Why Netflix is buying Warner Brothers — and how the deal can change Hollywood

Here is a look at why the deal took place and concerns around it.

The deal

For all its successes, Netflix, the world’s dominant streaming platform, has not been able to achieve two significant milestones so far. One, it is yet to win an Academy Award for best picture. Two, it has failed to deliver a blockbuster movie.

So, when Warner Brothers — a legacy company, which had struggled with its own online streaming platform — put itself up for sale in October, Netflix saw an opportunity. Note that Warner Brothers became available for purchase after Paramount made unsolicited approaches to buy it.

Netflix’s deal with Warmer Brothers came at a breakneck speed. According to a Wall Street Journal report, Warner Bros. Discovery Chief Executive David Zaslav and Netflix co-CEO Ted Sarandos are friends who have spent time together during the deal-making process.

“Netflix was “aggressive about pursuing the value,” said former Warner Discovery board member John Malone, who now serves as an adviser to the company,” according to the report.

Acquiring Warner Brothers will enable Netflix to get its hands on the recipe for making big-screen entertainment. It will help the streaming platform get its movies at the heart of American culture, much like its television series did.

Also, the deal gives Netflix access to Warner Brothers’ catalogue of nearly a century’s worth of titles, such as the Harry Potter series and The Game of Thrones. Netflix will also add some of HBO’s 128 million subscribers to its already more than 300 million-strong base.

The concerns

Warner Brothers had defined Hollywood, creating classics such as Casablanca, Gone with the Wind and The Exorcist. However, Netflix’s buying the studio shows that the golden era of cinema is over, and streaming is the future.

Mike Proulx, vice president at research firm Forrester, told the BBC, “With this deal it is official: legacy media is ending.”

Although Netflix has assured that it would keep releasing movies in theatres, not many believe that it will remain a priority for the streamer. This fear is not unfounded, as Netflix’s Sarandos had recently said that he believed movie-going was an “outdated concept”.

Moreover, there is still no clarity about the “window” — the period that theatres get to screen a movie before it goes to home entertainment formats. The deal will make it easier for Netflix to pull out a film from big screens and put it on the streaming platform on its own terms, which could be detrimental for theatre owners.

That is the reason why several Hollywood actors and directors have come out to oppose the deal. For instance, Titanic director James Cameron had warned — just before the deal took place — that it would prove to be a disaster for the industry.

Competition regulators in the United States and Europe are also concerned about the agreement. It has brought together two of the world’s largest streaming services and two of the biggest makers of films and television shows. This means that it would reduce choice for consumers and give Netflix a staggering share of the streaming industry.

In a statement, US Senator Elizabeth Warren, a Democrat, said, “A Netflix-Warner Bros would create one massive media giant with control of close to half of the streaming market — threatening to force Americans into higher subscription prices and fewer choices over what and how they watch, while putting American workers at risk.”