The High Stakes Behind the Netflix/Paramount Bidding War For Warner Bros.

Opinions are mixed but concerns abound over a Warner Bros. merger with either Netflix or Paramount.

“To buy something like Warner Bros. Discovery, holy cow, that’s a big library, and it raises all kinds of interesting future strategy questions,” says Kathryn Harrigan, Henry R. Kravis Professor of Business Leadership at Columbia Business School.

Further, she says, Paramount’s decision to go directly to shareholders is intriguing. “It remains to be seen whether that is an attractive enough offer or not,” Harrigan says.

If the deal goes to Netflix, which largely favors streaming over theatrical releases, cinephiles worry that this will be the beginning of the end for the movie theater business.

There are also labor concerns: Whether Netflix or Paramount prevails, company redundancies or restructuring could mean significant layoffs. Consolidation would likely mean fewer bidders on or producers of creative projects, shrinking the landscape of TV shows and films. Translation: Fewer and shorter theatrical releases, and potentially fewer gutsy projects overall (à la Severance or Seinfeld).

“What you’re seeing is only certain streaming services really can make prestige TV or push the envelope,” says Anthony Palomba, assistant professor of business administration at the University of Virginia’s Darden School of Business and an expert on the entertainment industry. “Artists now have fewer venues to create new content.”

In either case, regulators would have to approve the final deal. For Netflix, at least, the agreement is expected to close in 12 to 18 months.

One wild card: President Trump, who has said he’ll probably be involved in the decision, and that in terms of Netflix versus Paramount, he “has to see what percentage of market they have.” He’s also said it’s “imperative” that CNN be sold.

“It remains to be seen who eats who right now,” Palomba says. “All of the bidders are tech and media and that could result in a lengthy battle.”

When Netflix made its announcement, Harrigan says, “What everybody wanted to know was, ‘Does this mean I’m going to have this Netflix subscription where I can see all of this great stuff?’ And I said, ‘Don’t count on it.’”

The legal reality, Harrigan says, is that video properties have clauses that control how much it costs to exhibit them on your content menu, and those costs vary tremendously. “So it’ll be very interesting to see what happens,” she says.

“It does feel as though we’re going to have less quality content for a higher price,” Palomba says. “I’m genuinely worried for artists and I’m genuinely worried for consumers, no question about it.”