Netflix is officially the winning bidder in the Warner Bros. Discovery sweepstakes.
Netflix has agreed to a deal to acquire Warner Bros., the streaming and studios division of Warner Bros. Discovery that consists of the Warner Bros. film and television studios, HBO Max streaming service and HBO, it was announced Friday.
The transaction will be preceded by the planned spinoff of the WBD linear cable networks — including the TNT Sports networks of TNT, TBS and truTV — into a separate business called Discovery Global. That separation is now expected to occur in the third quarter of next year, later than originally hoped. The Netflix deal is not expected to close for another 12-18 months.
The cash and stock deal, which has been unanimously approved by the WBD and Netflix boards, values WBD at $27.75 per share and a total value of $83 billion. Netflix has reportedly agreed to pay WBD a breakup fee of nearly $6 billion in the event the deal falls through.
The aggressive breakup fee could be seen as an indication that Netflix is confident the deal will survive regulatory scrutiny. In a conference call Friday, Netflix co-CEO Ted Sarandos said the company is “highly confident in the regulatory process,” touting the deal as “pro consumer, pro innovation, pro worker, pro creator and pro growth.” Sarandos: “Really confident that we’re going to get all the necessary approvals that we need.”
Alternatively, it could be seen as the price for getting WBD to sign onto a deal with a higher-than-usual chance of failure. In the Warner Bros. studio and HBO Max, Netflix is acquiring businesses that are among its primary competitors in both production and distribution. It is also widely believed that U.S. regulators had a distinct preference for Paramount to prevail as it would have acquired WBD in full, including CNN — and presumably made changes to the cable news network akin to those that are ongoing at CBS News.
A Netflix acquisition of Warner Bros. has the potential to completely transform the TV and film business, but of all the possible outcomes, it is perhaps the least impactful on live sports. “I don’t think you should look at this as any change in our sports strategy at all,” Sarandos said when asked directly about how the agreement will impact the streamer’s approach to sports.
A Paramount-WBD agreement would have united TNT Sports and CBS Sports under the same umbrella, combining two largely complementary suites of rights, but ultimately reducing the number of players in the sports television space. Even a Comcast agreement would have had some tangential impact, with the increasingly sports-focused Peacock presumably combining with HBO Max. But the Netflix agreement leaves the status quo in place across the board.
With WBD set to move forward with its planned separation of its linear cable networks, TNT Sports will in a year’s time find itself in the same position as USA Sports — the new division consisting of former NBCU cable properties spun off into the venture Versant. TNT Sports will retain its independence and continue to exist as a competitor for live sports rights, as opposed to being absorbed by CBS Sports, but it will also have to do so without the backing of a major media business. ESPN has Disney, NBC has Comcast, CBS has Paramount, and TNT has had Warner Bros. since Ted Turner merged his creation with Time Warner in 1995.
Having already lost its longtime NBA rights package, TNT Sports still owns rights to two other major leagues — Major League Baseball and the NHL — in deals that expire in 2028. It owns rights to the NCAA men’s basketball tournament through 2032 in a joint arrangement with CBS Sports. And in a post-NBA scramble the past two years, it has added an eclectic mix of rights including French Open tennis and deals with several college sports conferences.
