Last week, Netflix agreed to buy Warner Bros. for $72B while taking on up to $59B in debt to finance the deal. If you’re looking for the logic in this transaction, my bet is you won’t find it in the numbers. Instead, you have to look at the world through the eyes of Ted Sarandos (Netflix CEO) and David Zaslav (Warner Bros. CEO).
For Zaslav, the deal makes sense. It’s 2026 and legacy media isn’t getting more valuable.
Meanwhile, Sarandos sees legacy media getting disrupted by Youtube, social media, and AI. His options are to come up with disruptive ideas of his own or buy time. He’s choosing the latter.
Netflix’s recent “innovations” have been ads, password crackdowns, and live sports; none are transformative.
Now, Netflix is borrowing $59B to merge with a legacy media giant.
This isn’t the end for Netflix, but it signals they are in a new stage where innovation is taking a back seat. They’re just another big company.
Still, the biggest risk is not the debt, or the strategy. It’s the politics.
The deal isn’t done yet. It won’t be done until Warner Bros. splits out its cable networks from its studio and streaming business (Netflix is buying the latter) and regulators approve the deal.
Donald Trump surely views this as a golden opportunity to gain more media influence.
Trump likely isn’t concerned with the antitrust implications of this deal, but he will use antitrust as cover to come out ahead.
Billionaire Larry Ellison’s son David owns Paramount Skydance. Having lost Warner Bros. to Netflix, Paramount is already appealing to the Trump administration. The Ellisons are Trump backers, so helping them would mean doubling down on the Ellison empire (Oracle, Paramount, TikTok) with an assumption they will remain loyal allies.
On the other hand, if you’re Trump, why waste a chance to do a deal with Netflix, another (and much larger) media behemoth? He can pressure them to move right, cancelling content that doesn’t fit his agenda, or introducing content that does. The Ellisons aren’t going anywhere.
As for Warner Brothers, Trump can block the spinoff of their TV assets with the same tactics. Don’t be surprised if CNN starts to sound more like Fox News.
I predict that the next 2 years will not be kind to Netflix or Warner Bros. Debt, politics and a shifting media landscape will stifle creative risk-taking. Expect both companies to struggle with the most important thing: making content people love.