What the Warner Bros deal could mean for streaming and cinemas

In a shocking twist after a months-long bidding war, Paramount has emerged as the apparent winner in the battle to acquire Warner Bros Discovery.

Netflix, which withdrew from the deal this week, had hoped to land the film studio and its vast film library.

Nearly a decade ago, Hollywood’s big six became the big five when Disney bought most of 20th Century Fox.

Now it seems the big five are destined to become the big four, including Universal and Sony, and the Hollywood filmmaking industry is once again in a time of profound transition.

Here’s what we know and what it means for the movies.

Why has Netflix withdrawn from the fight?

Simply put, it was no longer “financially attractive,” the company said.

By December, Netflix had reached a deal to buy some of Warner Bros.’s assets. Discovery, including their library, film studio and HBO.

Almost immediately, Paramount, which had expressed interest in acquiring Warner Bros months earlier, launched a hostile takeover bid for the entire company, culminating this week in an offer of $31 per share.

Netflix, whose previous offer was $27.75 per share, declined to make a counteroffer.

“We believe we would have been strong stewards of Warner Bros’ iconic brands,” Netflix’s co-CEOs Ted Sarandos and Greg Peters said in a joint statement.

“But this transaction was always a ‘nice to have’ at the right price, not a ‘must have’ at any price.”

Warner Bros Discovery CEO David Zaslav said in a statement that they were excited about “the potential of a combined Paramount Skydance and Warner Bros Discovery and can’t wait to work together to tell the stories that move the world.”

What are Paramount’s plans for Warner Bros?

Paramount Skydance Chairman and CEO David Ellison has said he wants to expand their combined offerings to more than 30 films per year, while keeping Paramount and Warner Bros as standalone operations.

In documents filed with the Securities and Exchange Commission last month, Paramount said:

“Our priority is to build a vibrant, healthy business and industry – one that supports Hollywood and creatives, benefits consumers, encourages competition and strengthens the overall job market.”

They also said they would look for ways to save about $6 billion from job cuts in “duplicate operations.”

Executives at Paramount have argued that the merger with Warner will allow the company to compete with larger rivals, especially in streaming, and offer larger content libraries for its customers.

Is this a better outcome for cinemas?

Cinema United, the trade body that represents movie theaters, has been opposed to Netflix-owned Warner Bros, fearing what it could mean for the future of movies.

Exhibitions and box offices have not fully recovered since the pandemic – previously the annual domestic box office would regularly exceed $11 billion.

Since 2020, it has exceeded $9 billion only once.

But consolidation is also a concern.

While Paramount has an established background in theatrical distribution, Cinema United also has concerns about that outcome, which they explained in a statement to the Senate Judiciary Subcommittee hearing in early February.

They noted that a combination of Paramount and Warner Bros would bring as much as 40 percent of the domestic box office into one studio each year.

“We have been clear from the beginning about our concerns about the consolidation, and nothing that has happened in the last 36 hours has changed that,” Michael O’Leary, president and CEO of Cinema United, said in the statement.

“Studio consolidation has historically led to fewer films being made, and at this time there is no reason to believe the outcome will be any different here. We continue to urge regulators to heed the lessons of the past.”

In theory, a guaranteed 30 movies a year would be a good thing for movie theaters, assuming they all get shown on the big screen and aren’t a combination of theatrical and streaming titles, as happened with a 20th century Disney property.

But some are skeptical about its outcome.

Hollywood historian and author Mark Harris wrote of Bluesky that “the idea of ​​a Paramount-WB merger producing 30 to 40 films a year is an absurd fiction”.

He predicted that Warner Bros would first become the “stylish” label within Paramount, “then it will become the specialty or streaming label. Then it will die.”

Actor Jane Fonda had previously said that regardless of who took over the company, a “consolidation on this scale would be catastrophic for an industry founded on free speech.”

The current state of Paramount films vs. Warner Bros

Warner Bros, one of the most filmmaker-friendly studios, has had a banner year with major blockbusters and critical successes.

This year they collected 30 Oscar nominations thanks to Sinners and One Battle After Another.

Paramount films received zero.

By 2025, Warner Bros. films (including A Minecraft Movie, Superman and Sinners) also accounted for 21 percent of the domestic box office.

Paramount’s market share was just 6 percent, thanks in large part to Mission: Impossible – The Final Reckoning, which didn’t even crack the top 10.

In November, Paramount pledged to expand its theatrical output to at least 15 films by 2026.

While Warner Bros has been successful with a combination of original and franchise films, Paramount’s slate is decidedly more franchise-heavy with intellectual property like Transformers, Scream, Sonic the Hedgehog and Paw Patrol in their arsenal.

Will HBO Max and Paramount+ be combined?

That remains unclear.

It is possible that there will be a bundling situation like with Disney+ and Hulu.

Will regulators approve the deal?

That remains to be seen.

The US Department of Justice has already begun investigations, and other countries are expected to do so as well.

AP