Netflix taking a hard look at Warner Bros.’ studio and streaming assets sounds like an easy Hollywood win. Who wouldn’t want DC, Harry Potter, Lord of the Rings, and the entire HBO library under one umbrella? That is a franchise buffet even Disney would drool over.
But the deal also comes with headaches big enough to spook investors. Morgan Stanley warns that Netflix could be biting off more than even the creator of Squid Game can chew. Warner Bros. makes a lot of money in ways Netflix traditionally avoids, like theatrical releases and third-party licensing. Folding all that into Netflix’s all-in, all-exclusive model could turn into a management maze instead of a synergy jackpot.
There is also the small issue of regulators. Netflix is the biggest rumored bidder, yet Morgan Stanley says it has the toughest antitrust path. Analyst Benjamin Swinburne noted that the stock has already taken a hit as investors worry the acquisition could distract leadership, complicate the growth story, and dilute earnings. Translation: great franchises, messy math.
Other potential bidders include Paramount Skydance and Comcast, which may face fewer regulatory hurdles. That alone tells you something about the scale of the challenge Netflix could be walking into.
If Netflix does go for it, the company would eventually need to reroute the entire Warner Bros. machine into its own ecosystem. That could mean skipping theaters, ending outside licensing deals, and pulling HBO content into Netflix exclusively. It also means leaving billions of EBITDA on the table in the short run, all in hopes that Netflix’s subscriber growth and pricing power can make up the difference.
And now Congress is circling too. Rep. Darrell Issa has already raised antitrust concerns, saying Netflix “wields unequaled market power” and that adding Warner Bros. would cross lines regulators usually flag. This is not your typical Hollywood merger chatter. It is a preview of the regulatory cage match that would follow.