Netflix-Warner Bros. film deal throws theater industry into upheaval
A man walks past movie posters at the AMC Theater on May 5, 2025 in Montebello, California.
Frederic J. Brown | AFP | Getty Images
Movie theater operators woke up Friday to the possibility of a new world order.
netflix And Warner Bros. Discovery The streaming giant announced a deal to acquire WBD’s movie studio and streaming service, ending a months-long bidding process in which Paramount Skydance and Comcast also competed for the assets.
Participants are in a panic as Netflix wins.
Unlike traditional film studios, the streamer has not committed to traditional theatrical distribution and there are fears that big changes could be coming to an industry still struggling post-pandemic.
“It’s no secret that this is probably the least desirable outcome for many movie theater owners,” said Shawn Robbins, director of analytics at Fandango and founder of Box Office Theory. “There are no two ways around this. This could be one of the most meaningful days in business history, but it could still be a constructive day for cinema if Netflix heeds early indications that Warner Bros. will continue its theatrical business model and capitalize on these unique strengths that cannot be replicated on the streaming platform.”
Cinema United, the world’s largest exhibition industry union, took a strong stance against the sale of WBD assets to Netflix on Friday morning.
“The proposed acquisition of Warner Bros. by Netflix poses an unprecedented threat to the global exhibition industry,” CEO Michael O’Leary said in a statement. “The negative impact of this acquisition will impact theaters in the United States and around the world, from the largest circuits to single-screen independents in small towns.”
A half-dozen theater operators who spoke to CNBC shared concerns that Netflix’s acquisition of WBD would lead to a significant decrease in the number of movies offered in theaters each year, resulting in a decline in annual box office ticket sales.
“Netflix’s stated business model does not support theatrical releases. In fact, it’s the opposite,” O’Leary said.
Cinema United said the deal would “risk losing 25% of its annual domestic box office” and would particularly put smaller theater chains and independent cinemas at risk.
“We’re going to use every tool we have because we think a deal of this size and the potential impact it would have is something that everyone with regulatory and oversight authority should look closely at,” O’Leary said Friday on CNBC’s “Squawk on the Street.” “So we’re already talking to people at the federal level, the state level, and the international level because we believe this is a significant, significant threat to the long-term sustainability of theatrical exhibition.”
Cinema United isn’t the only group concerned about the future of the industry if the Netflix deal is approved.
A team of leading industry players sent a message open letter We will provide Congress with details of the potential economic and institutional repercussions that could occur if the merger goes through.
The letter, reported by Variety, said Netflix would “effectively shut down the theatrical market” and could shift its theatrical movie footprint and reduce licensing fees paid in post-theatre windows.
An uncertain future
Many attendees told CNBC they feared a deal between WBD and Netflix would lead to fewer theatrical releases or even shorter theatrical windows for major releases.
Consolidation in the studio space has become a growing problem for the theater industry in recent years. When studios merge, the number of films they produce generally decreases; And that’s something the industry has seen firsthand. Disney acquired 20th Century Fox in 2019.
The theater industry has been in a difficult situation in recent years due to production disruptions due to the pandemic, as well as dual labor strikes that halted film shooting and delayed the release of films. The industry still hasn’t returned to pre-pandemic streaming numbers or box office ticket sales, and there are concerns it never will.
“Historically speaking, when legacy studios are absorbed by other entities, the amount of films produced for theatrical distribution decreases, even when those other entities are also legacy studios,” O’Leary told CNBC on Friday. he said.
Netflix co-CEO Ted Sarandos said on an investor call Friday morning after the deal announcement that Warner Bros.’ planned films “will continue to go to theaters through Warner Bros.”
Sarandos does not plan to change WBD’s current business practices, a person familiar with the matter told CNBC, speaking on condition of anonymity to discuss private conversations. Still, he plans to meet with theater owners to address concerns and explain his vision that films should have shorter exclusive theatrical windows, the person said.
For attendees, shrinking theater windows poses a major threat.
Before the pandemic, films were generally released in theaters for 70 to 90 days before entering the domestic market. After Covid-related closures, studios and theaters renegotiated these terms and the average duration dropped to 30 to 45 days.
But Netflix has never followed these rules. The company has long argued that its content is intended for streaming subscribers and should therefore be delivered to them via the service at home as quickly as possible.
If Netflix releases a movie in theaters, it’s usually only for weekend events, either as the minimum requirement to qualify for awards competition or as one-off events.
Netflix does not publicly disclose box office numbers when it goes to theaters. This has led industry analysts to wonder whether the company will maintain WBD’s transparency about ticket sales after the deal closes.
“We’ve released about 30 movies in theaters this year, so we have no opposition to movies in theaters,” Sarandos said during Friday’s investor call. “My reaction was mostly due to the long privacy windows, and we don’t really think they’re consumer-friendly.”
“Netflix movies will take the same steps, some have a brief run in theaters beforehand, but our primary goal is to bring first-run movies to our members because that’s what they’re looking for,” he said.
Of course, this strategy may change in the coming years.
Wedbush analyst Alicia Reese highlighted in a research note published Friday that the theater plan is being negotiated through 2029.
“So any buyer would need to fulfill these contracts by releasing the planned WBD films in theaters for at least the next four years,” Reese wrote.
A theater chain operator, who shared his candid thoughts on the condition of anonymity, told CNBC: “All the franchise can do is take Netflix at their word.”
“In the agreement, they promised to continue airing old WB productions in theaters,” the operator said. “Now does that mean a one-week window, a four-week window, or no window at all? Netflix will first have to fundamentally change its corporate streaming philosophy. We’ll just have to wait to see. It’s not great for release.”
— CNBC’s Alex Sherman and Stephen Desaulniers contributed to this report.
Disclosure: Comcast is the parent company of NBCUniversal, which owns Fandango and CNBC. Versant would become the new parent company of Fandango and CNBC, based on Comcast’s planned Versant spinoff.
