(Photo by Mario Tama/Getty Images)
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And just like that, to borrow the title of a misbegotten and now-cancelled HBO series, Hollywood’s original business is facing its biggest challenge yet in what’s been a very challenging decade.
Streaming giant Netflix’s agreement today to buy the Warner Bros. film and TV studios, vast library, HBO Max streaming service and HBO premium cable channel stands to kick out another leg of support under the still-struggling theatrical exhibition industry.
The $82 billion deal, including $10 billion in Warner Bros. Discovery’s plentiful debt, also would leave out on an ice floe (with even more debt) the remainder WBD assets, mostly cable networks including TNT, TBS, CNN and the reality-show-heavy Discovery nets.
Whether Netflix can navigate the thickets of Trump Administration fealty and political favoritism will be discovered in coming months. Indeed, the challenges of getting regulatory approval were enough of a potential lever that losing bidder Paramount Skydance, backed by Trump friend and Oracle founder Larry Ellison’s vast fortune, warned the WBD board in a letter this week that it was the only company that could get a deal approved.
The real challenge, though, may come from (and for) theater owners, as they desperately push their studio partners to produce and deliver a diverse, substantial and steady stream of new films to entice a wide array of audiences to their screens. A Netflix-Warner tie-up would make that less likely, despite promises from co-CEO Ted Sarandos that Warner films would continue to get theatrical releases, regardless of his company’s broader streaming-first approach.
But as streaming has become widespread, and films leave theaters for streaming far more quickly while studios make fewer projects for theatrical release, the exhibition industry’s fortunes have continued to decline. The news has panicked the theatrical industry even as it continues to limp along post-lockdown.
Cinema United, a trade group representing the owners of 50,000 movie screens, called the deal “an unprecedented threat to the global exhibition business.”
In a statement, President Michael O’Leary said, “The negative impact of this acquistion will impact theatres from the biggest circuits to one-screen independents in small towns in the United States and around the world. Netflix’s stated business model does not support theatrical exhibition.”
Plenty of Hollywood notables have sounded off about Netflix’s streaming-first approach, and can be expected to do so more while regulators consider the deal.
“Netflix (buying Warner Bros.) would be a disaster,” said box-office king Jim Cameron, whose Titanic and Avatar films have ruled theaters the past three decades, in a recent interview. “Sorry, Ted, but geez. Sarandos has gone on the record saying theatrical films are dead. ‘Theatrical is dead.’ Quote, unquote.”
Sarandos has long held that the company makes a wide array of projects for its paying streaming subscribers, and therefore doesn’t believe in delaying their opportunity to see those films on streaming as soon as possible.
That approach, among much else, saves Netflix many millions of dollars in traditional “prints & advertising” spending on marketing, even as it efficiently targets its streaming shows to specific audience tranches most likely to want to watch them.
The Directors Guild of America, the Hollywood trade union representing Cameron and dozens of other directors, told the Los Angeles Times that the deal “raises significant concerns” about its potential impacts on “a vibrant, competitive industry…that fosters creativity and encourages genuine competition for talent.”
Indubitably, success by any of the three bidders for WBD – Comcast and Paramount Skydance were the others – would consolidate and reduce the number of places where production companies might shop their projects. That might in turn also lead to fewer movies being made, at a time when theater owners say they need more.
Worse from the standpoint of directors and some other big-screen-loving corners of Hollywood, however, is Netflix’s long-time indifference to theatrical releases as part of its economic model. Many directors and other creatives say they create projects intending their release on the biggest, best screens (and sound systems) available.
Even with massive improvements the past decade in large-screen TVs, sound systems and broadband delivery networks, those theatrical fans say in-home streaming services can never fully replicate the experience of watching their projects communally in the darkened room of a traditional theater.
Truth is, however, that consumers don’t quite agree, a far bigger problem for exhibitors than just one admittedly massive deal.
Domestic box-office grosses have never recovered from 2020’s disastrous year of the pandemic, when just $2.1 billion in tickets were sold in the U.S. market, mostly before the lockdown hit. The previous five years saw domestic grosses routinely top $11 billion annually, most notably with 2018’s near-$11.9 billion led by Disney/Marvel’s Black Panther.
The number of films released has indeed dropped precipitously since the pandemic, according to Amazon-owned BoxOfficeMojo.com, which tracks the industry. In 2018 and 2019, more than 900 films were released both years. Last year, that total was 677, best since 2019, but still down nearly a third.
Many theater chains went out of business the past five years, with even giants such as Cinemark forced to file for bankruptcy to reorganize their debts. Another industry giant, AMC, has resorted to a wide range of unorthodox tactics to survive, including issuing a crypto coin, riding a meme-stock wave, and negotiating directly with singer Taylor Swift to distribute a hugely successful film of her record $2 billion-grossing concert tour.
Post-covid box office returns recovered to about $7.3 billion in 2022, though with far fewer tickets sold. Ticket prices continue to escalate, driven by an industry-wide emphasis on more expensive IMAX and other premium-screen releases, and have topped $8 billion each of the past two years.
The 2025 box-office take is barely above flat year-over-year compared to 2024, with about 3% fewer tickets sold. Dismayingly, that’s despite an extremely lucrative Thanksgiving weekend featuring sequels for Zootopia and Wicked. The arrival next weekend of the third installment of Cameron’s all-time box-office king Avatar is expected to be both massive and too late to meaningfully boost the year’s totals.
Netflix subscriber growth, meanwhile, has galloped forward since the pandemic hit. The company stopped reporting subscriber totals at the end of 2024, when it had 301 million worldwide, in more than 190 countries. HBO Max, WBD’s four-year-old streaming service and home to a deep collection of Emmy- and Oscar-winning series and features, has around 125 million more, in about 100 countries.
The overlap between the two companies’ subscriber bases is estimated as high as 95 percent, and Netflix suggested during the run-up to the deal that a combined Netflix-HBO Max would actually save most consumers money. The two services have never offered a joint bundle, though Netflix has licensed numerous movies and TV series from WBD over the past several years.
The problem, exhibitors say, is they already don’t have enough films getting made for their screens. Most Hollywood media companies have pulled back the number of films they release, especially mid-budget ones that long were a theatrical staple. Now, those adult-skewing dramas tend to show up on, well, Netflix and HBO Max and their streaming competitors.
Paramount Skydance already had pledged to increase its theatrical releases from eight this past year to 15 by 2027, part of new CEO David Ellison’s efforts to transform and modernize what had been Hollywood’s sleepiest, most-underfunded major studio.
Acquiring Warner Bros.’ highly productive studio certainly would have made reaching Ellison’s goal easier. This year, Warner has had a string of hits, including A Minecraft Movie, Sinners, Weapons, The Conjuring: Last Rites, and the latest Superman. The company also theatrically distributed Apple TV’s hit F1: The Movie.
Sarandos has pledged to continue releasing Warner Bros. films in theaters, perhaps similar to what Amazon does with movies from its MGM Prime studios. But the skepticism in Hollywood about how long that would continue, and for how many films, is certainly merited, given Netflix has even been willing to lose relationships with some big-name production companies rather than guarantee theatrical-always releases.
Netflix does send some projects to theaters, sometimes, for specific strategic reasons. Its list this year of about a dozen awards-contending films – including Guillermo Del Toro’s Frankenstein, as well as Train Dreams, Jay Kelly, and Nouvelle Vague – received short theatrical releases required to qualify the films for Oscars and other awards.
Cameron in his critical remarks about Netflix called those awards releases “sucker bait.” He went on to say Netflix’s general approach should mean its films can’t qualify for Oscars, even when they follow the Motion Picture Academy’s own mild rules for qualification.
“A movie should be made for theatrical…the Academy Awards mean nothing if they don’t mean theatrical (releases),” Cameron said. “I think they’ve been co-opted, and I think it’s horrific.”
He went on to say Netflix films shouldn’t be allowed to compete for Oscars unless they’d been released on “2,000 screens for a month.”
That’s far more than the Motion Picture Academy’s required week-long release, in a small number of specified theaters, to qualify most contenders, which these days tend toward small-budget art-house darlings and festival circuit champs that typically gross a tiny fraction of a Cameron-sized blockbuster.
Netflix’s most popular feature of all time, the anime-infused animated musical KPop Demon Hunters, didn’t receive an initial theatrical release, instead building an ardent repeat fan base online for its many chart-topping songs.
Indeed, Sarandos argued during a recent Netflix earnings call that the film had a chance to find its core audience of superfans only through a streaming-first release, allowing them to watch it repeatedly last summer while also driving many of the film’s catchy songs to the top of music sales and listening charts.
It would have been difficult, Sarandos suggested, for a theatrical release to build a similar mammoth U.S. audience for an anime-themed animated musical from East Asia.
That said, with the superfan audience now built, Netflix already has held two weekend-long theatrical releases of the movie featuring sing-along lyrics on screen. The first of those grossed an estimated $19 million, a very good weekend for a film already available on streaming for months, though Netflix doesn’t report theatrical grosses for any of its films.
Because KPop was released online first, it likely will be contending not for Oscar’s Best Animated Feature, as its cultural omnipresence otherwise might suggest, but for other animation awards and musical ones too, a Netflix awards team member told me recently.
Netflix also will briefly release in theaters on New Year’s eve the final episode of the final season of its blockbuster Stranger Things series, at the same time the episode hits streaming. The Duffer Bros., the show’s creators, are among those who’ve bolted Netflix for competitors who will do theatrical releases of their next projects.
But the reality for exhibitors (and creators) is that the vast majority of Netflix’s constant flow of features, documentaries, series and live events almost certainly will never grace one of their screens, regardless of what Netflix does with Warner Bros. films. It just isn’t in the company’s hugely successful business model.
