Breaking Bad, the first season of Stranger Things, The first season of Fargo, the first season of Succession. And that’s it.
I’m not a TV person. This list is all the TV that I’ve watched in the last ten or so years. 
I do care a lot about the movies. In past episodes, I’ve talked about the best picture winners since 2000, the NYT list of best films of the millennium, and changes to the industry since the advent of the DVD.
There was a bombshell in the news this week – Warner Brothers Discovery, the media conglomerate that owns, among other things, HBO, DC, CNN, and Harry Potter, has not one but two bids to purchase it: one from Netflix and one from Paramount, recently bought by Larry and David Elison, of Oracle fame. The board has officially accepted the Netflix deal. Paramount put a competing bid directly to the shareholders in what is often called a hostile bid.  
This is probably the biggest media story in the last few years and will have reverberations throughout the industry for years to come, no matter what happens.
The Big Picture and The Town both had very informative episode earlier this week as to the details of both proposals and the possible outcomes for the movie industry writ large, with Sean Fennessy segueing into his love for digital media, seemingly as a coping mechanism for the terrible news.
But is it that bad? 
I think it could be. I was going to do an episode this week on the Oscars and how to fix them, which was mostly just a thinly veiled attack on the academy itself. I’m going to push that episode to the next one but some of what I was going to talk about there is pertinent to this discussion too. 
I’m going to lay out three scenarios – Netflix buys WBD, Paramount buys WBD, nobody buys WBD. I’m going to touch on the “why does this deal make sense” from a business perspective and then look at what the ramifications of this will likely be in the industry as a whole. There will be winners and losers from each of these deals.
Before we hit the three scenarios, a brief history of Warner Brothers Discovery. Per Wikipedia, the movie studio originally known as Warner Brothers, had a long history of acquiring other companies, as well as being part of other corporate mergers. Most recently, the studio was spun off from AT & T Time Warner and merged with Discovery, Inc in 2022. This began a series of cost cutting at the newly merged company, with hopes that Discovery would help broaden the appeal of the HBO Max streaming service. After losing the rights to air NBA games, which TNT had held for nearly 40 years, the company began looking into splitting up its declining cable offerings from its streaming and studio business. It should be noted that during this time, the stock price hovered around $10 per share, where it has lingered for about 3 years. This is despite, per an article from the Hollywood Reporter from earlier this year, the number of subscribers on Max and Discovery + reaching, “more than 122 million subscribers, the company says, beating Wall Street expectations in most categories.” After new reports broke about the possibility of the company being acquired was announced in September, the stock price has risen to around $30 per share. I should note here that I do not own stocks in any of these companies, unless they are owned as part of my 401K, the specific makeup of which I’m unaware of. None of what I am about to write is to be taken as financial advice. The three scenarios:
Let’s start with Netflix. Why would they want to buy Warner Brothers Discovery?
It should be noted that they don’t want to buy all of Warner Brothers Discovery – their offer is only for the movie studio and streaming portion. Per CNN, “The other half, Discovery Global, will house CNN and other cable channels.”
If the deal were to go through, it would combine the 122 million current subscribers for Max and Discovery Plus with the over 300 million current Netflix subscribers, per the website The Streamable. There are about a billion subscribers worldwide for the major streaming services, so this combined entity would be 40% of the global market, assuming there is no overlap between the two services prior to the merger. In other words, huge. 
With this size and scale, this entity (we’ll just call it Netflix Plus), would possibly lead to higher prices over time. A woman from Las Vegas, per MSN.com, has filed a class action complaint and “called the acquisition ‘presumptively anticompetitive’. They quote her filing – ‘In the past few years, after the SVOD Market emerged post-pandemic with a handful of dominant products -- Netflix, Amazon Prime, HBO Max, Disney+, Hulu and Paramount Plus -- market prices have begun to soar, with service quality and output stagnant or degraded,’ the 56-page lawsuit states. ‘All this while SVOD subscription prices -- including for Netflix and for HBO Max -- have soared far beyond inflation in recent years and more than doubled in less than a decade.’
It is likely that, over time, should competitors leave the market because they are unable to compete with Netflix Plus, we’ll likely see prices rise to capture the monopolistic rents.  
Antitrust regulation, that is laws that are designed to ensure competition and prevent a company from capturing these monopolistic rents, are typically slow moving and, even when regulators find that companies have engaged in anticompetitive activities that go beyond laws or the spirit of laws, the tools at their disposal (fines, forced splits) may be too little or too late to achieve what they set out to do.
Because of the size of Netflix Plus, regulators would likely be hesitant to approve this merger. Obviously, Netflix thinks they will be able to convince regulators that the deal is above board. The board of directors at Warner Brothers Discovery, as part of the negotiation, has accepted an offer from Netflix – this includes a 5.8B breakup fee. Per Fortune, “At 8% of the deal’s equity value, the fee is well above the average even in big-ticket dealmaking, signaling Netflix executives’ confidence they can convince global antitrust watchdogs to let the transaction go ahead. The average breakup fee in 2024 was equal to about 2.4% of the total transaction value, according to a report from Houlihan Lokey.” Best name ever.
It's hard to look at this number and think that Netflix is not serious about the deal. Clearly, they think they can get this through regulators, though it’s also hard not to see it taking multiple years and being a tough fight, even with an administration that may be more inclined to fight the traditional power structures of Hollywood.
Why would Netflix offer 72B to buy Warner Brothers?
Aside from HBO, the undisputed king of premium television over the last 25 years, they would own a treasure trove of intellectual property. They would also own tv series that fall under the Warner Brothers production banner – which means even more bingeable series for their customers. 
Perhaps more importantly, I think the path towards long term revenue growth has a pit stop at live experiences and entertainments. It’s hard to not see, if Netflix wins this deal and overtime whatever restrictions of pre-existing licensing for these characters they would now own goes away, a Netflix Theme Park and, possibly, with their global brand, a series of theme parks. If not in Orlando or Tampa, anywhere between Sarasota and Naples would gladly take the hotel revenue and construction jobs that would occur should this become a reality. There are probably half a dozen other sites in the United States that you could make an argument for – maybe some international ones too.
To put some numbers on it, per a Forbes article from 2023, “In 2023, Disney’s parks and experiences division was the company’s best-performing segment, generating $32.6 billion in revenue. That represented 36% of the company’s total revenue but 70% of its operating income.”
Disney is king of this mountain and it’s not even close but if Netflix, with its vast global reach and an injection of world-class IP, is able to make even 2/3rds of this revenue, it would be staggering. Netflix’s revenue in 2024 was nearly $40B, so an increase of 20B would be massive.  
Who should lose should Netflix Plus become a reality? Prices are likely to rise for customers of this new service over time. Per an HBR case from 2020, Between 2013 and 2019, their standard monthly pricing plan increased four times. It’s hard not to see this continuing into the future.
The current model in Hollywood production, where royalties are paid out to participants whenever the movie produces revenue, allows for people to stay in the industry, even when they are between work, is not the Netflix model, where creators are paid once and then not given royalties afterwards. Hollywood, suffice it to say, does not like this. The biggest loser, however, has got to be movie theaters. Netflix is a company that, even when they could potentially have made a lot of money by allowing their movies to play there, have consistently chosen to not allow for significant theatrical runs. 
Case in point – Knives Out. The first Knives Out was a surprise hit – it only cost $40M while grossing over $300M at the international box office. When Netflix picked up the rights to the series, they made a sequel, Glass Onion. Per Popflick, “Industry sources calculate the movie may have grossed $15 million in just 600 screens, which hints at a hit with long legs. A bit more screens and aggressive marketing, might have pushed it to the $300 realm. At least, that is what exhibitors believe, with enough conviction to explore with Netflix the possibility of keeping the movie in cinemas longer. It did not happen. By Netflix standard release policy, the movie screened in theaters for one week only…The streamer is so committed to this strategy that it also played out like this in the international market.” 
In short, it left money on the table in order to move the movie to its streaming service, while also angering theater owners who benefit from having movies play for long stretches. If they’re this dismissive of the theater owners now, it’s hard to see them changing when they are the only one or two games in town. 
I don’t subscribe to any streaming services. I think the walled garden model is bad for consumers – see my earlier episode on this topic. One of the reasons I lamented the loss of Redbox seemingly more than anyone else was that Redbox was a neutral platform that allowed for movies from all producers to be showcased (without a monthly fee to access them). We seem to be moving to the bad old days of cable TV. 
If you don’t subscribe to any of these services, you’re left with bad options. Because you can’t physically buy the media - Netflix, apart from the Criterion Collection and a brief time when you could buy episodes of Stranger Things at Target, does not offer physical copies of the vast majority of their catalog – you’re either forced to go without or to pirate. Most of it I don’t want anyways but it’s not great from a consumer perspective knowing that one of the most hallowed studios in the history of movies is going to be owned by a company that sees physical media as an enemy to vanquish. 
I think the death of movie theaters is going to be a larger blow, in the long term, than people realize. You need movie theaters to fund failures and weird projects – things that are not going to be identified by an algorithm. Without movie theaters, you also hit the pipeline problem I talked about in earlier episodes. 
It’s possible that Netflix Plus would retain some of the studio and development executives but if Warner Brothers as a studio that makes movies to play in theaters is removed from the board, then the theater business is likely to drop by around 15% - this is using the market share of Warner Brothers from 2024. Do I think this would shudder most theaters? Yes, at this point post-COVID, it would. 
Before we move on to scenario number two, a word from our sponsor.
What is the case for Paramount? As I mentioned earlier, from the viewpoint of a theater that produces movies, the combined Paramount and Warner Brothers studios (I’m going to call this new company Amber) would have about 25% of the domestic box office, again using numbers from last year as a rough estimate. They would be able to consolidate the two studios and their lots to cut costs. They would be able to do the same thing with the streaming services, combining Paramount + and Max and Discovery +. Unlike the proposed Netflix deal which would leave the cable networks (TNT, CNN) as a standalone company, Paramount’s deal would include these. Per an article from September in Variety, “Paramount Skydance could see big benefits by pooling its TV business with WBD’s. “Overall, we would expect material cost synergies from the overlapping cable networks,” he wrote — i.e., layoffs. Fishman added that there are “presumably a high level of synergies from combining CBS News with CNN plus the long-term existing partnership between CBS and Turner with the NCAA’s March Madness Final Four.”
From a regulatory standpoint, the case for Paramount is a lot cleaner – they have an argument to make that they need to consolidate the industry to compete with Netflix (in streaming) and Disney (in theaters). Per another CNN article, the proposed Netflix merger “would surpass the 30% benchmark that regulators set to determine whether to block a merger in the US Department of Justice’s most recent antitrust guidelines, issued in 2023.” 
Amber is causing consternation on a few levels – one is political. There is already the feeling that journalism is under attack by the Trump administration and with this deal, with Trump’s son-in-law as part of the buying group, CNN, despite its waning influence in culture, would likely be put on the chopping block or stripped for parts or shutdown completely. It’s hard to see a stronger, independent CNN emerging from this deal. The foreign influence is, perhaps, much less commented on. Per Reuters, “Paramount Skydance's addition of three Gulf sovereign wealth funds to the cast of its $108 billion hostile bid for Warner Bros Discovery… a relatively rare alliance among the states as they build their own entertainment industries.” Per the same article, earlier this year, “an investor group led by PIF agreed to buy videogame developer Electronic Arts… in a $55 billion deal - the largest leveraged buyout in history - underscoring ambitions to make Saudi Arabia a global games and sports hub.” The ability for foreign investors to buy large shares of American assets is, along with the neo-liberal trade consensus, beginning to have opponents. I’m not saying that this will be the reason that the deal will or will not go through but is something to be considered.
The main reason that Hollywood is against this is pretty simple – jobs. Consolidating lots would mean the loss of many below the line, as well as executive positions. You also have fewer places to pitch projects, so budding screenwriters, directors, and producers trying to break into the business will also be harmed.
Consolidation is – in the short term – usually beneficial to consumers. Historically speaking, most mergers and acquisitions are predicated on consumers not suffering price hikes. This has, until very recently, been the focus of the merging parties – how do we convince legislators that this will not harm consumers, ie raise prices. This conventional wisdom is slowly changing.
Monopsony, the much less discussed twin of monopoly, is, per its Wikipedia page, “a market structure in which a single buyer substantially controls the market as the major purchaser of goods and services offered by many would-be-sellers.” We saw this come up recently when there was a proposed merger involving book publishers Penguin Random House and Simon & Schuster – that merger failed. The lack of buyers for new and established authors was one of the reasons cited for this failure.
Would anything that I care about be improved by Paramount winning this battle? Not really. For them to win the deal, they’re likely going to have to increase their bid to make their hostile bid attractive to Warner Brothers shareholders – after the board accepted Netflix’s proposal, they will likely have to show a clearly superior deal. This is probably going to be around $35-40 per share. Assuming that they have the funds to do this and that they have the will to go through the political gauntlet, and the deal gets approved, after all that, they will have to maximize revenues at every turn in order for this to work. Again, they’re offering to buy declining channels, which will likely not be engines for significant revenue growth. There seems to be a small, if real, market for physical media – maybe there’s a world where Paramount continues to issue physical copies of some of their biggest releases. I believe these gains will be offset by the increasingly risk averse nature of most corporate behemoths. 
If the deal falls through and no one buys Warner Brothers, what will happen? As I mentioned before, the board at WBD has been spending the last few years cutting costs with the intention of spinning off their cable assets that are increasingly looking like dead weight, while retaining the studio and streaming services. Despite all the hoopla surrounding the merger, per a Hollywood Reporter article from May, “Warner Bros. Discovery framed its streaming business as its growth engine in its first-quarter 2025 earnings report Thursday, noting that it had added 5.3 million subscribers to a total of 122.3 million, and grew streaming revenue by 8 percent to $2.7 billion and adjusted EBITDA to $339 million.” To add to this, they also had a very strong 2025 theatrically, with the studio being the first to hit 4B at the international box office, per Deadline. 
If neither deal holds up, the shareholders of WBD will be out of luck but it may be the best thing to happen to Hollywood in the long run. I realize that there are people who love the convenience of streaming and, despite the cries from traditionalists, abhor the movie going experience, either due to cost, geographical hassle, or the experience itself. I understand that viewpoint and have used my fair share of Fandango, YouTube, and Kanopy to watch movies online. I also think that it’s very hard to look at the future of the way that films are made, marketed, and sold today and not view this model on its way out. If it’s not clear, I have a lot of sympathy for theater owners: I think it’s the best way to watch a movie, granting a piece of art your undivided attention for two hours. In my neck of the woods, some theaters have improved the seating and sound quality, as well as diversifying the normal Hollywood fare by also showing Bollywood or Anime on occasion. 
That being said, the cost benefit analysis here is nearly impossible to ignore, especially as technology for home theaters gets better and cheaper every year. Let’s do a quick cost comparison. Assume a family of four people, let’s call them the Quatros. They are a mother and father with two twins aged 10. They love movies but are very busy. Let’s say that they have a goal of watching a movie as a family once every other week. If they were to do this 26 times a year, for ten years, they’re looking at 260 trips to the movies. 
If they went the home theater route and physically bought a copy of each and every movie they watched together (and only watched it one time), that would be around, let’s say $25 a pop. $25 * 260 = $6,500. Let’s double that for the cost of their home theater system and say that, in order to do this, they would spend $13,000 over ten years, or $1,300 a year, or about $50 a viewing.
Let’s assume that a ticket for each member of the family was $15 – for four people, that’s $60 a show. 
This obviously doesn’t take into account that the cost and time to drive to the theater each time would be a cost, if there is parking that’s a cost, if the kids want snacks, that’s a cost. You could also make the argument that a price conscious family would be able to find deals for matinees and thus the $15 per ticket may be inflated. These arguments are besides the point.
The main point is to show that the cost to do this, under normal circumstances, would be more expensive by going to the theater. The difference is $10 a show, $2,600 over ten years. Is that worth it for the big screen? Is it worth it to support theaters? Some say yes, some no.
The tension here is that Hollywood needs movie theaters because of the premium experience. Like the music business, the hits make up for the flops. If you remove the high cost of tickets and rely only on streaming, the business runs into several problems. 
Let’s assume for a second that ten years from now, we have no movie theaters outside of Los Angeles and New York City. Overnight. Gone. We have Netflix, Disney Plus, Apple TV Plus, and YouTube. We have PVOD (premium video on demand) and SVOD (streaming video on demand). Assume this is what we have. Assume that the Netflix Plus deal has happened and they now own all of the Warner Brothers IP.
Disney still makes a huge amount of money on their movies. However, both Pixar and Disney Animation take years to create a movie. Even working on parallel paths, it’s unlikely that they could put enough films in movie theaters to single-handedly keep them afloat. They would still be able to put some of their movies in international box office but most films would end up, very quickly, on Disney Plus.
It’s unlikely that the streaming revenue alone will be able to pay for the massive costs of high-quality movies. This is with the very important caveat that we are in the infancy of how AI will impact the creative arts but, assuming that the unions are essentially able to keep AI out, is there a problem here? Yes. Something has to give – either the amount of content has to drop sharply, the cost of the movies themselves has to come down, or the amount of revenue from the service has to rise to continue to pay for the high cost of production.
As streaming numbers begin to plateau – everyone who has signed up for one of these services and has the ability to pay has basically done so already – the only other way for these companies to make additional money is to raise prices (or cut costs).  They could also diversify into other businesses (as I mentioned earlier, though moving into other businesses you have no experience in is inherently risky).
I’ve talked about gaming and its impact on the entertainment industry in past episodes. Podcasts and user-generated content on YouTube and other sites are also frequently where many people are turning to for entertainment. Provided that video games, user-generated content, and podcasts continue to at least be as large, culturally and economically, as they now are, I think that movies are in a very precarious position. Gambling is also something that has risen in recent years, with laws relaxing in many states. Sports viewing has increased, whereas movie watching has not, pointing to the possibility of there being a connection between gambling and sports.
Without theaters, the whole business would fracture and would likely lead to a worsening of what we’re seeing now, where most genres that lie in the mid-budget range (comedies, westerns, biopics) simply aren’t made in the same number as blockbusters, sequels, or IP driven franchises. This is bad even if you hate those genres – Netflix Plus would continue to spend big on tentpoles but, unlike traditional movie studios, would not likely spend on advertisement to draw eyeballs to the movie. The Electric State is illustrative here – the budget was reported to be over $300M. Some of this is the way that Netflix pays talent (see above) but also the huge amount of CGI required to make the robots in the film – which they had to do in order to compete with the spectacles in gaming – look lifelike.
The other part of this is how movies work now – they can make money years after their original release. Movies released for the streaming services don’t have the same ability – they just sit on the service, forever – with growth slowing, they are no longer bringing in new subscribers with these releases; they are, at best, preventing churn, a customer dropping off the monthly subscription. 
I think the best way forward, for consumers, theater goers, and artists who work in film, would be this third option. Yes the status quo is bad for the shareholders of Warner Brothers Discovery but I think it’s ironic that the most successful movie studio of the last year, home of Sinners, Superman, and Weapons, is now on the chopping block. Consumers don’t go to the movie theater looking to support a distributor (unless they are Disney or A24), so their success here comes down to Warner Brothers’ strategy to put good movies in movie theaters in order to make good money. If WBD, for one reason or another, still comes out of this as a whole company, maybe they can continue the strategy that they set out to do before the merger discussions derailed them – spin off the cable stations and use the likely 2-5B to invest in bringing in top talent to the studio in order to make movies that continue to bring people into the theater. I think its financial success has been overhyped but Sinners is a great case in point – it’s an original title that is going to be talked about for years, it will probably pull in a few subscribers to HBO Max, and likely get award contention come Oscars time. Its success is shockingly old fashioned: they gave a talented filmmaker a decent bit of money and the film delivered. 
Now, a more important question, are we just shuffling deck chairs on the Titanic? I created a fictional family above, so I’ll create another one down here: The Trios. The Trios are two parents, in their early 30s, who have a ten-year-old child. They make, combined, 60K a year and they have very, very little disposable income. For a family like this, spending south of $30 a month on a single streaming service, after splurging on a $500 TV set, is the best “bang for their buck”. For people who don’t have a ton of disposable income, this is a no brainer. 
I recognize that, as a white collar worker who is employed and without major expenses, I’m in a relatively privileged position – conversations like “who will save movie theaters?” is really only important to people who frequent them or are employed by them. There are a lot of people who are not in either of those categories who get left out of the discussion. 
Maybe, at least in the beginning, a Netflix merger would be good for the Trios of the world – if the only way that Netflix can get through this merger and through the regulatory process, is to swear to the high heavens that price increases will be minimal, then maybe they will remain true to their word, focusing instead on the theme parks mentioned earlier as drivers of revenue. I mentioned the Big Picture and their discussion on the matter – Sean Fennessy, one of the two hosts, had a ray of hope in his belief that the theatrical experience will be necessary for a company saddled with debt to start getting every last dime they can (which would require longer theatrical runs). Amanda Dobbins looked at the cost of actually going to the movies and mentioned that the average American has been, largely, priced out of the movie going experience.
I view this whole discussion through the prism as someone who goes to the movies about half a dozen times a year. There were times in my life where it was much more frequent than that – excluding the time I worked at a movie theater, I’d say the average was closer to once a month. I realize that this is pretty out of the ordinary, with most people going, at this point, once a year. The movies are getting more expensive to make and ticket prices are going up too. The movie going experience, that was once called the opera for the masses, is no longer that. 
If this deal goes through, with either buyer, I think things will get worse. Personally, the idea that the fulcrum of Democracy relies on CNN not being merged with CBS by a holding company that has MAGA connections is silly – if it turns out to be true, to paraphrase Patton Oswalt, “then it wasn’t really ours to begin with.” Stripping the political ramifications out of this deal, two studios will be combined. Amber will put people out of jobs. Fewer things will get made in Hollywood itself. Fewer things will likely be released to theaters – the things that are will be increasingly IP-driven titles, franchises and tentpoles. A few auteurs will remain to make original movies. A24 will still be around to get a title or two in theaters at least every couple of years, maybe more in years where they have awards contenders. In other words, Hollywood will continue to go down the same path that it has been going down for the last 20 or so years. In this scenario, theaters are harmed but survive. This is a dark future – I was listening to the Two Reel Cinema Club podcast episode on the NYT List of the Top 100 movies of the last 25 years. Their conclusion? Cinema is dead – not dead in the sense of Hollywood not making anymore movies but dead in the sense of the best examples having been made already. I mentioned this on a previous episode – the decline in quality was pretty evident based on the NYT list. Either merger, IMO, will make things worse.
If Netflix wins, if Netflix Plus becomes a reality, I think the apocalyptic visions above will be true – most places will not have functioning movie theaters. I believe that the margins are so slim that a 15% drop in revenue is enough to put many regional chains out of business. Sean mentioned that Ted Sarandos, the co-CEO of Netflix, may have a change of heart in terms of theaters, citing the numerous times in the past that the company has changed its mind about policies (password sharing, ads, etc). This feels like hopium to me. Ted was quoted in Variety, in a call to investors and the press, as saying, “ I think, over time, the windows will evolve to be much more consumer-friendly, to be able to meet the audience where they are quicker … I'd say right now, you should count on everything that is planned on going to the theater through Warner Bros. will continue to go to the theaters through Warner Bros….”. To be clear, I think that some tentpole movies will play in theaters but, instead of playing for 2 or 3 months, it’ll be closer to 2-3 weeks (while there are movie theaters for them to play at). Everything else – everything that costs less than $200M to make, will probably not get a theatrical release by this company. I think they will have enough clout to take the system down with them. I hope I’m wrong.
A counter argument to the doom and gloom goes something like this – multiple technologies, not just AI, will democratize the artform and that will allow for a greater number of people to make their own movies that will run in movie theaters, because movie theaters, if they want to survive, will have to pivot to a more regional strategy, showcasing local filmmakers. I’m skeptical – we have had eBooks from self-published authors for over a decade now and there has been one hit that I can think of – The Martian. The dream of independent authors selling like Donna Tartt or Stephen King simply hasn’t materialized. I don’t see it happening for movies, either.
Hopefully, next time, we’ll end on a more hopeful note.  
Thank you for listening to this episode of Elegant Ramblings. If you’ve enjoyed what you’ve heard, please consider liking and subscribing to the channel on iTunes or YouTube. You’ll be able to find show notes there. Hope you enjoyed. Bye for now.