Netflix has agreed to buy Warner Bros Discovery's TV, film studios and streaming division for US$72-billion, a deal that would hand control of one of Hollywood's most prized and oldest assets to the streaming pioneer.
Reuters
Moviegoing might have died Thursday night. Perhaps that sounds a tad dramatic, but sometimes you have to deploy the hyperbolic language of Hollywood, especially when describing an industry disaster that is existentially on par with the most explosive chaos ever put on the big screen.
The calamity stems from the news that Netflix is officially buying Warner Bros. Discovery for US$82.7-billion ($114.6-billion) in total enterprise value. While the mammoth acquisition is far from a done deal – there are genuine antitrust concerns at play, and Paramount Skydance, Netflix’s rival suitor for WBD up until a moment ago, could throw up all variety of legal challenges – the fact that the situation even got this far is a sign of the end times for Hollywood as we know it. Make no mistake: This is a devastating blow for movie theatres, filmmakers, television creators and, of course, audiences.
Under the terms of the deal, Netflix would acquire the entire catalogue of the 102-year-old Warner Bros. studio – one of the last five remaining “legacy” studios in Hollywood, alongside Disney, Universal, Paramount Skydance and Sony Pictures – as well as its television and streaming arms, including HBO. In terms of intellectual property, WBD has a gold mine of brands ripe for exploitation. Harry Potter, the DC cinematic universe including Batman and Superman, Looney Tunes, Game of Thrones, The Lord of the Rings, The Sopranos, The Conjuring, The Matrix, the Ocean’s films, Barbie, not to mention such Golden Age classics as Casablanca and The Maltese Falcon: They will now all be under the aegis of Netflix.
Netflix to buy Warner Bros Discovery’s studios, streaming unit for US$72-billion
The short-view perspective might see this as a net positive for consumers. Hey, one less streaming service to subscribe to, right? But would HBO, inarguably the most quality-focused television outfit around, even exist under the new arrangement? Would Netflix commit to spending just as much as WBD had been on original productions, both for the big and small screens? There are significant reasons to be skeptical.
Under the terms of the deal, Netflix would acquire the entire catalogue of Warner Bros. studio, which is more than a century old.Mike Blake/Reuters
In its official announcement, Netflix said it “expects to maintain Warner Bros.’ current operations” and “build on its strengths, including theatrical releases for films.” But what does that mean, exactly? Looking at how Netflix has treated the theatrical experience thus far – as a nuisance at best, a business to be destroyed at worst – it is impossible not to see this as a bloody sucker punch for cinema, if not the death knell for most movie theatres.
Netflix has been famously built on the model of being a direct-to-consumer business, with no middle man. When it does put movies in theatres first – a rare occurrence – it does so in the most half-hearted fashion. Take the latest Knives Out entry Wake Up Dead Man, or Guillermo del Toro’s Frankenstein, or the George Clooney comedy Jay Kelly. These are all big-deal, high-budget, prestige-level titles that could easily play in theatres for weeks and weeks before becoming available to Netflix subscribers at home. But that is not the Netflix way.
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So, to placate the big-name directors it wants to work with – and to become eligible for the Academy Awards it desperately wants to win to prove its industry legitimacy and/or boost its corporate ego – Netflix has given a handful of its films paltry two-week-or-so runs at a minority of theatres. These are exhibitors that either do not care or rather cannot afford to care about how they’ve gotten into bed with a company that was built to cannibalize their business.
But, you might argue, Netflix seems so committed to movies! I mean, look at how many films they take to festivals around the world! Sure, and TIFF and Venice and other festivals are eager to roll out the red carpet for those premieres. Yet it is all, well, a bit of theatre. Netflix gets to (briefly) show filmmakers that it cares about the cinematic experience, and everyone else gets to feel good about the state of the medium for a brief moment. But Netflix doesn’t seem to want box-office grosses, and it certainly doesn’t want to split that revenue with theatre owners. It only wants subscribers to its digital service, end of story.
This is why the larger exhibition giants in the world, such as AMC in the United States and Cineplex in Canada, have historically refused to play Netflix titles in a wide-scale fashion. And they could (mostly) afford to do so because they had other studio partners, such as WBD, who would play ball, keeping their movies in cinemas for longer than a week or two. What happens when there is one less major studio around? This year, WBD sent a dozen movies to theatres for proper runs. How can theatres fill that gap if Netflix decides, nah, we’re not so much into that model? You don’t have to be Ben Affleck’s math whiz in The Accountant (another WBD property!) to figure it out.
The iconic WB water tower from outside Gate 4 at the Warner Bros. Studios in Burbank, Calif., on Oct. 22.ROBYN BECK/AFP/Getty Images
Then there is the creative-community angle. Forget, if you can, all the many employees (on both the WBD and Netflix sides) who are likely to lose their jobs as part of corporate restructuring and cost-saving efficiencies. Forget all the theatres that are likely to close, unable to weather a paucity of product. What about everyone who actually makes movies and television shows? With one massive and storied studio effectively gone, there will be one fewer outlet to sell their stories, to keep the business, and the art, of filmmaking alive.
This moment isn’t quite like the last major merger to go down in Hollywood, when Disney swallowed up 21st Century Fox in 2019. While that move was disastrous in its own right – Fox regularly sent a dozen-plus big titles to theatres when it was active; under the Disney umbrella this year, the husk of a studio distributed just four – the Netflix/WBD situation is exponentially more tragic. At least Disney has a century-long history of and affinity for theatrical distribution. Netflix’s very existence was formed in opposition to the business.
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And then there’s the Canada angle. Bell Media’s streamer Crave thrives mostly because it has an output deal with WBD for such premium-tier content as the HBO catalogue. When Netflix gets a hold of that, what will be left? Rogers Media, too, relies on its own funnel of WBD programming to support its specialty TV cable channels.
Unless Netflix decides to license parts of its catalogue out to competitors – a move that would keep revenues flowing freely but also goes against the company’s long-standing ethos of being a walled garden of content – then the deal could singlehandedly sink the Canadian media ecosystem.
The deeply, darkly ironic thing is that WBD recently proved the power of the theatrical marketplace, becoming the first studio to hit US$4-billion ($5.5-billion) worldwide this year, thanks to a series of hits including Sinners, A Minecraft Movie, Superman, Weapons and The Conjuring: Last Rites. It is also responsible for the very best film to be released this year, Paul Thomas Anderson’s One Battle After Another, the current frontrunner in the Oscars race. Will Netflix see that theatre-first success as something to be replicated, or subsumed and eliminated? Watch and learn.