Netflix is trying to reassure people that its planned US$82.7 billion (C$114.12 billion) acquisition of Warner Bros. is actually good for Hollywood.
In a memo to employees on Monday made public by the U.S. Securities and Exchange Commission (SEC), co-CEOs Ted Sarandos and Greg Peters addressed various questions related to the deal. One of the queries regarded sentiment that this move signals “the end of Hollywood.” In response, the CEOs said it’s been hearing these comments “for a long time,” but its stance remains that “we see this as a win for the entertainment industry, not the end of it.” They argued that the deal is about “growth” because “Warner Bros. brings businesses and capabilities we don’t have, so there’s no overlap or studio closures.”
Naturally, that’s a nod to Paramount, one of the “Big Five” Hollywood studios alongside Warner Bros., Disney, Sony and Universal. Netflix is arguing that this will shrink even further should Paramount, which launched its own US$108.4 billion (about C$150 billion) offer for Warner Bros., win the acquisition bid instead. Paramount argues that its deal is better because it wants all of Warner Bros. Discovery, not just the film and streaming divisions like Netflix, while its rival’s offer will also lead to a “protracted multi-jurisdictional regulatory clearance process with an uncertain outcome.”
In the Q&A, Netflix also addressed another long-running concern: that its buyout of Warner Bros. would effectively kill movie theatres. After all, the streaming giant has traditionally only had limited theatrical runs for select movies to be eligible for awards consideration, while Sarandos has previously called the theatrical model “outdated.” When asked whether Netflix will “preserve theatrical releases as part of WBD’s distribution model,” the CEOs said they will.
“Yes—we’re fully committed to releasing Warner Bros. movies in theaters, just as they do today. Theatrical is an important part of their business and legacy, and we don’t want to change what makes Warner Bros. so valuable,” they wrote. “If this deal had happened two years ago, hits like Minecraft and Superman would still have premiered on the big screen as they did—and that’s how we plan to keep it. We haven’t prioritized theatrical in the past because that wasn’t our business at Netflix. When this deal closes, we will be in that business.”
Shortly after the announcement of the Warner Bros. deal, Sarandos had said he wants to see the theatrical model “evolve” to become more “consumer-friendly.” Presumably, that would mean shorter runs in cinemas before coming to Netflix. It should also be noted that Netflix would have to honour any existing deals that are in place for Warner Bros. theatrical releases. However, there’s still no real guarantee that it will commit to cinemas beyond that.
And on the subject of streaming, Netflix says that even with HBO and HBO Max content, its TV market share in the U.S. would still be less than Disney and YouTube. (It’s unclear, however, what would happen in other markets, such as in Canada, where HBO/HBO Max titles are licensed to Crave.)
Going forward, the CEOs say they have “a small but mighty team of experts working on [the deal],” so it remains to be seen what, exactly, their plans for Warner Bros. would be. Of course, both Netflix and Paramount’s bids will also be subject to regulatory approval.
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