The worldwide media sector finds itself on the verge of a “historic transformation,”, with Warner Bros. Discovery (WBD) situated squarely at the “epicenter” of a major transformation in how assets are valued and competitive approaches are shaped, as indicated by Bank of America (BofA) Global Research. Given that WBD is the subject of considerable merger and acquisition activity, drawing interest from a minimum of three prominent entities—Paramount Skydance (PSKY), Netflix (NFLX), and Comcast (CMCSA)—BofA anticipates nothing short of “industry realignment” emerging from the competitive bidding process.
TL;DR
- Warner Bros. Discovery (WBD) is at the center of a historic media transformation, drawing interest from Paramount Skydance, Netflix, and Comcast.
- Bank of America (BofA) suggests a Netflix acquisition of WBD could be a "triple kill," consolidating streaming dominance and crippling rivals.
- WBD's Warner Bros. Studio, with its vast IP like Harry Potter and DC Comics, is considered a "crown jewel" asset.
- A Netflix acquisition of WBD would significantly impact rivals like Paramount Skydance and NBCUniversal, potentially ending the "streaming wars."
While there are multiple scenarios for WBD’s future, including a whole-company acquisition by PSKY or a structural engineering combination by CMCSA, BofA highlights the unique strategic leverage afforded to Netflix. The report asserts an acquisition by Netflix could potentially be “killing three birds with one stone,” with WBD the latest must-have asset in the competition once known as “the streaming wars.”
A crown-jewel studio
WBD's significant appeal is primarily due to the premium associated with its main holding: the Warner Bros. Studio. BofA stated that WBD's collection of intellectual property (IP), spanning from Harry Potter through DC Comics to Game of Thrones,, renders the studio a “crown jewel” asset, possessing one of, if not the most prized, content collections globally. Analysts at BofA, under the guidance of senior media and entertainment analyst Jessica Reif Ehrlich, calculated the acquisition worth of the combined WBD at roughly $30 per share. (At the time of this report, it was trading just over $24.)
Netflix’s reported focus is specifically on WBD’s studio and streaming assets, a deal likely to be valued at more than $70 billion. For Netflix, this would represent a significant pivot from building original franchises to buying established “franchise moats.” While Netflix is the undisputed leader in streaming subscribers, it has historically lagged behind other media companies in deep IP libraries that offer potential use cases for theme parks, gaming, merchandising, and Broadway shows.
Establishing a successful franchise such as Harry Potter “takes a significant amount of time and investment,”, according to BofA, offers immediate, low-risk involvement, along with substantial potential gains from subsequent revivals, origin stories, or additional series expansions.
“Warner Bros.’ Library offers a depth that Netflix cannot replicate organically within a reasonably short time frame across several pieces of IP,” BofA writes, but more important, it would be a death blow to all of Netflix’s rivals given this IP would complete the Netflix arsenal. “If Netflix acquires Warner Bros., the streaming wars are effectively over,” Ehrlich’s team wrote. Here’s how the birds would fall to the ground if Netflix were to fire its money cannon at WBD.
Triple kill, power consolidated
The first “bird” killed by a Netflix acquisition would be WBD itself, as its streaming and studio assets would vanish, to be housed within the dominant streaming platform.
“Netflix would become the undisputed global powerhouse of Hollywood beyond even its currently loſty position,” according to BofA, with a “content moat” that no stand-alone streamer could touch and combined efforts accounting for more than a fifth of U.S. Streaming.
According to Nielsen figures, Netflix currently holds approximately 18% of all TV streaming watch time, with HBO Max (WBD) accounting for an additional 3%. Such a merged company would significantly surpass other rivals such as Disney (11%) and Amazon Prime Video (8%). Only YouTube (28%), widely considered Netflix’s primary competitor, would maintain a greater portion.
BofA also predicts Netflix would continue to offer Warner Bros. Films via theatrical distribution, which has been a controversial subject for years for the big-red streamer. Co-CEO Ted Sarandos has been in a long-running cold—and sometimes hot—war with theater owners over his refusal to play ball with wide releases. Netflix has acquired some boutique theaters in New York (the Paris Theater) and Los Angeles (The Egyptian), where it airs its prestige, Oscar-favorite movies, but it has not played ball with wide releases. The first major crack in this strategy may be Greta Gerwig’s forthcoming Narnia adaptation, but Sarandos has insisted that is limited to IMAX releases only, an event-ized business model Netflix has replicated with its first foray into sports programming, the Christmas Day NFL games. Hollywood watchers like Puck’s influential Matt Belloni have questioned whether Narnia is some kind of tipping point, and a WBD acquisition would surely be a step deeper in that direction.
The other birds
The second and third “birds” pertain directly to Netflix’s rivals. The analysis points out that for medium-sized established media studios/firms, contending with Netflix’s unit economics or the comprehensive systems of major technology corporations such as Amazon proves progressively challenging. A takeover of WBD by Netflix would represent a significant development “existential” for Both Paramount Skydance and NBCUniversal (NBCU), thereby reinforcing Netflix’s formidable defensive stance.
Should Netflix purchase WBD’s studio and streaming holdings, it would substantially impede the worldwide growth ambitions of both Paramount+ and Peacock. The BofA analysts pointed out that Comcast, specifically, is in a “critical juncture” as it gets ready to separate its diminishing cable operations into an entity called Versant (a tactic WBD is also employing), all while grappling with a streaming service that is both domestically undersized and not accessible beyond American borders.
The BofA group didn't cover regulatory concerns or other elements that might influence the WBD acquisition process. For nearly a year, Paramount has reportedly been intensely focused on acquiring WBD, and its dominant Ellison family maintains strong connections to the White House. This is partly due to Oracle creator Larry Ellison, a significant figure among the globe's wealthiest individuals and a dominant force in AI and technology. Ellison was identified as a principal figure, alongside Rupert Murdoch and Michael Dell, within the entity overseeing the U.S. Arm of TikTok. A Paramount led by his son, David Ellison, who recently altered the direction of CBS News by naming the Free Press’s Bari Weiss as its top editor, would present a considerably altered landscape with a new prized asset.