. There has been so much consolidation that I have lost sight of it all.

But the second thought was what I immediately thought, what I kicked [off our discussion] that really thinks about how Netflix [has grown]and there have been dips along the way, with headlines being about how it’s struggling, and will it stay relevant, and how can it do that? If they are successful in the actual deal, [it would] possible reflection [that] they made it.

But again, they must continue [running] an even bigger company than ever before. And so I guess my third thought on this is: Should do they buy this? Is this what they need to expand? Is it a risk that they take on so much? Why don’t we just stay the way they are? And I don’t know if you agree with me on that. Is the risk too great?

Anthony: I understand this makes sense for Netflix. It’s a way to… [content] library which is already quite large, and they’ve obviously had some very successful TV shows – less so on the film front – [but] potentially they just become so much stronger on the content side.

[And] they are now suddenly involved in all these other businesses, although the question is how much they will invest in things like theater, theme parks, making TV shows for other streaming services and networks, all businesses that Warner Bros is in, and Netflix says it will continue to support. But we’ll see how true that is.

So it seems like something that Netflix could really benefit from in some ways, but at the same time it seems like this is a huge risk. If you go look the analysts say Netflix executives did that After you announce the deal, you can see the analysts wrestling with it and wondering, “Okay, I see this is growing your business, but is it growing your business? [so much that it’s] a deal worth $82 billion?”

And then of course, outside of the Netflix perspective, you have everyone else in Hollywood. There are all these perhaps hyperbolic headlines about: Is this the end of Hollywood? Is this the end of the cinema world? All the unions are basically saying, “This deal needs to be blocked” or “We are very, very concerned about this deal.” That’s what the theater owners say

And so I think there’s A) Is this a good deal for Netflix? And B) is this a good deal for the entertainment industry? I don’t have a good answer for that either [but] I think it’s more likely to be a good deal for Netflix than it will be a good deal for the entertainment industry.

But again, part of what we need to keep in mind as people weigh these options or think about possible outcomes is that because of the way Paramount Warner Bros. has forced to consider these takeover offers, it seems unlikely that Warner Bros. will be able to continue as an independent company – which, if you’re not a fan of media consolidation, is disappointing.