Netflix co-CEOs Ted Sarandos and Greg Peters found themselves on the defensive this Wednesday following the company’s latest earnings report. The streaming giant’s aggressive $82.7 billion all-cash offer for Warner Bros Discovery’s assets marks a radical departure from its long-standing “build, don’t buy” philosophy, a move that has left many investors feeling uneasy.
Shares Slide as Buybacks Stop
Market reaction to the deal has been swift and largely negative. Since the first offer was made on December 5, Netflix stock has dropped more than 15%. Shares fell another 4% in early trading on Wednesday as the leadership team confirmed they have suspended share buybacks to fund the acquisition.
To finance the deal, Netflix initially secured a $59 billion bridge loan. On Tuesday, however, the company increased that commitment by another $8.2 billion to support its $27.75-per-share cash offer.
A Reversal on Movie Theaters and Prestige TV
The acquisition targets Warner Bros’ storied film and television studios, an extensive content library, and global franchises like Harry Potter and Game of Thrones. Perhaps most surprisingly, the deal represents a total reversal of Netflix’s previous stance on movie theaters.
“We have often debated building a theatrical business, but we were busy elsewhere,” Greg Peters admitted. In a pivot from earlier claims that theaters were an outdated model, Peters noted that Warner Bros brings a “mature, well-run theatrical business” that Netflix is now eager to operate.
The leadership team also praised the HBO brand, calling it the gold standard for prestige television. They believe acquiring HBO will complement Netflix’s existing production capabilities and expand its global influence.
Why Change Course Now?
Ted Sarandos cited the evolving landscape of digital media—specifically the dominance of tech giants like Alphabet’s YouTube—as the catalyst for this change in strategy. Sarandos noted that the company must adapt its business model to remain competitive in an increasingly crowded market.
Key components of the acquisition include:
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Franchise IP: Access to 100 years of iconic Warner Bros content.
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Theatrical Power: Immediate entry into the global cinema market.
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Studio Infrastructure: Enhanced production facilities for new “Netflix Originals.”
Regulatory Hurdles and Economic Outlook
Despite the CEOs’ enthusiasm, the deal faces significant headwinds. Lawmakers and competition regulators are expected to scrutinize the merger, fearing it could create a monopoly and reduce consumer choice. Sarandos has attempted to preempt these concerns, describing the merger as “pro-consumer” and “pro-worker.”
Analysts remain apprehensive, particularly after Netflix reported a tepid revenue beat for the quarter. While the upcoming final season of Stranger Things is expected to drive growth, the high costs associated with the Warner Bros acquisition have cast a shadow over the company’s 2026 financial forecast.
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