Welcome to the big leagues, Netflix

Warner Bros. It has a notorious history of being bought out by other companies Then it quickly ends up back on the market after its new owners realize how difficult it is to leverage the assets of the old production studio. These challenges are part of what led to the failure of WB’s mergers with AOL and AT&T, which bought the studio in attempts to reinvent itself. But the World Bank’s latest takeover – this time With Netflix for $83 billion -It seems like it has the potential to look different given how important the streamer is in the entertainment industry. It’s also indicative of how far Netflix has come: In less than two decades, the streaming company has gone from a tech startup to one of Hollywood’s most iconic studios.

Assuming the deal receives regulatory approval, Netflix will soon own all of Warner Bros. (but no Discovery Global’s), which includes HBO/HBO Max, DC Studios, and the TV and film production arms of the old studio. This would make Netflix home to many of the world’s biggest entertainment franchises, e.g game of thrones and Harry Pottergiving the streamer a much larger operational space as a proper studio. Discovery Global — which retains ownership of networks including CNN, Discovery Channel and TLC — is set to become an independent corporate entity by the third quarter of 2026.

This strategic bifurcation and asset sale was clearly the desired outcome for WBD when the company first announced earlier this year that it planned to split Warner Bros. And Discovery back to two units. At the time, CEO David Zaslav had not yet announced that the company was open to takeover offers. But you can glean a lot from looking at the way WBD has been struggling to turn a profit with its linear cable networks.

Although WBD was able to pay off a significant portion of the $55 billion debt it inherited When Discovery bought WarnerMediaThe combined company’s declining cable television assets were a major factor Get a significantly reduced credit score Earlier this year. This religion — a remnant of AOL’s disastrous merger with Time Warner – hung over WBD throughout Zaslav’s tenure as CEO.

A combination of money problems Misleading trademarksand Multiple rounds of layoffs It left WBD in a very precarious position that selling itself to the highest bidder was one of its only viable options to satisfy shareholders. It may also be difficult for Netflix to deal with these challenges, but it looks like this situation could change very differently for several key reasons.

Unlike previous mergers in which traditional technology and telecom giants acquired Warner Bros., the new deal comes at a time when Netflix has long established itself as a power player in Hollywood. In addition to acquiring the intellectual property that has become a hit, the streamer has built a robust production infrastructure to spin entirely original projects of its own. And with many projects that generate subscribers to the platform such as Strange things and Squid game With the end in sight, it’s easy to understand why Warner Bros. would want to take over the franchise. A large library of movies and series. Netflix doesn’t have the strongest track record of building its own franchises – remember Rebellious moon? -And that’s exactly what’s happening with WB.

Although Netflix seems like a better acquisition partner compared to Warner Bros.’ Previous owners, this is still a merger and these types of mergers always come with losses. It is likely so We will soon start hearing news about layoffs As Netflix begins to deal with internal redundancies resulting from its acquisition of Warner Bros. Staff and operations. But what’s less clear is how the newly combined studio will go about launching its new projects.

In 2021, during the height of the COVID-19 pandemic, WBD’s decision to premiere films on HBO Max rather than in theaters prompted directors like Christopher Nolan to… He denounced the company To become the “worst streaming service.” Despite the box office numbers It has not yet returned to pre-pandemic levelsTheaters have reopened, with hits like Warner Bros.’ Minecraft movie and Superman The features made it clear that there is a demand to watch movies on the big screen. Netflix has it I tried with very Limited theatrical releases Which read transparently as plays to qualify their films for major industry awards. But it has remained primarily a streaming company in the years since it exited the DVD game.

Unlike MGM, which was in decline when Amazon bought it, Warner Bros. With a very strong track record through its recent theatrical releases. Netflix has said so ‘Expects to continue with Warner Bros.’ status Movies in theatersBut co-CEO Ted Sarandos pointed out that… The company is considering shortening its theatrical windows In order to “meet the audience where they are, faster.”

“I would say right now, you have to rely on whatever is planned to go to theaters through Warner Bros. will continue to go to theaters through Warner Bros. and Netflix movies will take the same steps that they did,” Sarandos said this week on a call with industry analysts.

It has Netflix too You made it very clear It is open to Reduce production costs with generative AI. The company hasn’t mandated that its collaborators use the technology as part of their production workflow, but it’s easy to imagine AGI becoming a bigger part of the studio now that it’s taken over all the projects Warner Bros. takes on. By developing it.

The most obvious concern stemming from the new merger is how it could impact competition between the major studios and streaming platforms. Netflix has effectively replaced Warner Bros One of the big fivewhich is likely to change the power dynamics in the entertainment industry. But streaming customers will likely feel these shifts more directly as Netflix and its competitors settle into a new status quo.

Netflix prices may rise again as the service becomes more premium with Warner Bros. Offerings. It’s still unclear how Netflix will handle the HBO/Max brands in the long term. The company said it believes “HBO and HBO Max also offer a compelling, complementary offering to consumers,” but it wouldn’t be surprising to see those two brands. Ultimately it’s going the way of Huluwhich was It has become a section within Disney Plus.

It’s been years since Netflix was a buzzy startup to be taken seriously. But even though the company has already cemented itself as the world’s largest TV/movie streaming company, this new deal will take it to a different level of fame. The Netflix-WBD merger will undoubtedly bring about changes — some of them bad — that will reverberate across the entire entertainment landscape.

But while things may be turbulent in the near future, it’s unlikely that Netflix will eventually try to sell Warner Bros. Within two years. Acquisitions of this size are not the company’s usual approach, but they were optimistic about the appetite for Warner Bros. Since the studio has been put up for sale. If the deal goes through, there’s no doubt Netflix will be in the big leagues — and now it has to prove it belongs.