Netflix CEO Ted Sarandon has told Bloomberg that the deal under which Paramount outbid his firm for control of Warner Bros, including its storied games division, is “dependent on a lot of cost-cutting”, which he said would take place following the deal’s completion.
“We were in the books of Warner Bros., and the biggest cost centers are people in productions,” he said in an interview. “There’ll be cuts in excess of $16 billion. They are telling people who lend them the money that’s going to happen in 18 months or so.”
This suggests that the company’s games division will be under scrutiny for cost-saving along with the firm’s film, TV and other assets. Warner Bros. is the home of Rocksteady, TT Games, Avalanche Studios and mobile studios.
Netflix pulled out of the running to buy Warner Bros last week, after Paramount raised its offer to $31 per share in an all-cash deal for the entire organisation. Netflix had previously agreed an offer of $27.75 in cash and $4.50 in Netflix common stock for each share of Warner Bros. common stock, but only for its film studio, streaming businesses, and games division. Netflix’s share price declined steadily after the offer was announced, but leapt back up following the announcement it was withdrawing from the process and banking a $2.8 billion breakup fee, paid by Paramount.
In our previous analysis of the Warner Bros. sale, the broad consensus was that Paramount would be the better home for the games studios, given Netflix’s withdrawal from console games, and the firm’s statement that the studios were a “relatively minor” part of the transaction.
Now, there are widespread concerns across the Warner Bros business about how Paramount will seek to consolidate its purchase once the deal clears. Sarandon said the deal “should be highly scrutinized the way I’m glad that ours was highly scrutinized,” referring to his testimony before the US Senate over competition concerns. Paramount CEO David Ellison’s father, whose personal fortune was pledged to support the acquisition, is a close friend of Donald Trump and the White House is believed to support the deal, but it will be reviewed by regulators in other jurisdictions including California and the EU.
Prior to the Paramount deal, Warner Bros. said it would refocus on four key IPs of Harry Potter, Game of Thrones, Mortal Kombat, and DC Comics after a period of the games division “substantially underperforming”. At the time, CEO David Zaslav pointed to multiplayer brawler Multiversus as a particular driver of the underperformance. The game was cancelled and the studio working on it, Player First Games, was subsequently shut down along with Monolith Productions and Warner Bros. San Diego.
You can view a full timeline of the Warner Bros acquisition process here.
