Inside Netflix Co-CEOs' Memo Defending Warner Bros. Deal

Netflix Co-CEOs Ted Sarandos and Greg Peters have moved to reassure employees about the company’s proposed acquisition of Warner Bros., issuing a detailed internal memo defending the US$82.7bn deal and rejecting claims that it signals the end of Hollywood.

The memo, disclosed in an SEC filing and shared internally via Netflix’s “Take 5” employee blog, comes amid heightened scrutiny following a hostile counterbid from Paramount Skydance.

Netflix announced on 5 December that it has reached an agreement to acquire Warner Bros. studios, HBO and HBO Max, bringing together Netflix’s global streaming platform with Warner Bros.’ film and television assets.

According to Netflix, the deal brings together “two pioneering entertainment businesses, combining Netflix’s innovation, global reach and best-in-class streaming service with Warner Bros.’ century-long legacy of world-class storytelling”.

In their note to staff, Ted and Greg said the company remains firm in its belief that the acquisition will deliver long-term value. They wrote: “We strongly believe that Netflix and Warner Bros. joining forces will offer consumers more choice and value, allow the creative community to reach even more audiences with our combined distribution and fuel our long-term growth.”

Responding to a hostile bid

Tensions escalated just days after the deal’s announcement when David Ellison’s Paramount Skydance took its US$30-per-share offer for Warner Bros. Discovery directly to shareholders, valuing the company at US$108.4bn.

Addressing employee concerns about the competing bid, the CEOs said: “It was entirely expected. But, we have a solid deal in place. 

“It’s great for our shareholders, great for consumers and a strong way to create and protect jobs in the industry.”

Warner Bros. Discovery CEO David Zaslav echoed the scale of industry change in his own note to staff, writing: “This decision reflects the realities of an industry undergoing generational change - in how stories are financed, produced, distributed and discovered.”

Regulatory confidence and market share

The Netflix leaders also sought to address concerns about whether regulators would approve the transaction. Ted and Greg argued that the combined company would still represent a relatively modest share of the US viewing market.

“We believe in this deal - in the value it creates - and we’re confident we’ll get the approvals we need to make it happen,” they added.

Citing data from Nielsen, an audience and data analytics firm, the Co-CEOs said Netflix’s US view share would rise from 8% to 9% post-acquisition, remaining behind YouTube at 13% and a potential Paramount/WBC combination of 14%.

They wrote: “The fundamentals are clear: this deal is pro-consumer, pro-innovation, pro-worker, pro-creator and pro-growth.”

Commitment to theatrical releases

One of the most sensitive questions surrounding the acquisition is the future of Warner Bros.’ theatrical business, given Netflix’s historic focus on streaming-first releases. The memo addressed those concerns directly.

Ted and Greg added: “Yes - we’re fully committed to releasing Warner Bros. movies in theatres, just as they do today. Theatrical is an important part of their business and legacy, and we don’t want to change what makes Warner Bros. so valuable.

“If this deal happened two years ago, hits like ‘Minecraft’ and ‘Superman’ would still have premiered on the big screen as they did - and that’s how we plan to keep it.”

Not the end of Hollywood

The Co-CEOs also pushed back against broader cultural anxieties about consolidation in the entertainment industry.

They added in the memo: “There’s no overlap or studio closures. We’re strengthening one of Hollywood’s most iconic studios, supporting jobs and ensuring a healthy future for film and TV production.”

Ted reinforced that message on 15 December while attending the premiere of Netflix’s ‘Emily in Paris’ season five. “We’re very excited,” he said. “We think that Warner Bros. Films and Series and HBO - all those products work better in our business model. And our business model works better with those films and series.”

Potentially moving forward with the acquisition, the memo encourages employees to stay focused amid speculation, concluding: “Continuing to deliver for our members is the best thing we can focus on.”