By Dan Gallagher
It's far from certain who will end up owning Warner Bros. It's more certain that, whoever does, the outlook for theatrical movies is dimming.
The battle to acquire the fabled Hollywood studio has cast another cloud over an industry still recovering from the dual shocks of the pandemic and the writers and actors union strikes three years later. This year's domestic box office of $8.3 billion as of Dec. 25 is a bit below last year's and well below prepandemic levels of around $11 billion.
Warner has historically been one of Hollywood's largest producers of theatrical films, averaging about 22 releases annually in the pre-Covid years of 2015 to 2019, according to data from Comscore. Its franchises include "Harry Potter," the DC Comics characters and "Lord of the Rings." But the current bidding war between Netflix and Paramount Skydance means Warner's future will ultimately be in the hands of either a streaming giant with a longstanding distaste for movie theaters, or a rival studio that will carry a sky-high debt load and therefore a need to sharply cut costs.
Netflix is still the official buyer since Warner Bros. Discovery designated the company as the winning bidder earlier this month. But Paramount isn't giving up. The company is now offering $30 a share in cash directly to Warner shareholders, compared with the price of $27.75 a share that Netflix is offering for the part of the company that won't include its cable networks.
The latest development has megabillionaire Larry Ellison committing to personally backstopping $40 billion worth of the transaction through a trust made up mostly of his holdings in Oracle. Warner's board has yet to formally take a position on the latest Paramount bid, but even another "no thanks" is unlikely to deter Paramount from its tender offer, which leaves the ultimate outcome a tossup for a while more. Paramount's tender offer is set to expire on Jan. 21.
Both Netflix and Paramount are using the interim period to campaign hard for their respective bids. And theatrical movies are playing a big role in those campaigns. Paramount has said it is committed to releasing more than 30 theatrical movies a year once combined with Warner, without specifying for how long. That would be close to the number of annual releases from the two studios combined in the pre-Covid years of 2015 to 2019, according to data from Comscore.
Netflix, meanwhile, has seemed to soften its dislike for theatrical distribution. The company now says it is fully committed to releasing Warner Bros. movies in theaters, though it doesn't say how many. It has even started to promise to honor "industry standard" windows that dictate how long a movie should remain in the theatrical circuit before becoming available for streaming. That contrasts with comments even from the deal's original announcement on Dec. 5, in which Netflix co-CEO Ted Sarandos, on a call with investors, predicted that release windows would "evolve to be much more consumer friendly."
"We haven't prioritized theatrical in the past because that wasn't our business at Netflix," Sarandos and co-CEO Greg Peters said in a memo to Netflix employees 10 days later. "When this deal closes, we will be in that business."
But just how much they will stay in that business remains an open question. It is a question that won't have a clear answer for a long time, given that Warner will have a slate of movies and signed contracts deep into its pipeline by the time any deal closes. In a report earlier this month, Wedbush analyst Alicia Reese said the current theatrical slate has already been negotiated through 2029, "so any buyer would have to honor those contracts by showing the slated [Warner] films in theaters for at least the next four years."
Investors seem deeply skeptical. Cinemark shares have shed about 18% of their value over the past month, while rival exhibitor AMC Entertainment is down more than 30%. Morgan Stanley recently downgraded Cinemark to a neutral rating, with analyst Ben Swinburne noting that concern over Netflix's commitment to theatrical distribution and release windows "is likely to cap the multiple" on Cinemark's stock.
Paramount might seem a better option for keeping Warner in the theatrical business, if nothing else, given CEO David Ellison's well-known love of movies. But he won't have much financial flexibility. Laurent Yoon of Bernstein estimates that a combined Paramount-Warner would be "levered to the hilt" after the deal closes. That would make the studio less likely to take a flier on anything short of a surefire hit from a major film franchise.
Warner at least has plenty of those to work with. And whoever takes over the studio will still need to maintain smooth relationships in Hollywood, where theatrical distribution is still highly prized by top-tier talent. That means any changes to Warner's movie business will likely be gradual over time. But time hasn't been on the side of movie theaters for a while now, and a takeover of Warner Bros. won't turn back that clock.
Write to Dan Gallagher at dan.gallagher@wsj.com
(END) Dow Jones Newswires
December 28, 2025 05:30 ET (10:30 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
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