Good morning. There’s a lot of debate over last week’s surprise announcement that Netflix struck an $83 billion deal to acquire Warner Bros. Discovery. President Donald Trump said Sunday that their combined market share “could be a problem,” and the deal will face international scrutiny, too. Some takeaways so far:
Warner Bros. held out for a bigger shared win. An insider told me that Warner Bros. chief David Zaslav was not eager to partner with Paramount Skydance because of financing, the price, and the fact that rookie CEO David Ellison would not only retain controlling shares but was still digesting his last win.
Activate Consulting CEO Michael J. Wolf, a veteran media consultant and former president of MTV Networks, argues that this deal is a must-do for Netflix, given the rising strength of competitors like YouTube, Amazon Prime and Tubi. “No doubt Netflix is the default streaming service,” Wolf told me over the weekend. “Going forward, what will be required to win is more iconic IP and more global franchises that work everywhere. Warner Bros. Discovery is one of the only companies out there that will give Netflix both of these at once.”
Experience matters. Content and the ability to distribute it have fueled many an entertainment merger. But history is filled with examples of those who’ve generated huge value for stakeholders from such deals and many that did not. The AOL Time Warner merger proved to be an expensive cautionary tale about clashing cultures, mistimed market shifts and the perils of buying at peak bubble. (Time Warner’s Turner acquisition, on the other hand, was a home run.) I remember GE CEO Jeff Immelt telling me “we know this world” when merging VivendiUniversal and NBC. Turns out GE didn’t create as much value as NBC Universal’s subsequent buyer Comcast did. Netflix co-CEO Ted Sarandos is right to say that “our mission has always been to entertain.” But even if he overcomes antitrust scrutiny, he must then…