It was hardly a surprise to anyone when, in December, Bloomberg broke the news that Warner Bros. president and CEO David Zaslav had agreed to sell the historic studio. Ever since Zaslav took over the company in 2021, the former cable television lawyer showed seemingly no interest in running the place as a profitable business. Zaslav buried films like Clint Eastwood’s excellent Juror #2, sending it to fewer than 50 theaters for just two weeks, despite sold-out screenings and critical acclaim. He canceled releases of already finished projects, like the documentary series Peltz Beckhams vs. the Wedding Planners, about Nicola Peltz Beckham’s lawsuit against her wedding planners, as a favor to Zaslav’s racist billionaire friend Nelson Peltz, Nicola’s father. Even as the studio floundered, Zaslav pillaged Warners for hundreds of millions of dollars in compensation, while issuing countless rounds of layoffs. By 2024, he was publicly begging the next presidential administration to allow for more deregulation and mergers.
What was shocking about the Warner Bros. sale was that the company that won the bid was Netflix. Just weeks earlier, Netflix co-CEO Greg Peters had played down his company’s interest in Warner Bros., stating at a media conference that Netflix preferred building businesses to buying them. “One should have a reasonable amount of skepticism around big media mergers,” he said. “They don’t have an amazing track record over time.”
For months, Paramount, and its new owner, David Ellison, had been widely projected to be the front-runner in the Warner Bros. auction. Zaslav had only put his company up for sale after Ellison, in his mad quest to own all media, made an unsolicited bid for the studio in September. Ellison had the money and political capital to complete the deal. Larry Ellison, the co-founder of Oracle and David’s father, had put $12 billion of his own fortune into his son’s $108 billion bid. He was also a friend of Donald Trump and uniquely positioned to help Paramount avoid scrutiny from the Justice Department and Federal Trade Commission. (In 2020, Larry went so far as to join a call with Sean Hannity and Lindsey Graham about overturning the election in Trump’s favor.)
But as it soon emerged, Ted Sarandos, Netflix’s other CEO, had been forging his own ties with the president. In November, Sarandos visited Trump at the White House to discuss a Netflix–Warner Bros. merger. He reportedly left convinced that Trump wouldn’t stand in his way. Combined with the strength of Netflix’s financing, this meeting of minds was apparently enough to assure Zaslav and the Warner Bros. board that Netflix’s smaller $72 billion bid, which excludes Warners legacy television networks like TNT and CNN, was more likely to succeed.
Now on the precipice of success, Sarandos is threatening to create one of the most damaging media conglomerates in the history of motion picture entertainment. The result will be more layoffs in Hollywood, fewer and lower-quality movies in theaters around the world, and at higher prices. The deal, which is motivated first and foremost by greed—Zaslav stands to earn $567 million from the sale, potentially making him a billionaire—should not just be blocked. Both companies should be broken up for parts, their streaming platforms spun off. The fact that the merger has even been agreed upon proves that a much deeper, more sinister takeover has already been completed: The studios are willingly charting a different future for entertainment.
For years, Sarandos has claimed that traditional Hollywood studios like Warner Bros. were dinosaurs whose business models were “completely out of step with the consumer.” So why merge with one?
Netflix wants Warner Bros. for two reasons. Foremost is that the merger will help Netflix improve its reputation. Despite growing from a small DVD-by-mail startup into the most powerful Hollywood studio to ever exist, Netflix has never been fully embraced by top talent, rank-and-file guild members, critics, or anyone in Hollywood who doesn’t already work for Netflix. When the company inaugurated its streaming platform in 2007, Hollywood executives viewed the streamer as a company of useful idiots who were getting their pockets picked for free: Netflix would license films and shows from legacy studios, then pay the studios handsomely, as it embraced a growth strategy built around cheap subscriptions and eye-popping spending.
Even when Netflix found success in 2013 with the television show House of Cards, the company’s first original hit series, executives touted themselves to the media as the innovators of “binge watching,” a new way to consume unhealthy amounts of television that derived its name from an eating disorder. In an industry where reputation and relationships with talent can supersede the most sober financial decision-making, Netflix’s reputation as a band of tasteless interlopers seeking the destruction of Hollywood’s way of life always posed an awkward problem for the company.
Giant bags of money helped smooth things over. Netflix got a foothold in television by giving large checks to producers and talent, who were paid up front and guaranteed a profit in lieu of back-end residuals. Around 2016, when Netflix moved into distributing and producing original movies, the company acquired independent films from top festivals, and eventually funded established auteurs like Martin Scorsese, Jane Campion, and Noah Baumbach, giving them limited theatrical releases. But by the end of the decade, just as Netflix had achieved market dominance, the streamer pulled back on spending. The large, up-front checks disappeared. Independents at festivals found that Netflix no longer wanted to buy their films. Instead of auteurs, Netflix focused on pumping out as much cheap content as possible with little evident regard for quality.
A decade and change into its pivot into original content, Netflix has become the de facto home for half-baked, glorified TV movies, which get dumped on the company’s platform and are never seen nor heard from again. Aside from a few gems (Alfonso Cuarón’s Roma, Todd Haynes’s May December, and Richard Linklater’s Nouvelle Vague), the company’s film library is mostly forgettable, oversaturated, poorly directed, high-def digital mush, with stupid titles that insult great cinematic achievements. (See: a romance about an American rehabbing his Italian villa, called La Dolce Villa.)
The Warner Bros. archive, on the other hand, which had absorbed MGM and RKO’s pre-1986 fabled libraries in previous mergers, includes Meet Me in St. Louis, The Big Sleep, Citizen Kane, and thousands of other masterpieces and classics. Ted Sarandos once defended Netflix’s low-quality films by claiming his company, a newcomer, was at a disadvantage by having to “make up for not having 90 years of storytelling.” By acquiring Warner Bros.’ more than 100 years of storytelling, Netflix believes it won’t have to make up for anything ever again.
The other reason Netflix wants Warners is that it will help kneecap movie theaters, one of the streamer’s key competitors. In a recent interview with The New York Times, Sarandos tried to assuage fears over his company’s hostility to theaters by promising to maintain Warner Bros.’ 45-day theatrical window—the period where films play exclusively in theaters before they’re available to stream or purchase at home.
But for at least a decade Sarandos has been advocating for shorter theatrical windows, which would devastate exhibitors. He’s routinely told journalists that theatrical exhibition, and windowing specifically, are “outmoded,” too expensive, and no longer worth the hassle. “If you’re fortunate enough to live in Manhattan, and you can walk to a multiplex and see a movie, that’s fantastic,” he said in April. “Most of the country cannot.”
Claims like this, which Sarandos loves to make, are misleading. Recent data shows that theatrical exhibition is not only a viable business, but is growing in popularity with young people. Sarandos is of course not wrong to identify that some kinds of theatergoing have become expensive, soul-sucking torture chambers: The theatrical industry is dominated by oversize multiplexes that program bad movies, charge too much money, and are in inconvenient malls and suburban lots that can only be reached by car.
But what Sarandos fails to say is that legacy Hollywood studios like Warner Bros. are largely responsible for creating this paradigm. Ever since the release of Jaws in 1975, studios and theater owners have oriented moviegoing around blockbusters that premiere on thousands of screens around the world. The largest theater chains soon built out their multiscreen theaters into souped-up multiplexes with dozens of screens, which benefited from economies of scale.
Netflix has taken advantage of multiplex misery by attempting to wind down theatrical exhibition altogether. But it’s clear this isn’t what audiences want. Newer distributors like A24, Neon, and Mubi have responded to multiplex immiseration with great success by pushing good movies for the independent and art house circuits. Warner Bros., for its part, has managed to find continued success with theatrical releases, both blockbuster franchises (the DC universe) and auteur-led one-offs (Ryan Coogler’s Sinners, Paul Thomas Anderson’s Oscar front-runner One Battle After Another). Netflix’s attempt to buy the company that accounts for 20 percent of North American box-office receipts bodes poorly for exhibitors. Acquiring these bargaining chips will give Netflix enormous leverage over theater owners as it aims to cut down theatrical windows and make theater-going unrecognizable.
Netflix is the largest streamer in the world. HBO Max, the streaming platform owned by Warner Bros., is the fourth-largest. Combining these businesses, according to the antitrust scholar Tim Wu, likely violates Section 7 of the Clayton Act, which prohibits mergers that substantially decrease competition. According to Justice Department and FTC guidelines, any merger or acquisition that pushes a company’s market share past 30 percent in a given market is presumptively illegal. “At the 101 law student level, look at the guidelines and look at this merger,” Wu told me. “It looks a lot like driving 65 in a 50 zone.”
Should the Trump administration attempt to block the merger, the outcome of any litigation will likely depend on how Netflix’s market is defined by the courts. Despite producing thousands of original movies and shows and wielding more studio power than Jack Warner could have ever dreamed of, Netflix continues to insist that it’s not a Hollywood studio at all. Instead, the company likes to argue, Netflix is more like YouTube, whose number of monthly visitors is 10 times the size of Netflix’s entire subscriber base. Netflix executives have been obfuscating like this for years, playing a shell game with the press about who it’s really competing with. (Sometimes these arguments accidentally swing back around into bracing honesty. In 2017, Netflix co-founder Reed Hastings claimed that the streamer’s chief rival was the biological need for sleep.)
Netflix wants audiences to believe that there is no difference between watching a movie and watching one of the three million videos uploaded to YouTube daily. To Netflix, it’s all “content,” which can be consumed from any device, in any location, and at any point in the day. In a sense, Netflix is right: One of the streamer’s greatest achievements was to cheapen Hollywood by flooding it with films and shows that are as artful, entertaining, and disposable as the zero-budget garbage served up by the YouTube algorithm, and pushing every other Hollywood studio to do the same. Still, there are crucial and obvious differences between the two companies. YouTube lets anyone upload to its website. It doesn’t produce, distribute, and exhibit original films and television shows with stars that compete for awards. Just because audiences might pay attention to YouTube at the expense of Netflix doesn’t change the fact that the two companies are in fundamentally different industries, rely on different economies, and employ different people.
“It’s a weak argument,” Wu said of Netflix’s YouTube defense. For him, the company’s position is analogous to the idea of McDonald’s buying Burger King and then claiming that its main competitor is every restaurant in the world, not other fast-food chains. “Netflix and its defenders have been effectively making an argument like, ‘oh, everything is a restaurant. Anything you’re spending your attention on is our competition,’” Wu said. “It looks like a loser to me.”
In truth, Netflix is a global television company. As America’s go-to provider for low-level, mass entertainment, the streamer is no different from any of the major broadcast networks (CBS, NBC, ABC, and Fox), except that Netflix is more powerful, unconstrained by geography and the physical limits of coaxial cable lines, and totally unregulated. By law, the networks have always had to broadcast their over-the-air signal to Americans for free, the cost of which was paid for by advertising. Despite now showing ads, Netflix has no free signal or stream. The company has raised its standard price by 100 percent over the last 14 years and will likely raise it significantly if the merger is completed. As is the case with so many tech platforms, Netflix has simply re-created twentieth-century technology for the digital age and made it worse.
While Netflix’s ultimate goal is to smash the film and television industries into one and take control of the wreckage, Netflix’s executives, as always, are playing the long game. Sarandos understands that theaters aren’t going away in the near or even medium-term future. Instead, they are devolving, especially in rural and suburban regions that face more closures and decreased projection quality. Acquiring Warner Bros. will give Netflix the tools to shore up its beleaguered film unit, collect major profits as the industry contracts, and launder its reputation through a historic studio that comes without Netflix’s reputational baggage. If the merger is completed, It would not be surprising if Netflix moved its auteur films inside Warner Bros. to give it a better shot at winning an Academy Award for best picture, Hollywood’s ultimate symbol of legitimacy, which academy voters have thus far never been able to bring themselves to confer on Netflix.
By selling itself to Netflix, Warner Bros. has confirmed a truth about Hollywood that had long been apparent but is now unignorable: The studios have no competing vision for the future of entertainment. To them, the cinema is just a headache they’d rather be rid of. Netflix might have once been viewed as a threat to their business models, but the merger shows just how much the streamer has succeeded, having not only conquered Hollywood’s balance sheets, but now the imaginations of studio executives. For Zaslav, the relief has never been more comforting.
