Does Netflix need to purchase a major studio to compete with Disney, Warner Bros., and Amazon, or can it rely on original content?
The recent speculation surrounding a potential acquisition of Warner Bros. Discovery (WBD) by Paramount Global has once again ignited a critical debate among investors: should streaming giants like Netflix and Amazon pursue acquiring a legacy Hollywood studio? This discussion, amplified by Amazon’s previous purchase of MGM, centers on whether the benefits of content ownership outweigh the monumental financial and integration risks.
According to analysts at Barclays, while a mega-merger between Paramount and WBD could theoretically limit the content available to third-party streamers like Netflix, the actual change in supply is unlikely to be dramatic.
Major studios, including a combined WBD/Paramount, currently generate over $13 billion in annual licensing revenue, with Netflix being the single largest buyer. Denying Netflix access to this content would result in significant revenue loss for the newly merged entity.
Proponents of a major studio acquisition argue that it offers a powerful defensive strategy and opens doors to lucrative intellectual property (IP).
Owning Warner Bros. Discovery, for instance, would grant Netflix direct control over global franchises such as DC Comics and Harry Potter.
This access could provide a massive boost to video gaming initiatives and subscriber engagement, areas Netflix is actively seeking to expand.
However, the price tag for WBD is estimated by Barclays to be in the region of $50-60 billion, presenting an enormous opportunity cost. Analysts caution that this capital could be strategically reallocated to other content areas, such as expanding into sports broadcasting or developing diverse original programming, which may ultimately yield a higher return on investment (ROI) relative to earnings per share (EPS) growth.
Furthermore, if Netflix were to drastically reduce licensing to third parties while insisting on day-and-date movie releases, the estimated revenue dis-synergies could reach a staggering $12 billion.
Beyond the financial outlay, integrating a legacy studio presents substantial operational and cultural hurdles. Barclays points out that a major difference exists between Netflix’s genre-centric organization and a studio like WBD, which operates distinct, creatively autonomous labels such as New Line or Focus.
This disparity in workflow and creative culture could lead to significant operational friction across the content value chain, from executive management down to the creators.
The firm highlights Disney’s ongoing struggles to integrate its traditional film distribution models with its streaming platform as a cautionary tale, noting the subsequent volatility and mixed reception of films like recent Marvel titles.
Additionally, the long-term value of a studio’s content library is not static. Distribution is a key determinant of success; shows that underperformed on linear TV have famously become global hits on Netflix.
The firm suggests that franchise management—which requires sustained investment in merchandising, cross-platform releases, and the talent pipeline—carries execution risks that could divert resources.
Barclays ultimately concludes that a more strategic, less risky approach for Netflix might involve acquiring smaller, independent studios.
This tactic allows the streamer to secure key talent and niche expertise without incurring the massive financial and cultural integration challenges associated with buying a multi-billion-dollar legacy studio and its iconic, yet complex, IP.