Netflix CEOs sent a letter to reassure staff about bid to buy Warner Bros.
Netflix CEOs sent a letter to employees outlining their arguments for acquiring Warner Bros.
(Bloomberg) — Netflix Inc. co-Chief Executive Officers Greg Peters and Ted Sarandos tried to reassure employees’ concerns about the company’s bid for much of Warner Bros. Discovery Inc., reiterating that there is no business overlap and therefore won’t be any studio closures.
“This is going to be a complex process over the next year or so,” the executives said in a letter posted to the company’s internal blog and published in a securities filing. “We see this as a win for the entertainment industry, not the end of it,” the Netflix co-CEOs wrote, addressing concerns that the combo of the streaming giant and one of the most iconic studios could bring about “the end of Hollywood.”
Warner Bros.’ board has accepted Netflix’s $82.7 billion offer to acquire Warner Bros.’ streaming and studio businesses, but Paramount Skydance Corp. has made a hostile bid of $108 billion for the entire company. Warner Bros.’ board is expected to respond to Paramount’s offer by the end of the week, and Paramount has hinted that it may not be the best and final offer.
Peters and Sarandos addressed the hostile bid in the letter, saying it was to be expected but that Netflix has a solid deal in place. “It’s great for our shareholders, great for consumers, and a strong way to create and protect jobs in the industry,” they wrote. The letter reiterated Netflix’s previous arguments for why it is the best company to buy and sell WBD assets. Its offer faces significant resistance in parts of Hollywood, where many have long been suspicious of Netflix for its business model, which has turned traditional film and television traditions upside down.
If Netflix’s deal to acquire Warner Bros. is approved, Netflix will take over one of Hollywood’s oldest and most legendary studios in one of the biggest media deals ever. It would also gain control of its former inspiration, HBO.
First, Netflix has preferred a streaming-based distribution approach and has a habit of showing films in theaters only a limited number of times, which has caused tensions with some big-name talent and theater owners. Sarandos previously said long, exclusive theatrical windows weren’t “consumer-friendly,” and that he thinks, over time, theatrical windows will continue to shrink.
As for regulatory approval, both bidders have said they have the clearest path to a deal. Paramount CEO David Ellison said their combination would reduce the concentration of the streaming market than Netflix.
Netflix, for its part, wants regulators to compare its market share to total television viewing time, including free platforms like YouTube. The CEOs made that point in a letter. They argue that Netflix and Warner Bros. together account for just 9% of the U.S. market, trailing YouTube and Disney. Paramount argues that the market should be defined by paid streaming, which is growing and where Netflix has the opportunity to extend its dominance.
The battle for Warner Bros. is expected to face intense scrutiny from regulators, but each bidder claims an advantage. “We’re confident we’ll get the approvals we need to make it happen,” the Netflix leaders wrote. “The fundamentals are clear: this deal is pro-consumer, pro-innovation, pro-worker, pro-creator, and pro-growth.”
Democratic Senator Elizabeth Warren of Massachusetts called Paramount’s proposal a “five-alarm antitrust fire.” She previously called Netflix’s proposal an “antitrust nightmare.”
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