It is not certain on the direction of the agreement and deal between Netflix and Warner Bros. Discovery (WBD), however, regardless of the outcome of Netflix’s $82.6 billion acquisition of Warner Bros., Hollywood is going through a difficult time as tech companies are taking centre stage in the entertainment industry.
Kirsten Korosec and Anthony Ha, discussed about the deal’s ramifications for Netflix and the greater Hollywood ecosystem on the most recent episode of the Equity podcast. Kirsten pointed out that it’s simply the most recent action that will further consolidate the media industry, and she questioned if it would be “too big a risk” for Netflix.
In the meantime, Anthony spoke with Netflix management about a conversation in which Wall Street analysts appeared to be having trouble understanding the acquisition. Naturally, there is also Paramount’s aggressive proposal. Regardless of the outcome, Warner Bros.’ days as an independent business appear to be numbered.
In a conversation between Kirsten and Anthony, in a sneak peek of discussion is outline below.
Where Kirsten described a tail where he had recall receiving their [DVDs] in the mail when Netflix was still a small business, growing. They’ve all grown up and are now vying for a legacy company.
Anthony, on the other hand described, In a metaphorical sense, Hollywood to have been devoured by the upstart at this point. Even before this agreement, there were numerous headlines claiming that “Netflix is eating Hollywood, Netflix is transforming Hollywood.” Netflix will have changed Hollywood regardless of the outcome of this agreement, but this seems to be one of the most significant and dramatic things that may occur, both in terms of symbolism and substance.
In addition, there are many more burning questions, such as: Will Netflix receive regulatory approval? Will the aggressive bid from Paramount be successful?, that are yet to be answered.
Anthony, a had asked Kirsten, what caught your attention was that you were catching up.
Kirsten response, first of all, as he wondered if the market would continue to consolidate. That was significant to him because, if his memory serves him correctly, Warner Bros. had already undergone a similar consolidation with Discovery. So here they are once more. He had lost track of everything since there has been so much consolidation.
The second thought, however, was what he immediately thought of and how he started the conversation, which was to really consider how Netflix had grown overtime and how there have been these bumps in the road along the way, where the headlines have been about how it’s struggling and whether it can stay relevant. It can indicate that they have succeeded if they are successful in the real transaction.
However, they also need to manage an even larger business than they have in the past. His third thought on this, was when he had suppose by asking: Should they purchase this? Is this what they need to grow? Do they run the risk of taking on so much? Why don’t they just remain the same? And I’m not sure if you concur with me on that point. Is the risk too great? Which other burning questions.
Anthony can understand how it make sense for Netflix. He went on to say that it’s a way to take an existing sizable [content] library, and they’ve undoubtedly had some pretty successful TV shows less so on the film side but they could possibly grow much stronger on the content side.
And they’re suddenly involved in all these other businesses, but it’s unclear how much they’ll invest in industries like theatre, theme parks, and producing TV shows for other streaming services and networks all of which Warner Bros. is involved in and Netflix claims it will continue to support. However, we’ll see how much of that is accurate.
Thus, it appears that Netflix could gain a lot from it in certain ways, but there is also a great deal of risk involved. You can see that the analysts are debating the deal, asking themselves, “Okay, as he can see that this grows their business, but does it grow their business so much that it’s worth a $82 billion deal?” in the analyst call that Netflix executives conducted following the announcement.
Beyond Netflix’s viewpoint, of course, there are all the other Hollywood players. There are a lot of headlines that may be overly dramatic about whether or not Hollywood is dying. Is the movie theatre industry coming to an end? In essence, every union is saying something like, “We’re very, very, very worried about this deal,” or “This deal should be blocked.” According to the theatre’s owners,
Therefore, Anthony believe that it Is either that, this is a decent bargain for Netflix? or Does the entertainment industry stand to gain from this? He is not sure yet how to respond to either question, but he believe Netflix will probably benefit more than the entertainment industry.
However, given how Paramount has compelled Warner Bros. to consider these acquisition offers, it appears unlikely that Warner Bros. will be able to continue as an independent company, which is disappointing if you’re not a fan of media consolidation. This is something to keep in mind as people consider those options or potential outcomes.
With respect to the significant risks and issues as the deal is concerned, and despite the possible advantages, there are a number of serious concerns that could prevent the agreement from succeeding, the reasons could be regulatory hurdles, its financial constrain, operational integration & culture clash, talent and theatrical windows, competition for acquisition and others.
However, in the end, the agreement is a huge wager on the potential of size and intellectual property ownership in the entertainment industry.