This is being much-discussed in some circles so I thought I’d comment about it. To fill you in on the backstory, Scott Nover remarks at the Washington Post:
When Netflix announced a blockbuster $83 billion deal to buy Warner Bros. Discovery on Friday, among the elements not included in the purchase was a conspicuous one: CNN, the cable news giant that has been associated with the Warner name for decades.
CNN will anchor a spin-off company called Discovery Global, which will also include cable outlets TNT Sports, the Discovery Channel and other properties including Food Network and Bleacher Report.
The economics are challenging for the stand-alone company, which Warner Bros. chief executive David Zaslav said would be spun off by the third quarter of next year. Cable TV viewership has been declining for years, and CNN generally lags behind rivals Fox News and MS NOW (formerly MSNBC) in ratings.
But industry experts and a number of CNN staffers said they felt that the storied news channel could emerge stronger as a leading part of this new company because of what happened Friday — and also because of what didn’t happen.
Jeremy Goldman, a senior director at the market research firm eMarketer, said that while CNN didn’t get “invited to the Netflix party,” this could be the best outcome for the cable news brand.
“CNN is no longer a political football, its 2026 budget is approved and growing, and the spin-off gives the network the focus and stability to pursue its digital transition without being weighed down by streaming-first economics,” he said.
Paramount is livid about it—they’d been trying to acquire Warner Bros. Discovery for some time. The noises are that this argument isn’t over but I think it’s over.
The following is what I think will happen. Not what I think should happen—I’ll add that at the end of the post.
I think that, following a lot of legal wrangling and bureaucratic angst, the acquisition will be approved. After that I see two possibilities, one if Netflix thinks there is no future for movie-making as it has been done for the last century and another if they think there is.
If Netflix thinks that LLM AI is making traditional movie-making and television production obsolete it will stripmine Warner Bros./HBO Max for content, their substantial libraries. Then it will sell off the various physical properties and pieces, in all likelihood leaving the vestiges saddled with the debt from the leveraged buyout.
The other alternative is that Netflix is acquiring Warner Bros./HBO Max to bolster their own content-production capacity and bring it in-house. Warner Bros. and HBO will remain as brands under the Netflix umbrella, probably a mainstream brand (Warners) and a premium one (HBO).
In either of these possibilities the costs to stream the stuff you’ve been streaming will probably rise, possibly substantially. I suspect that the only ones who will make money from this deal are the lawyers and David Zaslav, the CEO of Warner Bros. Discovery.
What I think should happen is quite different. I don’t think that enterprises (companies with annual revenues of $1 billion or more) should be legally allowed to grow by acquiring their competitors. Quite to the contrary, I think those that have should be split up into smaller companies. Anybody who thinks that a $39 billion company can realize economies of scale by acquiring another $39 billion company should show their work. I think that the economies of scale were realized a long time ago.
