- 12 hours ago
With a merger this big, creators, studios, and theaters all face uncertain futures. Here’s what experts are worried about and what good could come from it.
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00:00Netflix has secured a $72 billion deal to acquire Warner Brothers film and streaming assets.
00:07Man, oh man, what a move in the world of media this week.
00:10It would merge the largest streamer with one of Hollywood's largest studios.
00:15Christopher Zara, news director at Fast Company, joins us now.
00:17He is far smarter about all this stuff than I am.
00:20I have so many questions.
00:22Let's just start top line.
00:23What components of this story are standing out the most to you?
00:28And is this something you had expected even just a few months ago?
00:32No.
00:33I mean, the word bonkers comes to mind.
00:35The thing that stands out to me the most is the size and scope of this.
00:40Netflix, as being as giant a company as it is, has never done anything like this before.
00:45So we knew they were interested in this.
00:48We knew they were one of the bidders.
00:50But the fact that they came out today and just said, we're doing it.
00:53We're announcing this deal.
00:54I mean, it's somewhat of a surprise.
00:56It's obviously not a done deal from a regulatory standpoint.
01:01There are a lot of questions that are going to be worked out.
01:04But it's insane that this company is going to be even bigger in the streaming world.
01:10Like, already nobody can compete with Netflix.
01:13So it's interesting from a lot of different standpoints.
01:17But the fact that the size of it is just quite stunning, to be honest.
01:24I heard stunning.
01:25I heard insane.
01:26And I heard bonkers in that first response.
01:29I think those are three among many good descriptions for it.
01:31Probably in that order, yeah.
01:32Can you help me better understand this question?
01:38What franchises, what titles, what IP is now, if this goes through, now going to be under Netflix?
01:45Because I think that's what the average consumer needs to better wrap their heads around.
01:49Well, it's Warner Brothers is a hundred year old studio.
01:53So that not only do they have all this, the classic Hollywood movies like Casablanca.
01:59And I mean, the list goes on and on for the movies that they own.
02:02But they also own a lot of, as you mentioned, these really high end IP franchises that everyone knows.
02:07Like the DC Comics universe, which includes Batman and a lot of comic book characters.
02:14Harry Potter is another really big one.
02:17I mean, that's just one of these endless franchises where there's a million different spinoffs you could do.
02:23The TV show Friends, you know, a lot of Warner Brothers television is pretty well known.
02:28So the list is quite staggering.
02:32It's a lot of IP.
02:33I mean, this is reminding me of how stunning I feel like the Fox Disney deal or some of these really big ones where you're saying,
02:41wait a minute, this entire category of IP that we know and love as users is now going to be under fundamentally just a different shift overall.
02:51Would it be your expectation then, in theory, to access some of those titles you just mentioned?
02:56You would need Netflix, for instance, to watch the Harry Potter movies?
03:00Or we don't know those details yet.
03:01No, yeah, it's really a lot, pretty early to know those details.
03:07But I do, I see a universe where they keep it all under lock and key behind a Netflix subscription.
03:12I mean, why wouldn't they at some point?
03:13Obviously, I don't think they would try to do that right away.
03:17We didn't even mention HBO yet.
03:19I mean, HBO is part of this deal.
03:20And that itself is its own premium brand.
03:23I think one of the interesting things about Netflix versus HBO is these two companies kind of, they kind of became each other in a lot of ways.
03:32HBO was a premium TV network that was known for its, you know, its high-end television shows.
03:39And then about 10 years ago, it got into the streaming business with HBO Now, I think, was its first streaming product.
03:45Around that same time, Netflix starts doing premium TV, like House of Cards and some of the other early shows that they started to do.
03:52So they really started to try to become, compete with each other by becoming each other.
03:57It's like Batman versus the Joker, you know, where they kind of become, they have to compete and become each other.
04:02And so, and now, you know, Ted Sarandos, the CEO of Netflix, famously said at one point, we want to become HBO before they can become us.
04:11And now it looks like it's actually happened.
04:13I think that it's pretty amazing when you look at that, that trajectory.
04:17Die and be a hero or live long enough to see yourself become the villain.
04:21Let's keep going with the Batman analogies.
04:24In terms of court of public perception, who are the enemies now?
04:28Who are the bad guys, if there is one?
04:30Because if one of our producers pointed out, if you look at at least in social media commentary and comment section, there's a lot of concern.
04:37There's just a lot of general user consumer based backlash, I feel like, to these mega M&A deals in the media space.
04:46Yeah, I mean, one big one is the movie business itself, the theatrical movie business.
04:51So Netflix, obviously everyone knows Netflix has an incentive to get things onto its platform to stream them for its customers.
04:58It's already made some promises that when it buys the if and when it buys the Warner studio, that it will keep the theatrical business intact.
05:06But that, you know, that's these companies make promises all the time when they when they do these kind of deals.
05:11And those kinds of promises are really hard to enforce, especially over the long term.
05:15So one area of concern is what's going to happen to the movie business when a major studio is owned by by a company that has its first incentive is to is to stream things quickly.
05:27People will wonder, Christopher, how this impacts their wallets, streaming costs.
05:32They go up all the time, whether or not we realize it.
05:34Like, yeah, the streamers do they do send you a little user email and say, here are some updates to your account.
05:40But we're kind of in a cycle where I feel like most people say, oh, you know, you know, no one wants to pay an extra four bucks a month.
05:46But ultimately, you kind of grin and you bear it.
05:49What would you what would be your expectation with regards to the impact on how much money people will pay for these now even larger mega bundles?
05:57Yeah, the bundle part of it will probably be kind of interesting.
06:01Like, do they bundle Netflix with HBO kind of in a Disney sort of way where Disney's always trying to give you the bundles of Hulu and Disney Plus?
06:11I think that those kinds of things will be interesting to watch, whether or not it gets any cheaper for consumers.
06:17I don't have any I don't hold out a lot of hope that this is going to be ultimately cheaper for consumers.
06:23It never is in the end.
06:24Like what that what ends up happening is you get a company that.
06:27Owns more share of the entertainment that that you want.
06:31It's going to end up costing you more, not less in the long in the long run, I would guess.
06:36I mean, Netflix might might try to take issue with that.
06:40But I think in the long run, I don't think it's great for consumers.
06:44So no surprise to me, Chris, for at least the early stock reaction is a bit of selling for Netflix.
06:48That's the buyer, but a nice pop for WBD.
06:51Of course, that's what's being purchased here in theory.
06:54Yeah.
06:55Are we are we just help me better understand this.
06:57Will Warner Brothers Discovery in its current form cease to exist or do you see a world where it still operates as a publicly traded company with just a lot of assets somewhat stripped away?
07:10Yeah, there's the other part of Warner Warner Brothers Discovery, which is like the cable networks that includes CNN and TNT.
07:17All that stuff's going to be spun off.
07:19We already kind of knew that was happening.
07:21So that won't be part of this.
07:22And then when, you know, when the dust settles, I think later next year is that when that's supposed to close.
07:29There'll be a separate company that's mainly a pure play cable company with some of these cable networks that we all know.
07:37But it's also not like it's not really known as a growth business.
07:41I mean, there's some probably high quality sports tied up in there with TNT and stuff like that.
07:46But it's not that's not the part of the business that everyone is excited about in terms of like looking forward about the future.
07:53So, you know, I think one of the reasons the stock maybe went down a little bit is because Netflix investors are kind of happy with the way Netflix is in its current form.
08:05And maybe they feel that Netflix doesn't need to be weighed down by this.
08:09I didn't even think about the live sports component of all this because Netflix is now also making a very strong live sports play.
08:16Any any any frustrated fan of the NFL like myself will know that now is the time of the season between Thanksgiving and Christmas.
08:24And now you've got games that are exclusively on Amazon Prime.
08:28You've got games that are increasingly exclusively on Netflix during Christmas Day, which never used to be a thing for football fans.
08:34Is there a live sports component that you would expect to be further entrenched between these, given that as we followed the M&A activity in the space, as dizzying as it's been,
08:43there is still kind of this crown jewel, jewel associated with ad revenue that can kind of uniquely come from the interest and eyeballs of live sports?
08:53Yeah, I for sure. I would imagine that it would, because as you just mentioned, like when you're talking about live television broadcasts, sports is really the last thing that matters.
09:01It's kind of the only thing that matters. Live news is not really super profitable anymore because people can get it at just about everywhere.
09:09But sports is still a thing you're going to watch live. And of course, Netflix, as you mentioned, is already doing this.
09:15I would imagine they'll probably want to continue to do more of it.
09:19They're going to be in a position to make better deals for themselves, you know, if they have these other properties as well.
09:26So I think that we'll probably see a lot more deal making in sports as well.
09:30Oh, man, I have so many questions. I'm almost out of time.
09:35Like, it's just it's this difficult of a story to kind of sink our teeth into.
09:38OK, is there a is there a Larry Ellison component to this in terms of some rivals, Paramount Skydance?
09:47And then I'm kind of wondering, help me tie up the ends if there are any between Ellison and of course, the Trump White House.
09:53When you talk just general regulatory approval, you need the blessing of the administration.
09:59Yeah. How does that play a role, if and if at all?
10:02It's hard to predict. But I think that, like, as you as you mentioned, Ellison and Paramount Skydance, they're not they're probably going to fight it to some extent.
10:10I'm sure they'll sue. They're going to make the argument that this is unfair competition because in this in the world of streaming, because Netflix is already so big in streaming.
10:21I think Netflix will make the argument that in the broader video universe, we're actually not that big.
10:26Look at YouTube. They're bigger than we are. And so, like, they'll try to argue it as not from a streaming standpoint, but from a video standpoint and online video standpoint.
10:35And so there probably will be a lot of legal fights as far as what the Trump administration will do.
10:42That's that's really hard to predict. We could.
10:44I made a joke earlier that if they just make Trump the next Batman, that will probably solve the whole problem just to bring it back around with Batman.
10:51But the regulatory part is I think is hard to predict.
10:55They they approved the previous merger between Skydance and Paramount.
11:00So they approved that one. It's possible they might approve this one as well.
11:04But there's going to be a lot of legal challenges to it for sure.
11:07Maybe the president would be interested in a role in Rush Hour 4, given we know what a high priority that was.
11:15I mean, are we not just basically creating a fourth Rush Hour because the president wants it?
11:20Yeah, I feel like that's kind of what what's happening.
11:23I mean, that's not the not the worst thing he's done.
11:26But yeah, I mean, sure.
11:27Why not? Why not have the president weigh in on on blockbuster movies?
11:31Yeah. And we I mean, we can't forget he he does have some acting chops because Home Alone 2 lost in New York.
11:41Kevin McAllister had to figure out the way around the Plaza Hotel.
11:44All right. I could I could talk about this with you for hours.
11:47I have to leave it there. Please come back in the coming weeks because we have a lot more to talk about.
11:51And I'm sure it's going to be rapidly evolving.
11:54Good friend of ours here on the show, Christopher Zara, news director at Fast Company.
11:57Christopher, thank you.
11:59OK, thanks for having me.
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