Why NFLX is making a big mistake trying to buy WBD, according to a top analyst
Netflix’s interest in acquiring Warner Bros. Discovery would saddle the streaming giant with massive legacy risks and erase some of its biggest competitive advantages, according to Needham’s Laura Martin, one of the most widely followed media analysts on Wall Street. Martin estimates that buying WBD would put $83 billion of additional value at risk of disruption from generative artificial intelligence, exposing Netflix to the same structural pressures facing traditional studios. “Without WBD, NFLX is more global, more nimble, more tech-first, and has more flexibility with the Hollywood unions,” she wrote in a note to clients. Her warning comes as Netflix weighs whether WBD’s deep library, HBO pipeline and marquee franchises justify the financial and operational burden. A takeover of WBD would pull it toward the cost-heavy studio model just as technological disruption accelerates, Martin argued. NFLX 5D mountain NFLX 5-day chart Paramount Skydance has launched a hostile bid, going straight to WBD shareholders with an all-cash, $30-per-share offer. That’s the same bid WBD rejected last week and equates to an enterprise value of $108.4 billion. “The valuation risk piece that many investors may be missing in the NFLX vs. PSKY takeover of WBD debate is how GenAI could disrupt creative storytelling over the next five years,” Martin wrote. She argues that GenAI adds “an extra layer of technology risk to whichever company acquires WBD,” noting that the shift could mirror how the internet upended content distribution. Guild contracts, which restrict the use of AI tools, limit Warner Bros.’ ability to adapt, leaving Netflix more exposed than a PSKY buyer, she said. “Guild fears add incremental valuation risk to NFLX shareholders if NFLX owns WBD,” Martin said. Operational complexity is also a red flag, Martin said. WBD employs roughly 35,000 full-time staff, about 2.5 times Netflix’s 14,000, reflecting a legacy Hollywood workforce that Martin said would be difficult to integrate.
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