The company’s decision to bid nearly $83 billion for Warner Bros Discovery’s studio and streaming assets marks a dramatic departure from Netflix’s former mantra: build, don’t buy. Investors, however, remain unconvinced.
Shares were already under pressure before the bid. Since Netflix first offered for Warner Bros Discovery on Dec. 5, the stock has fallen more than 15%. The slide continued Wednesday, with shares dropping nearly 8% in premarket trading as co-CEOs Ted Sarandos and Greg Peters were forced to defend the acquisition strategy—one that has also prompted Netflix to suspend its share buyback program.
A strategic pivot prompted by changing viewing habits
Sarandos said that the shift was driven by changing consumer behavior, noting how tech giants such as Alphabet’s YouTube have reshaped television viewing, forcing Netflix to adapt.
The co-CEOs admitted they had not initially planned to make an offer for Warner Bros assets when due diligence began.
“When we got into the hood, there were several things we saw that were just really exciting,” Peters said.
Netflix is now competing with Paramount Global and Skydance in a high-stakes race to acquire Warner Bros’ film and television studios, extensive content library, and major franchises including Game of Thrones and Harry Potter.
Netflix reverses course on theatrical releases
In a notable reversal of its former stance, Netflix also embraced the value of theatrical releases, a model it once dismissed as outdated.
“We have often in our Netflix history debated building a theatrical business… But now with Warner Bros, they bring a mature, well-run theatrical business with amazing films,” Peters said.
He added that HBO’s brand strength and Warner’s television studio would complement Netflix’s own production capabilities.
Investors remain unconvinced
Despite a revenue beat in a traditionally strong quarter—driven in part by the final season of Stranger Things—Netflix’s results were seen as underwhelming, and the company forecasted muted growth for the year ahead.
Analysts say the acquisition’s high costs have raised doubts about the long-term payoff. Netflix has already secured a $59 billion bridge loan commitment for the deal and increased it by $8.2 billion to support its all-cash $27.75 per share offer.
Regulatory hurdles loom
The proposed acquisition is expected to face intense scrutiny from lawmakers and competition regulators amid concerns that large media mergers could reduce consumer choice.
Sarandos sought to calm fears, arguing the deal would be “pro-consumer” and “pro-worker,” and that it would create new teams and opportunities for creatives.
He added that the acquisition would give Netflix access to “100 years of Warner Bros deep content and IP,” which the company could develop and distribute in more effective ways to benefit consumers and the industry.
For now, however, investors remain skeptical as Netflix’s strategic shift unfolds under mounting market pressure.