Netflix Swears Its Warner Bros. Shopping Spree Isn’t Another AOL Time Warner Disaster
Netflix recently dropped $82.7 billion to scoop up the studios and streaming wing of Warner Bros. Discovery, and the company really wants everyone to believe this won’t be another entry in the franchise of spectacular Warner Bros. corporate mishaps.
Given the studio’s legendary history of mergers gone wrong, you can imagine why investors might be bracing for déjà vu.
On a call with Wall Street analysts, Co CEOs Ted Sarandos and Greg Peters made their case that this time is different. Peters tried to soothe the room by arguing that Netflix actually knows what it’s doing, unlike the ghosts of mergers past.
“A lot of those failures that we’ve seen historically is because the company that was doing the acquisition didn’t understand the entertainment business,” Peters said.
“They didn’t really understand what they were buying. We understand these assets that we’re buying, the things that are critical in Warner Bros. are key businesses that we operate in, and we understand.
“A lot of times, the acquiring company, it was a legacy non growth business that was looking for sort of a lifeline. That doesn’t apply to us. We’ve got a healthy, growing business that we’re super, super excited about.”
That’s a confident stance considering Warner Bros. still carries the scars of AOL Time Warner’s implosion back in 2000. AT&T’s $85 billion grab in 2018 also flamed out and ultimately set up the 2022 Discovery merger, which then led to yet another round of financial strain and now, well, Netflix getting the keys.
Of course, the timing of this blockbuster purchase raised eyebrows since Peters had declared earlier this year that Netflix leaders were “builders, not buyers.”
Sarandos brushed that aside with a simple explanation that leaves plenty unsaid. “It wasn’t for sale before. And they certainly hadn’t cleaned up the assets or separated the assets, in the way that they have right now. So I think that kind of goes to the ‘why now.’”
Peters also insisted this wasn’t a panic buy to patch up any weakness in Netflix’s own house. “We’re very excited about our organic road situation right now,” he said. “We’re doing a great job delivering double digit revenue growth. We’ve got key opportunities for growth in the business. So this isn’t really reacting to any situation.”
That might be true, but even Peters has publicly warned that big media mergers usually don’t turn out great. Back in October during a Bloomberg appearance, he said:
“One should have a reasonable amount of skepticism around big media mergers. They don’t have an amazing track record over time.”
On Friday he doubled down on that view while simultaneously insisting Netflix is the one player who can pull it off. “Historically, many of these mergers haven’t worked. Some have, but you’ve really got to take a look at this on a case by case basis.”
Netflix, he argued, isn’t doomed to repeat history because it has a plan. “We also know it’s gonna be a lot of hard work. We’re not experts at doing large scale M&A, but we’ve done a lot of things historically that we didn’t know how to do. We put our mind to it. We iterated, we put the right energy on it, and we’ve shown that we could work the problem and be successful and execute.
“So, whether it’s, you know, going from DVD to streaming, or U.S. to global, or licensing to originals all those are examples about sort of, you know, getting in, sorting it out, and ultimately iterating over time, and being able to deliver on the promise of the opportunity that we see.”
So that’s Netflix’s pitch. The company that once mailed discs in red envelopes believes it can wrangle Warner Bros. into something stable and profitable. Given the studio’s long streak of messy mega mergers, you can’t blame anyone for keeping their popcorn close.
Source: Deadline