With the acquisition of entertainment giant Warner Bros. Discovery (WBD) by streaming service Netflix, Hollywood is also being conquered by a company that owes its success to new technology. Just as tech companies previously played a leading role in the markets for music (Apple, Spotify), books (Amazon, Apple) and television (YouTube), the film world is now also gaining a dominant player from the technology corner.
As a result, the acquisition is not just a huge business transaction. It is also a power shift with major global cultural consequences. Silicon Valley occupies one of the best spots in Hollywood.
If US and EU competition authorities and WBD shareholders approve the deal, Netflix will acquire Warner Bros’ legendary film and television studios, including its vast catalog of old and newer hit films and series and the rights thereto. And just as important: the largest paid streaming service in the world will gain the competing streaming service HBO Max with this acquisition.
Netflix considers every hour people spend in a movie theater as an hour not spent on their platform
“Our mission has always been to entertain the world,” Netflix’s Ted Sarandos said on Friday. By merging the two entertainment companies, the company can “define a new age of storytelling.” WBD CEO David Zaslav used no less powerful words: “By merging with Netflix, we can guarantee that people all over the world can enjoy the most impressive stories for generations to come.”
Netflix started in the late 1990s as a company that mailed DVD rentals to customers, who had to return the discs after watching the movie. The streaming service now has 300 million subscribers, spread all over the world.
In total, Netflix is paying 82.7 billion dollars (71 billion euros) for the acquisition. It hasn’t gotten that far yet. WBD will first spin off and spin off its cable TV channels (including CNN and Discovery) into a separate company, expected in the third quarter of next year.
‘Outdated concept’
The large concentration of economic and cultural power at Netflix has caused concerns even before the deal was completed. Although Netflix has assured that it will continue to release films from the studios it now acquires in cinemas, cinema owners fear that the streaming service will be favoured.
There are also concerns about the market power of the new combination among film producers. In a letter to the US Congress on Thursday, a group of producers, without giving their names, expressed concern that Netflix “considers every hour people spend in a movie theater as an hour not spent on their platform,” quotes The New York Times from the letter. “They have no interest in encouraging the release of films in theaters, and a strong interest in killing it.” The producers are said not to have put their names under the letter for fear of retaliation.
Director James Cameron (of Avatar, among others) warned at the beginning of this week that the takeover of WBD by Netflix would be “a disaster”, because Netflix would not believe that films still have a future in theaters. Netflix CEO Sarandos called cinemas an “outdated concept” this spring. According to him, Netflix will save Hollywood, because the film industry should adapt to the way the public wants to watch films.
The company has released films in cinemas, but this was often in a limited number of theaters or for a short duration. The Netflix movie House of Dynamite for example, to the chagrin of the cinema companies, it was also shown on Netflix two weeks after it went into theaters.
In recent months it seemed that WBD would fall into other hands. Sarandos said in October that his company “has made it very clear in the past that it has no interest in owning a traditional media company” and that nothing had changed. His co-CEO Creg Peters said in the same month that Netflix has a strong background, but more as “builders than buyers”.
Big blow
Other companies did show great open interest in buying WBD: cable company and owner of entertainment and media company NBC Comcast (which only wanted to buy the studios and HBO Max) and Paramount Skydance (which wanted to acquire WBD in its entirety, including the cable TV channels that are now being divested).
This week all three parties made a bid and Netflix’s turned out to be the best, that is, the highest. It is not yet clear whether Paramount and Comcast are giving up the battle. Paramount CEO David Ellison, son of Oracle CEO and Trump friend Larry Ellison, in particular has good relations with the White House.
In the background of this takeover, in addition to the rise of technology companies, there are two developments that determine the media landscape. The first is that traditional television viewing is increasingly being replaced by streaming services, with YouTube also growing rapidly.
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In addition, a fierce battle rages between streaming services to determine who will be the largest and therefore have the best opportunities for growth and profitability. In that battle, Netflix, which is already the largest in many countries including the Netherlands, has now taken a major step. With HBO, Netflix could take a decisive lead over Amazon Prime, Disney and the other streaming services (although it is not yet clear whether Netflix will swallow HBO or let it continue as a separate brand). And with the WBS studios, Netflix also strengthens its position by ensuring a steady supply of films, series and TV productions from its own stable.
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