Netflix‘s senior management team continued to campaign Tuesday for their pending $82.7 billion acquisition of Warner Bros., billing it as a surprising opportunity they didn’t want to miss.
Speaking Tuesday afternoon after the company reported a solid set of fourth-quarter earnings results, Co-CEOs Greg Peters and Ted Sarandos along with CFO Spence Neumann held forth at length on the deal. Investors have been less than convinced of the merits of the pricey transaction, with some fearing it is largely a defensive move sending a signal that the company needs an artificial way to shore up future growth prospects.
Via moderator on the call, Morgan Stanley analyst Ben Swinburne asked whether the deal is designed to improve Netflix’s “stagnant engagement levels.” Peters, who had invoked Netflix’s “deep heritage” of growing organically and not via acquisitions in a conference appearance last October, said Warner Bros. would be “an accelerant to our strategy.” The deal, he went on, would be “another mechanism to improve our offering for our members. Our job is to identify the best opportunities to improve that offering, both organic and through selective M&A, and always remain flexible and disciplined and pursuing those opportunities.”
When a different analyst cited Peters’ October comments, Sarandos sought to provide more context. The company’s “default position” prior to the due diligence process with WBD was that “we were not buyers,” he said. “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, Paramount, NBCUniversal all took part in a formal process, agreeing to a non-disclosure agreement in order to access the “data room” where the books are kept. Other companies, including Amazon, are thought to have considered jumping in before ultimately abandoning the idea. Paramount, has made a series of proposals to buy all of Warner Bros. Discovery, not just the studio-and-streaming part that would go to Netflix. Paramount has since launched a hostile bid, insisting it is better than Netflix’s and has a better chance of gaining regulatory approval. A proxy war in the coming weeks over seats on the WBD board appears to be the next act in the drama.
Earlier Tuesday, Netflix shifted its offer to all-cash, eliminating the small portion of it that had been comprised of stock. Netflix shares ended the day down nearly 1%, falling further on concerns about a projected 10% increase in content spending in 2026, which could squeeze profits. The stock has lost more than 25% of its value since word of the deal emerged last fall.
One of the biggest riddles-within-the-riddle with the Netflix-Warner marriage is the notion of the streaming kingpin being in charge of a theatrical film operation. Sarandos was asked about his consistently standoffish comments about theaters, even as the company has produced crowd-pleasing titles and courted top-tier filmmakers who are passionate about the theatrical experience.
“I’ve said it many times: This is a business and not a religion,” Sarandos said. “Conditions change, and insights change. And we have a culture that we re-evaluate things when they do.” Examples of such re-evaluations include “the pivot we made around advertising, around live, around sports,” the exec added.
“We debated many times over the years, whether we should build a theatrical distribution engine or not. And in a world of priority setting and constrained resources, it just didn’t make the priority cut. So now, when this deal closes, we will have the benefit of having a scaled world class theatrical distribution business with more than $4 billion dollars of global box office. And we’re excited to maintain it and further strengthen that business.”
Sarandos reaffirmed a comment he made several days ago in an interview with the New York Times, saying that Warner-branded film titles will be released in theaters with a 45-day window. “This is a new business for us, and one that we’re really excited about,” he said about theaters. “And I’m actually quite proud of our long track record of evolving the business, and I believe our results speak to that as well.”
