Warner Bros. Discovery has entered exclusive negotiations to sell its film and television studios, along with the HBO Max streaming service, to Netflix.
Netflix has reportedly offered a breakup fee of roughly $5 billion should regulators block the transaction, a signal of its confidence in navigating what is expected to be intense antitrust scrutiny, according to sources who spoke with Bloomberg.
An agreement could be announced within days, these people said, though they cautioned that the negotiations remain fluid. The bid places Netflix ahead of other suitors, including Comcast and Paramount Skydance, both of which had aggressively pursued the storied studio.
Warner Bros., valued at more than $60 billion, had formally put itself up for sale in October after receiving multiple unsolicited offers.
Before any sale is completed, Warner Bros. plans to spin off its traditional cable networks, including CNN, TBS and TNT, continuing a strategic shift away from declining linear television revenue. In its most recent quarter, the company’s cable division reported a 23 per cent drop in sales as viewers continued migrating to streaming platforms.
News of the exclusive talks lifted Warner Bros. shares by nearly 4% in premarket trading on Friday. Netflix stock slipped slightly.
If completed, the acquisition would represent a dramatic departure from Netflix’s long-standing approach. The company rose from a DVD-by-mail service to Hollywood’s most powerful streaming giant largely without owning an extensive library or studio infrastructure. Instead, it licensed content from others and later built a robust slate of originals.
Assuming regulatory approval, Netflix would gain control of HBO and its award-winning catalogue, including “The Sopranos,” “The White Lotus,” and “Game of Thrones” as well as Warner Bros.’ vast film and television archives such as the “Harry Potter” franchise and “Friends.” The deal would also give Netflix ownership of the Burbank studio lot, one of Hollywood’s historic production hubs.
The negotiations have not been without controversy. Paramount Skydance, which initially set off the bidding war, accused Warner Bros. of running a “tainted” sales process that favored Netflix, according to letters disclosed by people familiar with the matter.
Paramount has argued that its proposal would face fewer antitrust obstacles than Netflix’s, given the combined streaming subscriber base of roughly 450 million users that the Netflix-Warner merger would command.
Bloomberg Intelligence estimates that a Netflix offer valuing Warner Bros. at about $75 billion would face formidable regulatory challenges in the United States and Europe. Netflix has argued to policymakers that combining services could ultimately lower consumer prices through bundled offerings.
Still, the prospect of Netflix controlling one of Hollywood’s most revered studios has unsettled parts of the entertainment industry. The company has historically resisted giving its films wide theatrical releases, a stance that has put it at odds with traditional studios and theatre owners.