Hollywood was mourning one of its finest this week. Tinseltown reeled in shock after Rob Reiner, the director of When Harry Met Sally, This Is Spinal Tap and A Few Good Men, was killed with his wife Michele. Their son, Nick, has been charged with their murders.
The ghastly loss has, for a few days at least, distracted attention away from the gargantuan takeover battle for Warner Bros that, in a very different way, has brought a sense of grief for the passing of the old order in La La Land.
The epic saga started at the start of this month when the king of the streamers, Netflix — maker of Stranger Things and Squid Game — announced it had secured agreement for an $82.7 billion (£62 billion) takeover of Warner Bros Discovery. The media company is the owner of the legendary studio that brought classics such as Casablanca and Citizen Kane to the big screen, along with modern favourites including the Harry Potter franchise.
Heavily indebted, it made a $148 million (£120 million) loss in the third quarter of this year and stunned the industry in October when it announced it was considering a sale, after “multiple parties” made unsolicited offers.
The proposed Netflix deal appalled many true believers in the magic of cinema. They had not forgotten the chilling, and for some heretical, words of Netflix co-CEO Ted Sarandos in 2023, when he tweeted “there’s no reason to believe that the movie itself is better on any size of screen,” pointing out that his editor son Tony “watched Lawrence of Arabia on his phone”.
The sense of unease in the film industry, still recovering from Covid and the Hollywood strikes and battling the AI threat, is palpable. “It’s hard not to see this as depressing,” the head of a European film company said, adding: “Get ready for the Harry Potter and K-Pop Demon Hunters mash-up.” As another commentator put it: “For Netflix it’s all about the platform, the goal is drive acquisition and retention of subscribers and to be super efficient. It’s a very different model to the studios.”
For an Oscar-winning cinematic star as luminous as Jane Fonda the proposed tie-up can only be bad and means “fewer jobs, fewer opportunities to sell work, fewer creative risks, fewer news sources and far less diversity in the stories Americans get to hear.”
But what was already a dramatic plot took a stunning twist last week when the owners of Paramount, the second oldest studio in Hollywood, gazumped the Netflix bid with a $108.4 billion (£81 billion) hostile counter-offer.
Suddenly what was already a high-profile takeover was propelled to the front ranks of US politics. Parent company Paramount Skydance is led by David Ellison, son of the Oracle tech centi-billionaire Larry Ellison, who has close links with Donald Trump and was briefly this year the world’s richest man, overtaking his friend Elon Musk. Not only that, but the Paramount bid initially included funding from Affinity Partners, the private equity firm owned by the president’s son-in-law Jared Kushner — although later reports suggested it has pulled out.
Just to add a further dash of political spice, Warner Bros Discovery also owns the CNN news network that the president sees as a preeminent peddler of what he calls fake news.
Under the Netflix proposal, CNN would be spun off as a separate company after the takeover. Paramount, on the other hand, would keep it.
Occupants of the White House are not normally supposed to get involved in anti-trust decisions about corporate takeovers. But typically, Trump could not help himself, telling reporters last week “it’s imperative that CNN be sold” because: “I think the people running CNN right now are either corrupt or incompetent.”
Later Trump tried to downplay his connections with Paramount, writing on his Truth Social platform that its news network CBS “has treated me far worse since the so-called ‘takeover’ than they ever did before. If they are my friends, I’d hate to see my enemies.”
On Wednesday, Warner Bros Discovery’s board rejected Paramount’s bid as inadequate and urged shareholders to accept the offer from Netflix. But neither outcome — a takeover by Netflix or Paramount — is regarded by many technicians or executives in the industry with any degree of enthusiasm.
And what could it all mean for Britain’s burgeoning and hugely successful film production industry? Both Warner Bros and Netflix have invested heavily in studio capacity around the M25. Warner Bros was the first Hollywood major to set up its own studio outside the US when it invested £150 million in the Leavesden complex in Hertfordshire, where all eight of the Harry Potter films were made.
Netflix has also created its own London production hub at Shepperton Studios, where current productions include the third series of the Lord of the Rings spin-off Rings of Power.
Would a merged Warner Bros-Netflix behemoth feel the need to keep both expensive UK facilities amid the inevitable cost shedding that would follow a takeover? Only time will tell.
The proposed takeover of Warner Brothers by Netflix is a hugely worrying development for anyone who values competition, and a plurality of voices and stories in entertainment and the media
But Philippa Childs, head of British broadcasting union Bectu, is concerned, warning that either proposal would be “a hugely worrying development for anyone who values competition and a plurality of voices”.
There are many who feel the whole takeover saga is driven by the egos of the leading players, with Wall Street — in line to pocket up to $1 billion in advisory fees — egging them all on. John Colley, professor of practice at Warwick Business School and an expert on mergers and acquisitions, said it reminded him of the scene in Succession — itself a product of Warner Bros Discovery subsidiary HBO — when three of Logan Roy’s children recklessly outbid him for a takeover target. His scathing response? “Congratulations on saying the biggest number, you f**ing morons!”
But this time the biggest number is not $10 billion as it was in the TV drama, it is more than $100 billion. Colley fears the bidding war will result in grotesque overpayment followed by a huge shake-out to make the financial numbers work for Wall Street. “It defies logic, this is going to be hugely value-destroying,” he said. If that is the case there will be no happy ending for Hollywood.
