By Morten Suhr Hansen
“Entertaining the World.” That was Warner Bros’ old slogan. It will almost certainly also become Netflix’s ambition with the acquisition of Warner Bros, including HBO Max.
But what does the acquisition mean for the future of the streaming market? And for you as a consumer?
Netflix has now positioned itself at the forefront of one of the most dramatic reshuffles in Hollywood with yesterday’s announcement that it is acquiring large parts of Warner Bros for USD 82.7 billion, including its film and TV studios, a wide range of valuable film and game rights, and the streaming service HBO Max.
Until now, Warner Bros has been part of the conglomerate “Warner Bros. Discovery“, created by a merger between the two media companies in 2022, but which never became a success.
With the acquisition, Netflix transforms from streaming platform to Hollywood conglomerate
With the acquisition of Warner Bros, Netflix is sending a clear message: The company is transitioning from being ‘just’ a streaming service to becoming a full-scale Hollywood conglomerate with its own studios, cinema distribution, games, and one of the industry’s strongest rights catalogs, ranging from Harry Potter and the DC universe (Superman, Batman, etc.) to Game of Thrones and other prestigious HBO series.
This opens up a 360-degree strategy where a single IP (property) can live as a series on Netflix, a movie in theaters, a AAA game, a mobile game, and other experiences – where Netflix can control the entire value chain and its revenue streams much more directly.
This means that Netflix gets both the new seasons and back catalogs that people return to again and again. In subscription logic, this is worth its weight in gold: rights that can generate a lot of interest and thus sign-ups, and films and series that will have a long life and ensure that subscribers can always find something new when they have finished a film or series.
At the same time, Netflix expects the acquisition to generate significant economies of scale. In fact, they expect cost synergies of USD 2-3 billion annually after three years, primarily by consolidating technology, administration, marketing, and content production.
Global consolidation of the streaming market is coming
At the same time, the acquisition means that the great ‘Streaming War’ is entering a new phase, where we will see significant consolidation and far fewer global players. Basically, I envisage that the market will concentrate around four players:
• Netflix + HBO
• Disney (incl. Hulu, ESPN)
• Amazon Prime Video
• Apple TV+
Smaller services such as Paramount, but also larger local or regional streaming services, will increasingly become acquisition candidates or content providers rather than full-scale streaming platforms.
We will see fewer true global streaming services – but those that remain will be bigger and more complete.
A benefit for consumers? Still too early to say
What will this mean for us as consumers? It’s hard to say. On the one hand, critics fear that a concentration of players in the market will reduce competition and push up prices. Netflix itself argues that the acquisition will mean greater scale, enabling more investment in content, and that bundling Netflix and HBO Max, for example, could make it cheaper for consumers.
The cinema industry is particularly concerned, as it naturally fears that the new acquisition will, in the long term, shift more and more focus away from cinemas and towards the streaming market.
Regardless, a new and exciting chapter has been added to the story of Netflix, which just 25 years ago entered the DVD rental market and almost ‘invented’ subscription as part of their business model by accident.
PS. An important caveat to the story is that the deal still needs to be approved by competition authorities in both the US and Europe. This is one of those comments that always appears in articles about major acquisitions and is often just a footnote. But perhaps not here! In any case, Donald Trump, the President of the United States, has weighed in and said that he will be involved in the approval of the acquisition – which he is skeptical about, by the way. The final word on this matter has certainly not been said.
