By Adam Levine
Like all the old Hollywood studios, Warner Bros. has taken a twisted path into the present, filled with mergers and acquisitions -- the latest a proposed sale to Netflix for $82.7 billion, including assumed debt. Some have worked out well and some haven't, but the good ones are all long in the rearview mirror.
The 1950s heralded the end of the studio system of Hollywood's Golden Era. The studios began to see competition from television, and they lost their theater chains to antitrust action by the U.S. Department of Justice. In dire need of cash, Warner Bros. made one of the worst media deals of all time in 1956, selling off its entire pre-1948 film library just as TV stations were about to need those old movies and cartoons to fill their schedules.
Like many studios, Warner was adrift for years. As U.S. culture changed in the 1960s, Warner and the other studios had trouble keeping up, and that was the last straw.
In 1967 an aging Jack Warner still owned a controlling interest in the studio and sold it to a film distribution company named Seven Arts to form Warner Bros.-Seven Arts. But Seven Arts had bitten off more than it could chew. After a string of flops in 1968 and 1969, the company was sold to Steve Ross's Kinney National, which owned mortuaries, parking lots, and other decidedly nonentertainment businesses. The studio was re-christened again, this time as Warner Communications.
Thus began the best years for Warner both financially and creatively since the 1930s. It had production and distribution for film, television and music as these were all burgeoning in the 1970s. In 1990 it added publishing with Time Inc. It also brought a cable television system that combined with Warner's to create one of the largest systems in the U.S., just as cable TV was about to boom. The new company was called Time Warner.
The 1996 addition of Turner Broadcasting brought cable channels, the pre-1986 MGM film library, a plethora of cartoons, and the return of the pre-1948 Warner library, bringing Casablanca and Bugs Bunny back home.
Though there was reported friction between the button-down publishers at Time and the laid-back Hollywood scene, the 1990s were peak Warner. The film studio pumped out hits and was finding new distribution channels internationally and with home video. Stuffed with ad pages, it was a high point for magazine publishing. The TV studio produced many of the top shows on U.S. television, including Seinfeld, Friends, and ER, all of which are still raking in cash today. The WB broadcast network started up. Cable subscriptions were expanding. CNN set the standard for television news, and the Turner networks added sports. Warner/Elektra/Atlantic was the largest distributor of music in the industry's best decade.
But like Warner's first golden era, this one also ended with a new medium: the internet. Old-media companies were justifiably concerned that it would disrupt their businesses, and with hindsight we know they were right to be scared. Time Warner CEO Gerald Levin thought the answer was another merger, this time with the premier internet service at a time when dial-up connections were still king -- America Online. Despite being the smaller company, AOL was valued more highly than Time Warner in the 2001 all-stock deal that formed AOL-Time Warner.
This was a disastrous hookup of old and new media. The promised "synergies" never materialized. The World Wide Web overtook AOL's walled-garden model of the internet. Most important, the timing couldn't have been worse, with the deal being announced two months before the dot-com crash. Eventually, $99 billion of the $165 billion merger was written down. AOL was just sold in October for a reported $1.4 billion.
The merger strategy that had been so successful for 30 years fell flat on its face, and since then, Warner has faced another long period of struggle.
In 2018, with many parts severed from Warner like AOL and Time Warner Cable, AT&T bought the studio, renaming it WarnerMedia. But just three years later it saw the strategic error of larding on $44 billion in debt (including assumed debt) to buy Warner's flagging properties. By 2022, AT&T had merged it with Discovery's cable channels and spun it off as Warner Bros. Discovery -- a pastiche of old media -- which it remains today.
Every media merger is different, but among these episodes the Netflix-Warner hookup most closely resembles the Seven Arts deal. Like Netflix, Seven Arts began as distribution for a new medium, in this case TV. Seven Arts bought TV rights from studios and packaged them together to sell to TV stations. Like Netflix, Seven Arts started making its own content when the studios weren't producing enough. And like Netflix, it turned to acquiring a distressed old media company to add more content and production.
This doesn't mean the Netflix-Warner deal is doomed, but it highlights the integration challenges to Netflix as it brings in a sprawling old-media company.
Write to Adam Levine at adam.levine@barrons.com
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December 06, 2025 11:52 ET (16:52 GMT)
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