Netflix Leaders Advocate for Warner Bros. Partnership, Highlighting $83B Strategy Aligned with Ad and Sports Focus
On Tuesday, Netflix’s senior management team made a strong case for their proposed $82.7 billion acquisition of Warner Bros., emphasizing the deal as a significant opportunity not to be overlooked.
During a call following the company’s solid fourth-quarter earnings announcement, Co-CEOs Greg Peters and Ted Sarandos, along with CFO Spence Neumann, addressed investor skepticism surrounding the costly transaction. Many investors have expressed concerns that the acquisition may be a defensive strategy aimed at bolstering Netflix’s growth prospects.
Morgan Stanley analyst Ben Swinburne raised a critical question about whether the acquisition was intended to address Netflix’s “stagnant engagement levels.” Peters, who previously highlighted Netflix’s commitment to organic growth over acquisitions, described Warner Bros. as “an accelerant to our strategy.” He asserted that the deal represents “another mechanism to improve our offering for our members,” emphasizing the importance of being flexible and disciplined in pursuing both organic and acquisition opportunities.
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In response to a question referencing Peters’ earlier statements, Sarandos provided additional insights, stating that the company entered the due diligence process with a default position of “we were not buyers.” However, he noted, “We went into this with our eyes open and our minds open, and we got into it. We both got very excited about this amazing opportunity.”
Netflix, along with Paramount and NBCUniversal, participated in a formal bidding process and signed a non-disclosure agreement to access Warner Bros.’ financial details. Other companies, including Amazon, considered participating but ultimately stepped back. Paramount has proposed a full acquisition of Warner Bros. Discovery, arguing that its offer is superior to Netflix’s and more likely to receive regulatory approval, setting the stage for a potential proxy war over board seats at Warner Bros.
Earlier on Tuesday, Netflix adjusted its offer to an all-cash proposal, removing the previous stock component. Following this change, Netflix shares dropped nearly 1%. Concerns about a projected 10% increase in content spending for 2026 have also contributed to the stock’s decline of over 25% since news of the acquisition surfaced last fall.
A notable aspect of the potential merger is the challenge of managing a theatrical film operation, given Netflix’s historical stance on theaters. When asked about his previous remarks on the topic, Sarandos reiterated, “I’ve said it many times: This is a business and not a religion.” He further explained, “Conditions change, and insights change. And we have a culture that we re-evaluate things when they do.” He cited Netflix’s recent pivots toward advertising and live sports as examples of this adaptability.
Sarandos noted that Netflix has often debated the merits of establishing a theatrical distribution network but had previously prioritized other initiatives. Once the acquisition is finalized, he expressed excitement about inheriting a “scaled world-class theatrical distribution business” that has generated over $4 billion in global box office revenue.
He also confirmed plans for Warner-branded films to be released in theaters with a 45-day window, calling it “a new business for us, and one that we’re really excited about.” He expressed pride in Netflix’s history of evolving its business model, stating, “I believe our results speak to that as well.”
