Warner Bros. Begins Exclusive Deal Talks With Netflix

(Bloomberg) — Warner Bros. Discovery Inc. (WBD) has entered exclusive negotiations to sell its film and TV studios and HBO Max streaming service to Netflix Inc. (NFLX), according to people familiar with the discussions.

Netflix is offering a $5 billion breakup fee if regulators don’t approve the deal, said the people, who asked to not be identified because the discussions are private. The two companies could announce a deal as soon as in the coming days, assuming talks don’t fall apart, the people said. The move suggests Netflix has pulled ahead of Paramount Skydance Corp. (PSKY) and Comcast Corp. (CMCSA), who were also competing for the asset.

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Prior to the closing of the sale, Warner Bros. — valued at more than $60 billion overall — will complete the planned spinoff of cable channels including CNN, TBS and TNT.

Warner Bros. shares rose by around 3.7% in premarket trading on Friday after closing at $24.54 in New York. Netflix shares were down around 0.6% in premarket trading.

A deal, if consummated, would bring seismic change to the entertainment industry, joining the world’s dominant paid streaming service with one of Hollywood’s oldest and most revered studios.

The acquisition marks a dramatic strategic shift for Netflix, which has never done a deal of this scope. The streaming pioneer grew to become Hollywood’s most valuable company, without the benefit of a content library or studio, by licensing programs from others and then expanding into original content. Representatives for Warner Bros. and Netflix didn’t immediately respond to requests for comment.

With the purchase, Netflix becomes owner of the HBO network, along with its library of hit shows like and . Warner Bros. assets also include its sprawling studios in Burbank, California, along with a vast film and TV archive.

It would represent a setback for Paramount Skydance Chief Executive Officer David Ellison, who kicked off the bidding for Warner Bros. with multiple unsolicited bids.

Warner Bros. formally put itself up for sale in October after receiving interest from several parties. Comcast also made offers.

The bidding got contentious, with Paramount accusing Warner Bros. of operating an unfair process that favored Netflix. A Dec. 3 letter from litigation counsel representing Paramount called the sale process “tainted” and suggested Warner Bros. had titled the auction in Netflix’s favor.

Paramount argued in a Dec. 1 letter to Warner Bros. that its bid was more likely to pass muster with regulators around the world.

The traditional TV business is in the midst of a major contraction as viewers shift to streaming, the world that Netflix dominates. In the most recent quarter, Warner Bros. cable TV networks division reported a 23% decline in revenue, as customers canceled their subscriptions and advertisers moved elsewhere.

What Bloomberg Intelligence Says

Netflix may be the front-runner in the race for Warner Bros., ahead of Paramount and Comcast. A $30-per-share bid implies a steep equity valuation of $75 billion for Warner’s assets. A combined base of about 450 million subscribers would trigger significant antitrust concerns, though Netflix is trying to ease regulators by arguing the deal would lower consumer prices through bundling.

– Geetha Ranganathan and Raveeno Douglas, analysts.

Founded almost three decades ago as a DVD rental company sending discs to customers by mail, Netflix finished 2024 with $39 billion in revenue. Its market value is roughly $437 billion. Warner Bros., founded in the 1920s, had more than $39 billion in sales.

Warner Bros.’ iconic content would give Netflix powerful programming to sustain its lead over challengers like Walt Disney Co. and Paramount. The deal will certainly face antitrust scrutiny in the US and Europe, and has already raised some red flags.

California Republican Darrell Issa wrote a note to US regulators objecting to any potential Netflix deal, saying it could result in harm to consumers. Netflix has argued that one of its biggest competitors, however, is Alphabet Inc.’s YouTube. Utah Senator Mike Lee, also a Republican, echoed Issa’s concerns this week.

Netflix’s interest in Warner Bros. also sent shivers through Hollywood. The company has largely refused to release films in theaters, occasionally giving its original movies limited runs in cinemas.

—With assistance from Josh Sisco and Ryan Gould.

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