Five takeaways from the blockbuster Netflix Warner Brothers deal

It may seem like a simple merger deal, but it has all the ingredients of a Hollywood drama: A rich and powerful suitor, political intrigue and cliffhangers galore.

Netflix’s deal to acquire Warner Brothers Discovery’s famed film studio and popular HBO streaming network is the real-life story of a conquering giant.

But with regulators and competitors still waiting on the sidelines, this is likely just the beginning of the saga.

There are five important things to pay attention to as the story progresses.

Netflix has been prominent in Hollywood for years and is the world’s largest streaming subscription service and the largest producer of new content in California.

But the deal, the biggest in the industry for years, will confirm the company’s position at the head of the group by providing it with a catalog of nearly a century of titles and strengthening its already strong production capacity.

That’s not to mention subscriber power, as Netflix prepares to add some of HBO’s 128 million subscribers to its already 300 million-strong base.

“Netflix is ​​already the largest streaming service, and now when you add HBO Max to that, it becomes arguably untouchable,” said Mike Proulx, vice president of research firm Forrester.

The deal will bring together beloved historical series such as Looney Tunes, Harry Potter and Friends, and HBO hits such as Succession, Sex and the City, and Game of Thrones under the same roof as Netflix’s less traditional productions such as Stranger Things and KPop Demon Hunters.

The purchase also includes TNT Sports outside the US.

Netflix said it hopes to close the deal within the next year to 18 months.

But executives have been coy about how or whether they plan to incorporate Warner Brothers and its flagship HBO brand into the existing Netflix service.

Netflix co-chairman Greg Peters said the HBO name was “very strong” and would give the company “a lot of options” but did not elaborate further.

Netflix may bundle movies and shows into different packages, but analysts say it would be a surprise if the HBO brand disappeared entirely.

The impact on prices is also unclear.

Netflix’s dominance could allow it to charge customers more. But if viewers realize they’re paying for one streaming service instead of two, it could end up costing them less.

Warner Bros. is one of the studios that defined Hollywood, creating classics such as Casablanca, Gone with the Wind and The Exorcist.

But this takeover is an example of how the golden age of cinema is fading.

Forrester’s Mr. Proulx said the trajectory was clear, the future was “all broadcast.”

“This agreement is now official: old media is coming to an end.”

Netflix has promised to continue releasing movies in theaters; This is a very logical decision as it will be purchasing the DC superhero series, which has been very successful in movie theaters.

But not everyone believes this will remain a priority for the broadcaster.

After all, earlier this year Netflix co-chief executive Ted Sarandos said he believed going to the movies was “an outdated concept.” And the consolidation is touching a nerve in an industry already grappling with previous layoffs, a decline in production and the threat of artificial intelligence.

Titanic director James Cameron was one of many in Hollywood to greet the deal with dismay, warning just before it was announced that he thought it would be a “disaster” for the industry.

Completion of the deal is far from certain.

First, Warner Brothers Discovery must complete the spin-off of the parts of its business it has not sold to Netflix, including CNN, Discovery and Eurosport.

Meanwhile, rival suitor Paramount Skydance, which hopes to buy the entire Warner Brothers Discovery business, may try to convince shareholders that it can offer a better alternative.

But the biggest question is whether the deal will win approval from competition regulators in the US and Europe; This can pose a big challenge.

Lawmakers from both parties in Washington opposed the deal, voicing concerns that it would lead to fewer choices and higher prices for consumers.

Mr. Sarandos said Netflix, which must pay $5.8 billion to Warner Brothers if the deal falls through, was “pretty confident” the deal would be approved.

That will depend in part on how regulators define the competitive landscape, said Jonathan Barnett, a professor at the University of Southern California Gould School of Law.

If regulators look only at streaming video, Netflix’s rise in market share could raise significant red flags. But he said “concentration concerns will gradually diminish” if regulators adopt a broader definition that includes cable and broadcast television and even YouTube as Netflix’s rivals.

Rebecca Haw Allensworth, a professor at Vanderbilt Law School, said a merger like this would often be a “difficult situation” pushing for better terms for consumers.

This time, he worries the Trump administration could put pressure on Netflix on issues like diversity and political bias, as it has in other cases.

The debate is whether President Donald Trump will weigh in.

This administration has promised lighter regulation when it comes to mergers.

But the president, Warner Bros. Paramount spoke highly of Skydance’s owners, tech billionaire and Republican donor Larry Ellison and his son David, who are behind a rival bid for the company. Trump has always shown a keen interest in the media and entertainment industry.

There was no comment from U.S. antitrust regulators, but a senior Trump administration official told CNBC that Netflix views its bid for Warner Bros. with “heavy skepticism.”