ZAP // yousafbhutta / Pixabay; WBD; HBO Max
From the impact on entertainment workers, to the political ramifications and the effect on underwriters’ pocketbooks, there are several factors to take into account in the valuable race for Warner Brothers.
It looks like a simple merger agreement between companies, but it brings together all the elements of a Hollywood drama: a rich and powerful suitor, political intrigue and many suspenseful scenes.
The purchase of the Warner Bros. studio Discovery and the popular streaming networks from HBO to Netflix are, in practice, the story of a giant expanding its dominance.
But with regulators and rivals lurking, this is probably just the beginning of the saga.
As the story unfolds, here are five key points to understand what is at stake.
1. Netflix is becoming even more powerful
Netflix has been expanding its advantage in Hollywood for years: it is the largest subscription streaming service in the world and the main producer of original content in California (USA), where Hollywood is located.
But this agreement, the largest in the sector in years, would consolidate its leadership, by giving the company a catalog with almost a century of titles and also expand its already robust production capacity.
Not to mention the huge number of subscribers, as Netflix prepares to incorporate part of HBO’s 128 million subscribers to its universe of more than 300 million.
“If Netflix is already the largest streaming service, by adding HBO Max it becomes practically untouchable“, said Mike Proulx, vice president of research consultancy Forrester.
The operation will bring together historic franchises such as Looney Tunes, Harry Potter and Friends and HBO hits such as Succession, Sex and the City and Game of Thrones, alongside Netflix’s own productions such as Stranger Things and K-pop Warriors (Kpop Demon Hunters, in the English version).
The purchase also includes TNT Sports outside the United States.
If Paramount emerges victorious in the dispute, it would add part of HBO Max’s 128 million subscribers to Paramount’s 79 million.
2. The agreement could make prices rise… or fall
Netflix says it expects to complete the transaction within 18 months. Executives, however, avoid saying how or if they intend to integrate Warner Brothers and the HBO brand into the current service.
Greg Peters, co-chief executive of Netflix, said the HBO name is “very powerful” and offers “many options”but did not detail which ones.
The company may create separate packages, although analysts consider it unlikely that the HBO brand will disappear.
The impact on prices is also uncertain.
The expanded domain could allow for increases. On the other hand, consumers may end up pay for a single service instead of two.
3. Streaming is the future, and Hollywood feels left out
Warner Bros. Discovery, which dates back nearly a century, has a vast catalog that includes classics like Casablanca and The Exorcist.
But the traditional company has suffered commercial pressure with the transformation caused by online streaming in the film and TV industries.
And the acquisition shows how the golden age of cinema has lost strength.
According to Proulx, from Forrester, the direction is clear: the future is “all streaming”. “With this agreement, it becomes official: traditional media is coming to an end.”
Netflix promises to keep premieres in theaters, something that makes sense, since the purchase includes the DC superhero franchisea big box office grosser.
But there are questions about whether this will continue to be a priority. This year, Ted Sarandos, co-chief executive of Netflix, said he considered going to the cinema an “outdated concept”.
Consolidation with the purchase by Netflix touches on a sensitive point in an industry already shaken by staff cutsdrops in production and the advancement of artificial intelligence.
James Cameron, director of Titanic and the Avatar franchise, was one of many who reacted negatively, stating, shortly before the announcement, that the deal could be a “disaster” for Hollywood.
4. The deal is not yet closed
The conclusion is far from guaranteed.
First, Warner Bros. Discovery needs to complete the spin-off of units that will not be sold, including CNN, Discovery and Eurosport.
At the same time, competitor Paramount Skydance, which intended to buy all of Warner Brothers Discovery, presented a hostile offer hoping to convince shareholders that it could offer an attractive alternative.
In negotiations between corporations, this occurs when one company tries to buy another without consent of the management of the company to be purchased, usually offering to buy the publicly traded shares of that target company.
The biggest uncertainty, however, is what type of agreement will be approved by competition regulators in the US and Europe, something that could represent a major challenge.
In Washington DC, the capital of the USA, congressmen from both parties have already criticized Netflix’s proposalalleging the risk of fewer options and higher prices for consumers.
Sarandos said that Netflix, which will have to pay 5.8 billion dollars If the purchase agreement falls apart, he is “very confident” in the approval of the purchase.
Some Democratic Party congressmen also criticized Paramount’s competing bid. Analysts claim that would require a review of the impact on advertisers and local TV distributors, due to the combined company’s power over sports and children’s networks.
The decision will depend, in part, on how regulators understand the competitive scenario in the market, said Jonathan Barnett, professor at the University of Southern California (USA).
If they only consider streaming, Netflix’s expanded share could generate a large concern for consumers. But, if they include cable TV, open broadcasters and even platforms like YouTube, “concerns about concentration decrease”.
Rebecca Haw Allensworth, professor at Vanderbilt Law School (USA), stated that an agreement of this size “would normally be challenged“, in search of better conditions for consumers.
This time, however, she fears that the government of American President Donald Trump will try to pressure Netflix on issues such as diversity and political bias, as has happened in other cases.
5. Donald Trump is another unpredictable factor
Trump has always demonstrated interest in the media industry and entertainment and said he hopes to participate in decisions. He has demanded that CNN, which he accuses of being hostile to his government, be sold to another company as part of any deal.
But it’s not clear what he thinks about the current proposals.
Over the weekend, Trump signaled concern about Netflix’s size after the merger, saying that could be “a problem”. At the same time, he praised the company’s leadership.
Trump has already spoken positively about Larry Ellison, a tech billionaire and Republican donor, and his son David, who are leading Paramount Skydance’s rival bid. But, on the 8th, he criticized the company after a Aired interview with Congresswoman Marjorie Taylor Greenepreviously his ally.
“They’re not exactly great friends of mine,” said the president.
Bill Kovacic, former president of the Federal Trade Commission (FTC), told the BBC that Trump’s statements indicate that any decision will need approval from the White House.
This may represent “an unprecedented level” of presidential control about the process, Kovacic said.
