Warner Bros. Discovery and Netflix Said to Be in Exclusive Talks

Netflix would acquire Warner television and film studios as well as HBO Max in a deal that would bulk up the world’s biggest paid streaming service.

Netflix is close to winning Warner Bros. Discovery.

Warner Bros. Discovery, the old-line entertainment company that controls the Harry Potter and Batman franchises, has entered exclusive talks with Netflix for a deal to sell its movie and television studios and HBO Max streaming service, according to two people familiar with the negotiations who were not authorized to talk publicly.

The culmination of a deal would send shock waves through Hollywood and the broader media landscape. Netflix is already the world’s largest paid streaming service, with more than 300 million subscribers. Bulking up with Warner Bros. Discovery assets would create a colossus with greater leverage over theater owners and entertainment-industry unions. It could force smaller companies to merge as they scramble to compete.

A deal would also complete the conquest of Hollywood by tech insurgents. Instead of acquiring studios, tech companies have mostly grown under their own steam in Hollywood — until now. Warner Bros. would be the first major legacy studio to fall to a Silicon Valley competitor.

The move to exclusive talks with Netflix came after a bidding war that pitted Netflix, Comcast and Paramount against each other. The three companies submitted sweetened bids this week. Netflix offered mostly cash.

Comcast has also been bidding for Warner Bros. Discovery’s studios and HBO Max streaming service. David Ellison, the Paramount chief executive armed with billions from his father, has been trying to buy all of Warner Bros. Discovery, including traditional television channels like CNN and TNT.

The pitch from Netflix was notable in part because it included a pledge to continue theatrical releases for movies from Warner Bros. Discovery, one of the people with knowledge of the talks said. That would be a significant development for Netflix, which pioneered at-home viewing and has so far avoided going all in at the box office.

Netflix has never attempted an acquisition even remotely close to this size. Bloomberg earlier reported that Netflix and Warner Bros. Discovery had agreed to exclusive talks.

The emergence of Netflix as a formidable bidder for Warner Bros. Discovery’s assets surprised many in the industry because of how it contradicts the streaming giant’s ethos as a company. “We come from a deep heritage of being builders rather than buyers,” a co-chief executive, Greg Peters, said in October at the Bloomberg Screentime conference in Los Angeles.

Any deal would need approval from federal regulators. How the Trump administration evaluates antitrust concerns in any of the proposed deals will depend in part on how it defines the key participants in a media industry that is rapidly evolving as technology giants like Apple and Amazon become rivals to legacy players.

Politics have also seeped into some deal approvals during the Trump administration. Mr. Ellison has cultivated a relationship with President Trump, who has praised his family’s ownership of Paramount. Brian Roberts, the chief executive of Comcast, has found himself at odds with Mr. Trump, with the president calling him a disgrace to broadcasting.

On Thursday, a group of anonymous feature film producers sent a letter to Congress with “grave concerns” about Netflix buying Warner Bros. Discovery. “Netflix views any time spent watching a movie in a theater as time not spent on their platform,” the letter said. “They have no incentive to support theatrical exhibition, and they have every incentive to kill it.”

The letter also voiced worry about “monopolistic control” of the streaming market. The producers said they didn’t sign their names to the letter out of “fear of retaliation.”

More than any movie company, Warner Bros. symbolizes the romance of Old Hollywood. Bette Davis and James Cagney acted on its soundstages. Its 100-year-old library includes “Casablanca,” “The Maltese Falcon,” “Bonnie and Clyde,” “Dirty Harry,” “The Shining” and “Chariots of Fire.” As a result of deal making in the 1990s, Warner Bros. also controls Metro-Goldwyn-Mayer classics like “The Wizard of Oz” and “Gone With the Wind.”

Over the spring and summer, Warner Bros. had one of the most successful box office runs in its history, delivering eight hits in a row, including Ryan Coogler’s “Sinners” and Paul Thomas Anderson’s “One Battle After Another,” both of which are expected to be a force at the coming Academy Awards.

HBO has long been the No. 1 premium television operation in Hollywood. Its roster of current hits includes “Euphoria,” “The Gilded Age” and “The White Lotus.”

By swallowing all of this and more — Warner Bros. also controls Bugs Bunny and television colossuses like “Friends” and “Game of Thrones” — Netflix would greatly strengthen its content hand.

Netflix has shown that it can create hits like “Stranger Things” and “KPop Demon Hunters” from unproven intellectual property. But it has lacked the kind of “enduring, multigenerational franchises that drive recurring engagement from both first-time and longtime viewers,” Robert Fishman, a MoffettNathanson analyst, wrote in a Nov. 12 report.

Nicole Sperling contributed reporting.

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