Netflix and Warner Bros. deal highlighted the Hollywood crisis. Analysis

Streaming service Netflix intends to buy the Warner Bros. film studio. and its direct competitor HBO Max for $72 billion. The company will become the owner of many famous films and TV series, as well as occupy a dominant position in the entertainment market. The deal has yet to be approved by the U.S. antitrust regulator. The takeover of the legendary film studio was a reflection of the current Hollywood crisis that began with the development of online entertainment. How the deal will affect the film industry is in the Izvestia article.

What is the deal?

• Netflix has announced its intention to make one of the most ambitious deals in the entertainment industry. The streaming service with 300 million subscribers is about to be acquired by one of the oldest and most respected Hollywood studios, Warner Bros. The deal will amount to $72 billion, of which $59 billion will be borrowed from leading Wall Street banks.

• The deal will also include one of Netflix's main competitors in the streaming market, HBO Max. These companies occupy the first and third places in the US market, respectively (Amazon Prime is located between them). Netflix will also become the owner of the entertainment company DC Entertainment and the sports broadcaster TNT Sports.

• Netflix's asset will be an extensive library of Warner Bros. movies and TV series. and HBO Max, which includes the DC cinematic universe, films and the upcoming Harry Potter series, the series "Game of Thrones" and "The Sopranos", the trilogy "The Lord of the Rings", the film franchises "The Matrix", "Mad Max", "The Conjuring", "Friday the 13th", as well as animated franchises Looney Tunes, Tom and Jerry, Scooby-Doo.

• One of the assets being acquired will be the Warner Bros. game company. Netflix will become the owner of such game franchises as Hogwarts Legacy, Mortal Kombat and LEGO. In this way, the streaming service will gain a presence in the video game market for the first time, discovering a whole new line of activity.

• Some assets of the Warner Bros. holding company will be excluded from the deal. Discovery. He will retain control over CNN, TNT, and TBS, the Cartoon Network animation network, and all channels under the Discovery brand.

Can the deal fail

• It is important to note that the deal to purchase Warner Bros. It hasn't been concluded yet. It can be finalized by the end of 2026, despite the fact that the Polymarket prediction market platform estimates the probability of concluding a deal by this date at only 22%. The problem is that the takeover still needs to be checked for compliance with US antitrust laws, which may significantly delay the process or even lead to a ban on the purchase.

• Even US President Donald Trump has spoken about a possible obstacle to the takeover. He noted that Netflix may gain too much market share, since together with Warner Bros. will receive HBO Max. In total, they occupy more than 30% of the market, which is precisely the reason for the regulatory authorities to ban the takeover. The new streaming giant will have to prove that the deal is not aimed at dominating the market, but at increasing efficiency in favor of the end user.

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• Netflix already has counterarguments for the Department of Justice. The company wants the analysis of the entertainment market to also include video hosting and social networks like YouTube and Tik-Tok, which also produce popular video content, but at the same time do not belong to classic streaming. With these factors in mind, the combined Netflix's share in the online entertainment market will no longer be so significant. In addition, 75% of HBO Max subscribers already have Netflix subscriptions, and combining the two services will lower costs and lower prices.

What the deal says about the state of Hollywood

• The takeover of Warner Bros. by the flagship streaming services has become a vivid reflection of the crisis of classical Hollywood and the entire US film industry. Over the past decade, major film studios have been competing with new online platforms and gradually losing the battle for viewer attention, especially during the coronavirus pandemic. The changes led to a reduction in movie rentals in cinemas and the departure of movie lovers online, and the result was a reduction in film production, the loss of jobs in Hollywood, and the gradual stagnation of the entire film industry in its former studio format.

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• The purchase of one of the leading film studios will strengthen Netflix's position in this competition. American cinema chains have already reacted to the deal with an 8% drop in their shares, as it is now expected that Netflix will be able to attract viewers from cinemas to their own homes even more actively. A streaming service cannot completely abandon film distribution, since showing films in cinemas is a prerequisite for their nomination for awards, including the Oscar. Netflix claims that the purchase of Warner Bros. It will help him to distribute his work more actively in cinemas, however, the Cinema United network, which owns 56,000 cinemas worldwide, warned of a loss of 25% of box office receipts in the United States due to the deal.

Hollywood has already experienced several major mergers in recent years. Disney acquired the assets of 21st Century Fox, Warner Bros. itself It gained control of Discovery, and Skydance Media (owned by David Ellison, the son of Oracle owner Larry Ellison, whom we wrote about here) absorbed Paramount. Each time, this led to another wave of cuts in the entertainment content production industry as part of the optimization carried out by the new management.

• Reduced competition and staffing of film studios will further lead to a loss of product quality. There will be fewer creative people in the industry who are capable of independent and innovative creativity. For those who stay in their jobs, the enlarged film studios will motivate them to create less risky and simpler content that is guaranteed to make a profit, but will not move the film industry forward.