Wall Street's "conspiracy theory": Netflix is actually going to spend $80 billion to acquire the "outdated" Warner? There is a "big game" behind it!

Netflix's aggressive acquisition offer for Warner Bros. Discovery has caused significant upheaval on Wall Street and in Washington, with this deal seen as a controversial marriage between digital disruptors and traditional media giants.

According to reports, Netflix has announced a bid of up to $72 billion for Warner Bros. (including film studios, HBO, and HBO Max). This move quickly sparked divisions in the market, with Barclays analysts estimating that the total investment for the deal would exceed $80 billion, and strongly questioning why Netflix would acquire traditional assets it once "disrupted," pointing out that the expected synergies from the deal are only between $2 billion and $3 billion, and that it faces significant integration risks.

After the announcement of the deal, regulatory and political resistance quickly emerged. Senator Mike Lee swiftly raised antitrust concerns, warning that this move would reduce competition in Hollywood, indicating that congressional hearings may be held in the near future. The Hollywood community is also in a state of panic, with industry insiders worried that the merger poses risks of stifling the theatrical market and could even face illegal monopoly charges.

As a result, analysts warned that Netflix's valuation logic would undergo fundamental changes. As the deal enters a lengthy approval process similar to the AT&T merger era, Netflix's stock price may experience downward drift due to the increased risks associated with traditional media box office and licensing, necessitating a reevaluation of its attributes as a defensive tech stock.

Doubts About Synergies After Premium Acquisition

The analyst team at Barclays, led by Kannan Venkateshwar, pointed out in a report to clients that Netflix has committed to investing over $80 billion. The "Spending" under Barclays analysts typically includes the debt burden or actual total cost post-acquisition. Acquiring a "franchise factory" is perplexing. Analysts question that the issues Netflix is currently trying to solve or the opportunities it is seeking could have been achieved through organic growth without paying such a high premium.

Crucially, Barclays expects the synergies generated by the deal to be only between $2 billion and $3 billion, a figure below market expectations. This is largely because Netflix plans to largely maintain Warner Bros.' business operations as they are. The existing wholesale distribution and content licensing agreements of Warner Bros. globally will take time to dismantle, and since there are overlapping subscribers between HBO and Netflix, both parties will need to independently support their respective businesses for a considerable time to avoid revenue conflicts, making the integration path exceptionally lengthy.

Lengthy Regulatory Approval and Valuation Pressure

Although the controversial CNN asset is not included in this deal, Barclays believes the approval process will still be extremely tortuous, similar to the AT&T and TWX merger case during the Trump administration. During this period, Netflix's valuation will have to account for transaction risks and transitional risks post-merger.

The report notes that Netflix was previously viewed as a defensive stock with low leverage and low macro risks, but the new deal will expose it to new regulatory and integration considerations. More importantly, Netflix's stock will now include more traditional media elements, such as box office performance and licensing revenue, all of which need to be re-incorporated into the valuation model Analysts warn that even if Netflix maintains its current multiples, there is still downside potential for its stock price; and if multiples decline, the risk-reward ratio will significantly worsen.

Cultural Conflicts and Strategic Shifts

In the long run, investors are skeptical about the prospects of this combination. Barclays emphasizes that there are significant cultural differences between the two parties in areas such as project approval, box office window periods, licensing relationships, and budget priorities. Although Netflix has a top-notch management team, this is still a massive integration that is difficult to digest, with the cultural gap between the two companies even wider than in most previous media mergers.

In terms of content strategy, to extract corresponding value from assets like DC Comics' "Harry Potter," Netflix may be forced to shift towards a Disney-like model, focusing on expanding franchises. While this is not entirely negative, it is not only costly but may also lead to limited content breadth and stagnation in the creative pipeline.

This means that this acquisition is more of a vehicle for Netflix's strategic transformation rather than an accelerator for its existing growth engine.

Monopoly Concerns and the "Battle for Influence" in Content

In addition to financial concerns, the deal has sparked intense discussions about cultural influence. Commentator Benny Johnson has put forth a more radical view, claiming this is "the most dangerous media consolidation in American history." He warns that if the deal goes through, Netflix will hold monopoly rights over children's entertainment content, including Batman, Superman, Harry Potter, and Bugs Bunny.

This perspective argues that this is not just a business merger, but a "battle for influence" over the younger generation. Critics point out that given the political backgrounds of Netflix's executives and board members, such as Susan Rice, as well as Obama's deep collaboration with the platform, controlling top children's IP will allow certain political forces to deliver specific ideologies to the next generation through algorithms. This concern over content control has strengthened calls from opponents to use antitrust laws to block the merger.

The deal also has direct implications for other industry participants. Barclays notes that with the WBD board approving the transaction, PSKY is effectively out of the running for this merger. From a fundamental perspective, without the deal, PSKY's valuation will struggle to hold up, facing significant downside risks. Additionally, PSKY may need to raise substantial funds to support its existing strategic priorities, including expanding studio output, UFC, and streaming businesses. While there may still be other spin-off deal opportunities involving cable networks in the market, these will also require more capital investment