Netflix’s $82.7 billion acquisition of Warner Bros. is, in many ways, the last thing a weakened Hollywood needs right now. The industry is still recovering from the COVID-19 pandemic, where theaters were forced to close and audiences became even more comfortable with streaming films at home. The WGA and SAG-AFTRA strikes in 2023, which were driven by legitimate concerns around studio interest in generative AI, delayed production and promotion of many film and TV projects. And the rise of streaming content pushed many media companies towards taking on debt and unwise mergers (see: Warner Bros. Discovery), which led to higher subscription costs, layoffs and production belt-tightening.

How can a troubled media company survive today? The answer seems to be further consolidation. Amazon’s $8.45 billion MGM takeover in 2022 heralded future deals, like Skydance’s $8 billion acquisition of Paramount . But Netflix’s WB deal goes even further: It could fundamentally reshape the media industry as we know it, from theatrical movie-going to the existence of physical media.

What will the Netflix and Warner Bros. deal include?

After next year’s already-announced separation of Warner Bros. and Discovery, Netflix says it plans to acquire all of Warner Bros. remaining assets — including its film and TV studios, HBO Max and HBO — for $82.7 billion. According to Game Developer, representatives also say Warner Bros. Games, which includes Mortal Kombat developers NetherRealm, will also be part of the deal.

Will the Netflix and Warner Bros. deal be approved by regulators?

Even before the deal was formally announced, it was clear that whoever bought WB would be facing government opposition from every side. Yesterday, Paramount sent WB a letter questioning the “fairness and adequacy” of the acquisition bidding process (which also included Comcast as a potential buyer). Afterwards, the New York Post reported that Paramount CEO David Ellison, son of the Trump-boosting Oracle CEO Larry Ellison, met with administration officials to make his case for buying Netflix. As of this morning, the Trump administration views the Netflix/WB deal with “heavy skepticism,” an official tells CNBC.

On the other side of the aisle, Senator Elizabeth Warren (D-MA) has called the Netflix/WB deal an “anti-monopoly nightmare.” She added, “A Netflix-Warner Bros. would create one massive media giant with control of close to half of the streaming market. It could force you into higher prices, fewer choices over what and how you watch, and may put American workers at risk.”

At this point, it’s too early to tell if the Netflix/WB deal will make it past regulators, but it’s clear that both companies should prepare for a rocky approval process.

What does the Netflix and Warner Bros. deal mean for streaming video?

According to data from JustWatch, a combined Netflix and HBO would account for 33 percent of the US streaming video market, putting it ahead of Prime Video’s 21 percent share. As for how the two media companies would co-exist, Netflix says it will “maintain Warner Bros. current businesses,” which includes HBO Max and HBO, theatrical releases for films and well as movie and TV studio operations.

“We think it’s too early to talk specifics about how we’re going to tailor this offering for consumers,” Netflix co-CEO Greg Peters said in an investor call this morning, when asked if HBO would remain a separate service. “Needless to say, we think the HBO brand is very powerful, and would constitute part of our plan for consumers. That then gives us a lot of options to figure out how to package things to offer the best options for consumers.”

At the very least, we can expect increased prices across the board for HBO and Netflix. There’s also potential for the company to offer combination subscriptions, similar to how Disney juggles Disney+, Hulu and ESPN.

What does the Netflix and Warner Bros. deal mean for theaters?

In short, a combined Netflix/WB wouldn’t be great for theaters. Previous mergers, like Disney and Fox’s union, led to fewer theatrical releases, not more. Since its transformation into a streaming-first company, Netflix has also been primarily focused on increasing subscriptions and engagement, with theatrical releases of its original content treated as an afterthought.

“We’ve released about 30 films into theaters this year, so it’s not like we have opposition to theatrical release,” Netflix Co-CEO Ted Sarandos said in the investor call (without specifying how short some of those theatrical releases were). “It’s the longer windows that aren’t consumer friendly. Life cycle that starts in the movie theater, we’ll continue that. Over time, the windows will evolve to be much more consumer friendly, to meet the audience where we are.”

He added: “All things that are going to theaters through WB will continue to do so. Our primary goal is to bring first-run movies to consumers, and we intend to continue with that.” In an April interview at the Time100 Summit, Sarandos also famously called the theatrical model “outdated,” since most people in the US can’t easily walk to a multiplex.

Cinema United, a trade group representing over 30,000 movie theater screens in the US, is unsurprisingly against the entire deal. “The proposed acquisition of Warner Bros. by Netflix poses an unprecedented threat to the global exhibition business. The negative impact of this acquisition will impact theatres from the biggest circuits to one-screen independents in small towns in the United States and around the world,” Cinema United President and CEO Michael O’Leary said in a statement.

“Cinema United stands ready to support industry changes that lead to increased movie production and give consumers more opportunities to enjoy a day at the local theatre,” he added. “But Netflix’s stated business model does not support theatrical exhibition. In fact, it is the opposite. Regulators must look closely at the specifics of this proposed transaction and understand the negative impact it will have on consumers, exhibition and the entertainment industry.”

What do artists think of the Netflix and WB deal?

Writers, directors and producers are already having a tough time getting projects off the ground, so having one less place to pitch isn’t going to help. There are also a handful of artists, including former WB darling Christopher Nolan, who have refused to work with Netflix entirely.

“The end goal of these consolidations is to limit choices in entertainment to a select handful of providers, so they can capture our whole attention, and thus our every available dollar,” C. Robert Cargill, the screenwriter behind Doctor Strange and The Black Phone, said in a statement to Engadget. “The result will be a gutting of diversity and fresh voices in the industry, sending thousands, if not tens of thousands, of people back to their home towns to start their lives over, as there simply isn’t a place for them in Hollywood any more, while homogenizing film and television into the “content” word we all grumble about hearing.”

“WB has made so many daring choices this year, with executives taking big risks that made real cultural and financial impacts at the box office,” he added. “And HBO, constant name changes be damned, is still making some of the best television there is, bar none. Will those creative environments survive the merger, or will many of those brilliant execs be sent packing along with the writers, directors, and crews?”

“In short, it’s a very scary and heartbreaking time to be a filmmaker. No shade on Netflix and the people that work there; it’s just that less choice in entertainment always makes for fewer winners and more people on the outside looking in.”

What about physical media?

Other than noting that Netflix used to be a DVD-by-mail company, there was no mention of physical media on the acquisition’s press release or investor call. That’s not too surprising, as physical releases have always been an afterthought for Netflix. A few of its films, like Roma and Frances Ha, are available as discs through the Criterion Collection, and some shows like Stranger Things are also on DVD and Blu-ray.

Netflix claims it’ll continue to run WB’s businesses as usual if the deal goes through, which should include physical media, but those sorts of pre-acquisition promises rarely last for long. WB’s home video business isn’t entirely its own, either: In 2020, it formed the joint venture Studio Distribution Services with Universal, which also handles physical media distribution for Sony Pictures, PBS and Neon.

Given the slowing demand for physical media, it’s likely one of the first things a combined Netflix/WB would eventually drop. But there’s also been a resurgence of premium physical releases from distributors like Arrow Video, so there’s a chance Netflix may want to keep it around for special releases.

Steve Dent contributed to this report.

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