This morning Netflix pulled the trigger on a blockbuster deal with an equity value of $73 billion. The massive acquisition, if it receives regulatory approval, will see the video streamer purchase Warner Bros. Discovery's streaming and film studio assets. Netflix will pay $23.25 in cash and $4.50 worth of Netflix stock for each Warner Bros. Discovery share which closed Friday up 6.3% or $1.54 to $26.08. Besides taking control of the iconic Warner Bros. studio, Netflix takes control of streaming app HBO Max.
Harry Potter, Friends, The Big Bang Theory will bring their talents to Netflix
The deal does not include Discovery Global which will be spun off as previously announced. That unit includes cable giants CNN and TNT. Netflix will end up with a huge library of popular film and television titles to stream. Film titles include the Harry Potter series, "The Wizard of Oz" and the DC Comics universe. Television shows coming to the Netflix library will include (the always popular on streaming platforms) "Friends," "The Sopranos," "The Big Bang Theory," and "Game of Thrones" to name a few.
Ted Sarandos, co-CEO of Netflix, said, "Our mission has always been to entertain the world. By combining Warner Bros.’ incredible library of shows and movies—from timeless classics like Casablanca and Citizen Kane to modern favorites like Harry Potter and Friends—with our culture-defining titles like Stranger Things, KPop Demon Hunters and Squid Game, we'll be able to do that even better. Together, we can give audiences more of what they love and help define the next century of storytelling."
Warner Bros. Discovery shares over the years. | Image credit-Google
The Netflix Warner Bros. Discovery deal will need regulatory approval from Brendan Carr and the FCC.
The deal could close in 12 to 18 months, but it does require regulatory approval, which is where the transaction could run into issues. The Trump Administration loves allowing big businesses to grow bigger but isn't so fond of the entertainment industry. Whatever President Donald Trump wants, his appointed FCC Chairman, Brendan Carr, will make sure that he gets.
Trying to persuade the FCC that it should approve the transaction, Netflix has already started a campaign to show Carr and the FCC that there are positive benefits for the public. For example, Netflix is expected to use Warner Bros. world-class studios to produce more streaming content for Netflix subscribers and even create theatrical releases. Adding HBO and HBO Max programming to Netflix will allow the streamer to enhance the options it offers to consumers.
Late Thursday, Paramount Skydance reportedly made a $30 bid but it was rejected for one reason
It also will give consumers more choices and provide them with greater value. Netflix could convince Trump that the deal will expand U.S. production capacity and add jobs as investment in original content grows. Expanding content could attract more subscribers to Netflix generating incremental hikes in revenue and operating income. By the third year following the transaction's close, Netflix is expected to generate $2 billion to $3 billion in cost savings annually. By year two, Netflix expects the deal to be accretive to GAAP earnings.
Are you in favor of this merger?
Yes. It will be great for consumers.
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David Zaslav, President and CEO of Warner Bros. Discovery, commented on the acquisition of his company. He stated, "Today’s announcement combines two of the greatest storytelling companies in the world to bring to even more people the entertainment they love to watch the most. For more than a century, Warner Bros. has thrilled audiences, captured the world’s attention, and shaped our culture. By coming together with Netflix, we will ensure people everywhere will continue to enjoy the world’s most resonant stories for generations to come."
If the deal is not approved, Netflix will pay Warner Bros. a $5.8 billion reverse break-up fee
If the deal is not approved, an SEC filing reveals that Netflix will pay a reverse $5.8 billion break-up fee. If Warner Bros. Discovery backs out to sell to a different bidder, it will pay Netflix a $2.8 billion break-up fee. The newly created Paramount Skydance reportedly lobbed in a $30 bid for Warner Bros. Discovery late Thursday evening that leaned more on equity than cash, which is why the Warner Bros. Discovery board choose the bid from Netflix.
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Netflix was the first video streaming app for mobile that offered content such as movies and television shows. In June 2010, Netflix announced that it was launching the Netflix app for iOS. The following May, Netflix launched its app on select Android devices such as the HTC EVO 4G, T-Mobile G2, HTC Incredible, Google Nexus One, and the Google Nexus S. Around the same time, Netflix was added to the Motorola DROID X, DROID 2, and the first-gen DROID. I owned the latter at the time and remember the excitement of being able to view content via the Netflix app on my phone.
Alan, an ardent smartphone enthusiast and a veteran writer at PhoneArena since 2009, has witnessed and chronicled the transformative years of mobile technology. Owning iconic phones from the original iPhone to the iPhone 15 Pro Max, he has seen smartphones evolve into a global phenomenon. Beyond smartphones, Alan has covered the emergence of tablets, smartwatches, and smart speakers.
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