Warner Bros. Discovery is preparing to spin off its main cable channels such as CNN, TBS and TNT to facilitate the sale of its streaming and production assets, in a deal that would be worth more than $60,000 million (51,452 million euros). This internal restructuring before the completion of the sale process is one of the main conditions of the agreement with Netflix, as detailed by the Financial Times. The sale, which involves the HBO Max platform and the film and television studios, is being negotiated exclusively with Netflix, while other companies in the industry express concerns about the transparency of the process.
The Financial Times newspaper reported that Netflix has submitted a proposal with an indemnity clause that would pay Warner Bros. Discovery $5,000 million (4,287 million euros) if the agreement falls through due to regulatory obstacles. This condition, as well as the other features of the offer, positioned Netflix over other interested parties and granted it temporary exclusivity in the negotiations.
According to the Financial Times, Warner Bros. Discovery began looking for a buyer in October, inviting several companies to participate in the bidding for assets related to streaming and audiovisual content production. From the beginning of the process, various companies such as Paramount and Comcast expressed interest, although Netflix was chosen as the only interlocutor at the most advanced stage of the discussions. The media stated that the size of the amount offered by Netflix, plus the economic guarantee in the event of regulatory failure, made this proposal stand out compared to the others.
Another fundamental element of Netflix, according to the Financial Times, is to maintain Warner Bros. film releases in theaters even as the merger moves forward, thus maintaining a hybrid strategy between theatrical releases and streaming platforms. This decision would have a direct impact on the way the content is released and could impact distribution and box office reception.
While Warner Bros. Discovery and Netflix continue to engage in exclusive negotiations, other parties involved have formally expressed concerns to Warner Bros. Discovery management. Financial Times reported that Paramount Skydance, led by David Ellison, sent a letter to David Zaslav – chief executive of Warner Bros. Discovery – in which the conglomerate’s lawyers demanded guarantees regarding the impartiality and transparency of the process. The letter, gathered by the media, said there were “serious concerns about the impartiality and appropriateness of the bidding process” and focused criticism on possible preferential treatment over Netflix.
The text, published by the Financial Times, called on Warner Bros. Discovery to confirm the existence of a special and independent committee, composed of impartial board members, responsible for ensuring an objective review of all proposals and making decisions on the sale. Paramount Skydance officials called for the creation of such a committee in the absence of one, presenting this request as a way to ensure impartiality and maximize the value of the resulting transaction.
The distribution and exclusivity process with Netflix keeps various companies in the audiovisual environment in a state of expectation and requires the use of clear and transparent control mechanisms to ensure a fair playing field. The characteristics of the Netflix offer, in particular the financial guarantee, as well as the possibility that the industry will experience a significant change in its configuration, mark the evolution of this episode, according to the Financial Times.
The outcome of the negotiations still depends on the completion of the divestment process of the cable channels and the assessment of the regulators that could prevent the conclusion of the agreement. The Financial Times highlighted the uncertainty about the impact that the merger between Netflix and Warner Bros. Discovery would bring, as it would mean the merger of two of the most important streaming services in the United States, with potential implications for competition and balance in the audiovisual sector.
At the same time, negotiations between Warner Bros. Discovery and Netflix continue to determine the terms of the possible merger. The newspaper explained that the official announcement of the operation could be made in the coming days if the parties manage to reach a final consensus, always subject to the reaction of the regulators and compliance with the internal stages of the divestment process.
With the exclusivity in place, Warner Bros. Discovery assumes the responsibility of responding to the transparency demands of other interested parties and implementing possible recommendations to maintain the neutrality of the process. Meanwhile, the industry is watching the outcome of an operation that, if completed, could transform distribution, exhibition and access practices for cinema and television in the world’s most important audiovisual market, the Financial Times reports.
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