Hollywood moguls as soon as dismissed the outsize ambitions of Netflix’s executives.
“Is the Albanian military going to take over the world?” former Time Warner Chairman Jeff Bewkes requested a reporter 15 years in the past. “I don’t suppose so.”
Suppose once more. On Friday, Netflix co-Chief Govt Ted Sarandos pulled off an audacious $82-billion deal to purchase a lot of Bewkes’ outdated haunts: the Warner Bros. movie and TV studios in Burbank, and HBO and the HBO Max streaming service in Culver Metropolis.
“It is a uncommon alternative,” Sarandos stated in an investor name. “It’s going to assist us obtain our mission to entertain the world and to deliver individuals collectively via nice tales. We’ve constructed a fantastic enterprise, and to do this, we’ve needed to be daring and proceed to evolve.”
If the takeover is accepted — it might face a raft of authorized and regulatory challenges — Netflix would acquire possession of such classics as “Casablanca” and “Goonies” and well-liked characters together with Batman, Scooby-Doo, Soiled Harry and Harry Potter.
The acquisition represents a second of triumph for the brash Sarandos, who has gone from Hollywood gate-crasher to the final word energy dealer.
“There appears to be no ceiling of alternative for Ted Sarandos,” stated Tom Nunan, a former studio and community govt. “He’s the king of Hollywood.”
Netflix’s victory within the public sale for Warner Bros. surprised many in Hollywood who figured Paramount — whose bid was backed by the one of many world’s wealthiest males, Larry Ellison — had a lock on the prized Warner property.
Even Netflix’s brass downplayed their merger ambitions as not too long ago as two months in the past. Co-Chief Govt Greg Peters shrugged off any curiosity at a Bloomberg convention, saying: “We come from a deep heritage of builders quite than patrons.”
However the streaming big’s dominant market place and powerful steadiness sheet allowed it to assemble a largely money bid that wowed Warner Bros. Discovery’s board, which voted unanimously in favor. What’s extra, Netflix agreed to soak up greater than $10 billion of Warner Bros.’ debt, bringing the deal’s complete worth to $82.7 billion.
Warner shareholders and U.S. and overseas regulators nonetheless should approve Netflix’s takeover. Netflix — which relies in Los Gatos however has a big presence in Hollywood — stated it expects the deal will shut inside a yr to 18 months.
Netflix, nevertheless, already is going through stiff opposition from cinema chains, lawmakers, distinguished creatives and labor unions. The Writers Guild of America stated the deal must be blocked.
“The world’s largest streaming firm swallowing certainly one of its greatest opponents is what antitrust legal guidelines have been designed to forestall,” the WGA stated.
A profession of defying conference
If it succeeds, the takeover could be a coup for Sarandos, the corporate’s usually controversial co-CEO who has been answerable for Netflix’s content material operations since 2000. Till not too long ago, he was seen as a disruptor who upended the trade’s long-standing enterprise fashions, particularly its reliance on the massive display.
It’s a exceptional trajectory for the 61-year-old Phoenix native and film buff, who as soon as clerked in a strip mall video retailer, becoming a member of Netflix when it was a scrappy Silicon Valley startup distributing DVDs via the mail in pink envelopes.
Firm co-founder Reed Hastings was impressed by Sarandos after he struck a first-of-its-kind revenue-sharing cope with Warner Bros. as an govt at West Coast Video/Video Metropolis retail chain.
Sarandos has been in control of Netflix’s content material operations ever since.
Certainly one of 5 youngsters, he’s the son of an electrician and a stay-at-home mother who left the TV on all day.
Whereas working on the video retailer, Sarandos earned a status for giving nice film suggestions to clients primarily based on what they appreciated to observe. In some ways, he was a human model of Netflix’s now well-known advice algorithm.
Sarandos spent his first three years at Netflix understanding of his bed room in Los Angeles. Hastings and Sarandos’ enterprise was largely answerable for bankrupting the then-dominant video rental chain, Blockbuster.
His knack for realizing what audiences need was instrumental in Sarandos’ ascent at Netflix and Hollywood: Netflix now has greater than 301 million subscribers, and it might develop much more.
Analysts estimate the acquisition might add an extra 100 million clients to the streaming service — a bounty that’s anticipated to attract the eye of antitrust regulators.
Over time, the corporate shifted to streaming licensed TV and movies, however as studios began to drag away from these offers, Netflix started its foray into unique content material.
Once more, Netflix wasn’t taken too critically at first. Sarandos would get TV present scripts with indicators of rejection — espresso stains and smudged fingerprints — however his gamble on shopping for the rights to David Fincher’s political thriller, “Home of Playing cards,” starring Kevin Spacey and Robin Wright, in 2011 modified that.
Sarandos walked into Fincher’s workplace and provided him a provocative deal: Netflix would decide to the primary two seasons of “Home of Playing cards” with out seeing a pilot for $100 million.
“There have been 100 causes not to do that with Netflix,” Sarandos instructed The Instances in 2013. “We needed to give them one nice purpose to do it with Netflix.”
Sarandos has made a profession out of defying conference.
Beneath his management, Netflix launched episodes to exhibits unexpectedly, permitting individuals to binge watch a complete season. The platform greenlighted full seasons of exhibits even earlier than they started, and older collection like “Associates” and “The Workplace” discovered new audiences years after they ended on community tv.
He made bets on collection that different conventional studios handed on, together with the favored sci-fi present “Stranger Issues,” which might turn into a worldwide hit with its personal universe of characters, like “Star Wars.”
Some studios have been hesitant to offer the present’s creators, Matt and Ross Duffer, first-time showrunners, the reins. Sometimes, Netflix and Sarandos thought in another way.
“They learn it, they bought the mission, they usually wished me and Ross to be concerned as showrunners and to direct, and that utterly modified our lives,” stated Matt Duffer on stage on the L.A. premiere of the ultimate season of “Stranger Issues” in Hollywood this month.
“Ted made that call all the best way again then, 2015, and that’s why we’re right here at this time,” he stated.
Over time, Netflix grew to become a spot the place expertise wished to pitch their exhibits.
“The aim is to turn into HBO quicker than HBO can turn into us,” Sarandos instructed GQ in 2013.
Quickly, Sarandos is likely to be in control of HBO.
Netflix expanded its attain globally, making a manufacturing pipeline overseas. Its greatest worldwide hits embrace 2021 Korean language collection “Squid Sport,” Netflix’s hottest present of all time, with its first season producing 265.2 million views in its first three months.
However as Netflix’s technique modified the Hollywood panorama, it additionally angered theater homeowners and opponents who have been upset that the streamer was enjoying by completely different guidelines that challenged long-standing practices within the leisure trade.
Sarandos specifically has taken direct purpose on the conventional apply of releasing films in theaters first — and holding them there for months earlier than making them obtainable for dwelling viewing.
Netflix typically releases films in theaters just for brief durations with a view to enchantment to followers or qualify for awards. They seem on its platform shortly after they debut in theaters.
Sarandos was promoted from chief content material officer to co-CEO in 2020, operating the corporate with Hastings, who had beforehand served as Netflix’s CEO.
The duo confronted their greatest problem in 2022, when Netflix’s subscriber numbers plunged by 200,000 subscribers in its first quarter, the primary decline in additional than a decade.
Analysts feared that the streaming revolution was over and Netflix had reached a ceiling to its development.
However Netflix was capable of finding new income streams by cracking down on password sharing and coming into new areas of enterprise it beforehand neglected, together with promoting and stay occasions like sports activities, together with NFL soccer.
In 2023, Hastings stepped down from his function to be govt chairman, and Peters, chief working officer, was named to the co-CEO function.
Immediately, Netflix is extensively heralded because the winner of the streaming wars years after many rivals tried to enter into the house, placing the corporate in a super place to make a big money and inventory bid for the Warner Bros. Discovery property it was in search of.
Not like lots of its opponents, Netflix is worthwhile — the corporate generated $2.5 billion in internet earnings within the third quarter, up 8% from a yr earlier.
Netflix has provided Warner Bros. Discovery shareholders $23.25 in money and $4.50 of Netflix inventory for every share. In September, earlier than Paramount began the bidding, Warner Bros. was buying and selling round $12.
“These property are extra invaluable in our enterprise mannequin, and our enterprise mannequin is extra invaluable with these property,” Sarandos stated in a name with traders on Friday.
If the deal is accepted, Netflix could be the third proprietor of Warner Bros. and HBO in a decade. On the decision, Peters addressed his earlier critique that the majority huge media mergers fail.
“We perceive these property that we’re shopping for,” Peters instructed traders on Friday. “Issues which can be vital in Warner Bros. are key companies that we function in, and we perceive lots of instances, the buying firm, it was a legacy, non-growth enterprise that was on the lookout for a lifeline. That doesn’t apply to us. We’ve bought a wholesome, rising enterprise.”
Sarandos expressed confidence the deal would undergo.
“This deal is pro-consumer, pro-innovation, pro-worker, pro-creator, pro-growth,” Sarandos instructed traders. “Our plans listed here are to work actually intently with all the suitable governments and regulators, however actually assured that we’re going to get all the mandatory approvals that we want.”
Sarandos is certainly one of Hollywood’s most well-compensated CEOs, with a package deal that was valued at $61.9 million in 2024.
Lengthy seen as pleasant to expertise, he has weathered some controversies through the years.
Throughout twin strikes in 2023, writers and actors complained bitterly about how Netflix was compensating them for his or her work on streaming exhibits.
Sarandos was seen as one of many key Hollywood gamers in serving to bridge the hole. One of many outcomes of the strikes was that studios, together with Netflix, would launch viewership information to the unions and provides bonuses to expertise primarily based on sure viewership metrics.
In 2021, Sarandos confronted inside backlash inside Netflix when some staff organized a walkout over transphobic feedback stated on comic Dave Chappelle’s particular “The Nearer.” Sarandos had stood by the comic, saying in a employees memo that “content material on display doesn’t instantly translate to real-world hurt.” However days later he instructed Selection that “I screwed up that inside communication.”
“I ought to have led with much more humanity,” Sarandos stated.
Regardless of its dominance in streaming, Netflix continues to face challenges from different types of leisure, together with YouTube and social media websites like TikTok or gaming communities like Fortnite that each one compete for eyeballs.
“In a world the place individuals have extra decisions than ever the right way to spend their time, we are able to’t stand nonetheless,” Sarandos stated Friday. “We have to maintain innovating and investing in tales that matter most to audiences, and that’s what this deal is all about.”
