Netflix planned acquisition of Warner Bros. Discovery for $82 billion could deliver a massive blow to the movie industry. There are hurdles to cross — antitrust regulators, Trump’s whims, and a hostile bid from Paramount. But a record breaking $5.8 billion breakup fee signals high levels of confidence that the deal will close.
If it does, the consequences will be profound: lower quality mainstream films, rising subscription prices, theater closures, a shrinking video on demand and Blu-ray market, and reduced access to classic films. Many filmmakers will lose their jobs and have a less competitive market to distribute their movies. The waning cultural relevance of film will accelerate.
Netflix, of course, disagrees. Ever since the news broke, CEO Ted Sarandos has tried to assuage fears of a theatrical collapse and mass industry layoffs. But based on the streamer’s past behavior, the results will likely be far worse than they suggest.
Netflix will inevitably meddle with Warner’s creative direction. New productions based on Warner-based intellectual property are a sure bet, along with influence on Warner Bros’ production slate. The streamer may fold WB studio resources under the Netflix banner.
That’s a problem given the quality control for most Netflix original movies is so inconsistent. Most are forgettable with weaker cultural and critical reception than traditional studio releases.
The streamer’s big budget releases have an especially poor track record. Films like Red Notice and Rebel Moon were universally panned by critics and quickly vanished from Netflix’s own streaming charts. Even their blank checks to acclaimed auteur directors have had mixed results. For every success story like David Fincher’s The Killer, there is a misstep like Edward Berger’s Ballad of a Small Player.
The merger ensures Netflix eliminates one of their biggest streaming competitors — HBO Max. As we saw with Disney after it combined Hulu, Fox, Marvel, and Star Wars under a single platform, less competition historically leads to higher streaming prices.
Unlike traditional studios or its tech rivals Amazon and Apple, Netflix has never put their movies on video on demand services for rental or purchase. I’d expect many future WB films to follow a similar playbook.
Those actions would remove around 20% of new studio output from the VOD market. That’s a significant blow for movie watchers, given VOD is by far the most widely accessible and price friendly format available.
Netflix’s direct-to-consumer model treats theaters as at best a nuisance, and at worst as a direct competitor. Very few of its films ever play in theaters. The few that do get limited releases — often no more than three weeks and less than a few hundred screens — to placate filmmakers and qualify for Oscars.
Warner Bros films, by contrast, typically release across three thousand or more screens for runs of at least a month or two. Eventually, the movies enter the home market on premium VOD, then widen to digital purchases, rentals, and Blu-ray releases, before finally appearing on streaming. On average, the theatrical to streaming window lasts 70 to 90 days.
Under Netflix, I expect that timeline to collapse to well under half that studio average. Many more WB films will go either straight to Netflix or scale back their theatrical commitment. Even the biggest franchise movies — DC comic franchises, Harry Potter spin offs — may see no more than a two to four week run before appearing exclusively on Netflix.
Given WB generates roughly a quarter of domestic theatrical revenue, a 50% reduction could cut total U.S. ticket sales by 10-15%. Many theaters, already struggling post-pandemic, would close. Those that remain would face thinner programming and higher ticket prices.
Netflix almost never releases their movies on Blu-ray. Even though the streamer releases over a hundred original movies a year, only around ten have ever made it to disc. Those extreme rarities — movies like Jane Campion’s The Power of the Dog and Martin Scorsese’s The Irishman — rely on the clout of a strong willed auteur director and the right awards push.
Warner Bros, however, has the largest physical media distribution of all the major studios. Practically all new WB movies that play in theaters eventually are released on Blu-ray. Warner has also made an extensive effort to upgrade and re-release many movies from their vast back catalog on 4K UHD, from Blade Runner to The Searchers and The Shining.
Netflix is unlikely to continue this. Certain contractual obligations and enthusiast demand could keep select movies on Blu-ray, especially if they can offload the effort to a boutique label like Criterion or Arrow. But I expect most future releases will stay locked inside Netflix’s digital platform, leaving collectors and enthusiasts behind.
Merging Netflix and Warner Bros would eliminate many jobs due to overlapping departments. A weaker theatrical market and fewer distribution opportunities will give film producers less control and negotiating power over deals.
Netflix typically offers rich upfront fees but diminished backend profit participation for the film’s creative community. That loss in creative revenue will translate into fewer jobs and smaller productions.
Furthermore, with Netflix’s greatly expanded studio ownership, the streamer’s incentive to look outward for film acquisitions will diminish. I suspect we’ll see a significant pullback on festival buys going forward.
The merger would also reshape Netflix’s licensing partnerships with the legacy studios. Today Sony contractually puts most of their movies on Netflix, with A24 having a similar relationship with HBO Max. Given Netflix’s widening power, I imagine any renegotiations will be on less favorable terms, further squeezing the industry.
Warner Bros has one of the most storied back catalogs in film history, from Casablanca and the Exorcist to The Matrix and GoodFellas. Yet Netflix’s library today overwhelmingly favors new releases. Over 90% of their movies were made from 2010 or later. Only 7% originate 2000 or earlier, with less than 2% made before 1980. The streamer is also one of the most aggressive in the industry on reshuffling its home page and algorithm. Most movies disappear from casual browsing quickly.
That behavior sets a poor precedent for how Netflix may treat Warner’s vast archives. I expect most WB classics will eventually be relegated to Netflix’s digital library. Discoverability will only be available to those with an active subscription and the right search query. Many will no longer be available on VOD or physical media.
Following Disney’s example with 20th Century Fox’s catalog, Netflix may also restrict repertory screenings. Watching Bonnie and Clyde, Blade Runner, or Eyes Wide Shut on the big screen will become an increasingly rarified experience.
Netflix has always been a technology company at its core, not a film studio. It sees its competitors as YouTube, TikTok, and PlayStation more so than any force in Hollywood.
Tech platforms value engagement and attention over artistry. Under that lens, are movies a good fit for Netflix at all? A typical Warner Bros movie is an expensive two hour “one and done” narrative. It provides no future episodes to binge and keep subscribers hooked. It also lacks the live immediacy of talk shows and sports.
Such logic taken to its extreme suggests Netflix pulls back from movies altogether. Warner Bros becomes an IP content farm for Netflix to rework and morph into other more addictive, shorter, retention-friendly formats: TV shows, games, sports, and other spinoffs.
Admittedly, Netflix has proven to be an adaptable company for its size and influence. Every time the streamer finds a natural ceiling to growth it pivots to find fresh revenue. Since 2022, that’s included an ad-supported streaming plan, mobile video games, and live sports. Years ago, most analysts and Netflix’s own public statements were dismissive of all three areas. Today, each are an increasingly central focus of the business.
So to grow beyond an largely saturated streaming audience, could traditional media plays — global blockbusters in theaters, Blu-rays to enthusiasts, TV shows syndicated to cable networks — be Netflix’s next natural evolution? It’s the HBO and FX studio model — cross promote and cross sell, but leave the creative group independent to ensure its “special sauce” stays successful. If Netflix took that hands-off approach, many fears might prove unfounded.
The industry’s future depends entirely on how Netflix manages Warner’s assets. Optimists see a company expanding into theaters, Blu-rays, and cable networks to meet Wall Street’s never ending expectations around corporate growth. A hot tech company begrudgingly becomes more of a traditional studio to placate shareholders.
But I remain deeply skeptical. Every action Netflix has taken to date has preserved its direct-to-consumer control. I expect their acquisition of Warner Bros to be no different. If it proceeds as expected, the result will be a weaker film industry, a shrinking market for moviegoers, and a medium pushed further from the cultural mainstream.
One only hopes other remaining forces in the industry, from high profile directors like Christopher Nolan, to theatrical and artistically minded upstarts like A24 and Neon, to legions of younger film fans swarming Letterboxd and repertory theaters, to support what’s left.