Netflix’s Warner Bros acquisition: Will Netflix keep or kill its rival HBO?

When Warner Bros turned 100 in 2023, it produced a four-part docuseries about its own history, legacy and creative principles.

In one shot, current Warner Bros Discovery chief executive David Zaslav shows off his favourite toy, the bird statue from the studios’ classic 1941 private eye film noir The Maltese Falcon.

“It has special meaning to me,” Zaslav told the camera as he placed his hand on top of the falcon, big smile on his face.

“Because at the end of the movie, they ask Humphrey Bogart what is this, and he said, ‘It’s the stuff dreams are made of’, and that’s what we get to do every day, the stuff that dreams are made of”.

Hollywood has long been thought of as the dream factory but right now, the industry is reeling from Zaslav and the Warner Bros board’s decision to sell the storied studio to the Silicon Valley interloper, Netflix.

The $US82.7 billion transaction, still pending regulatory approvals in the US and potentially also in the EU, is the stuff nightmares are made of, if you ask the cinema owners lobby, the writer’s guild, the director’s guild, an anonymous list of top producers and skittish entertainment workers who have barely survived years of sackings, cost-cutting and a rising tech sector coming to eat their lunch.

Theatrical box office receipts have yet to recover to their pre-pandemic levels after lockdowns accelerated audience shifts to streaming, and Netflix co-chief executive, Ted Sarandos, whose employment history is in VHS and DVD distribution, has been on the record as calling the cinema experience as “outmoded”.

Netflix is famous for its belligerence when it comes to putting its movies in cinemas, refusing to respect long-held exclusivity windows between a theatrical release and its streaming debut, and has only ever run awards-contenders in a small number of cinemas and for a period of two to three weeks.

The potential impact of a Netflix acquisition of Warner Bros on moviegoing behaviours could be catastrophic, even if the streamer is at the moment committing to keeping WB’s release model, but has already flagged it would “evolve” over time.

Sarandos and Zaslav, two men whose backgrounds are not in film but DVDs and basic cable TV, now hold the future of cinema in their hands.

Perhaps empathy from the wider public for Hollywood is in short supply but rarely has a merger of large firms in any industry been a good outcome for the consumer, no matter how much PR the companies try to spin.

Netflix sent out a global email to subscribers over the weekend, touting its excitement and promising to marry the vast archive of Warner Bros with its own library in an attempt to get the public on its side after a near-unanimous negative reaction from the entertainment industry. It was fuzzy on the details.

Consolidation almost always leads to fewer choices and eventually higher costs for customers as one business’s dominance becomes harder to challenge.

The other big question is what will happen to WB’s other shining jewel in its crown, HBO? Would Netflix control of the brand most synonymous with prestige television kill everything that makes HBO special?

HBO is in a different position to WB’s cinema output because Sarandos has long been an admirer of the premium cable TV brand.

Fifteen years earlier, when Netflix was still primarily a mail-order DVD rental service and had only ventured into internet streaming, HBO had refused to licence any of its library to Netflix.

It was one of the reasons Sarandos and his team of executives decided to make their own original shows, when it realised that there would eventually be a streaming war and rivals would lock their programming to owned platforms.

Netflix was correct on this front, and had even, back then, stated its intention to become HBO faster than HBO could become Netflix.

In its first years of original programming, Netflix was going for prestige and curated with creatively ambitious shows such as House of Cards, Orange is the New Black and Mindhunter. But that changed in 2020 when its strategy decisively shifted to volume and mass appeal.

On an investor call following confirmation of the Netflix-Warner Bros deal, Sarandos said, “we think that the HBO model itself is working and quite beloved by consumers, and we want to keep investing in that,” promising to keep it operating “largely as it is”.

While HBO as a brand has a 50-year history, until the 1990s, it was still known as Home Box Office, and primarily as a cable add-on for movies and sports and comedy events. Its first entry into original programming was in 1983 with a satirical news show called Not Necessarily the News.

In the early and mid-1990s, it was starting to gain notice for The Larry Sanders Show and then Oz, a gritty prison drama created by Homicide Life on the Street’s Tom Fontana.

In 1996, it launched the tagline that became synonymous with its brand and also spoke to its positioning in the market: “It’s not TV. It’s HBO”. HBO wasn’t the same as regular network TV, it was elevated, it was special and it was worth the extra subscription cost.

Sex and the City launched in 1998, and immediately took over the zeitgeist as a spicy and smart comedy with which a generation of women came to define themselves by. The following year, The Sopranos arrived and changed television for the next decade and a half as every producer chased their own angsty male anti-hero dramas.

Series such as Curb Your Enthusiasm (2000), Six Feet Under (2001), Band of Brothers (2001), The Wire (2002), Angels in America (2003), Deadwood (2004), Entourage (2004) Big Love (2006), Flight of the Conchords (2007), In Treatment (2008), True Blood (2008), Generation Kill (2008), John Adams (2008) and Boardwalk Empire (2010) were beloved and acclaimed, drove US subscriptions and worldwide DVD sales, and topped piracy charts.

They also became shorthand for prestige and taste, as markers of a discerning viewer who made it part of their personality, that they didn’t just like TV - especially during a decade when reality was on the ascendency – but they were into HBO.

In 2011, another phenomenon dropped, Game of Thrones, and throughout the 2010s, it dominated pop culture, reaching fever pitch for the three months each year the political fantasy epic was on air.

Again, it moved the dial as genre fare became properly mainstream, growing on the foundations already laid by Harry Potter and The Lord of the Rings. There’s a reason why an influx of expensive fantasy and sci-fi series followed.

When Netflix launched its first original series, Lilyhammer, a co-production with Norwegian and German outfits, in 2012, followed by House of Cards in 2013, it was the first real threat to HBO.

Other US cable channels such as Showtime (Homeland, Weeds) and AMC (Mad Men, Breaking Bad) had given it a run but they didn’t have the resources to make as many shows or take as many risks as HBO. But Netflix did.

Still, HBO forged on, and made the likes of Mildred Pierce (2011), Veep (2012), Girls (2012), Silicon Valley (2014), The Leftovers (2014), True Detective (2014), Westworld (2016), High Maintenance (2016), The Night Of (2016), Insecure (2016), Big Little Lies (2017), Succession (2018), Barry (2018), Watchmen (2019), Chernobyl (2019) and I May Destroy You (2020).

It wasn’t immune to industry shifts, and especially after Warner Bros merged with Discovery in 2022 under the aegis of Zaslav, it leveraged more of the studio’s existing franchises by creating shows such as It: Welcome to Derry, Dune: Prophecy, The Penguin and GoT spin-offs House of the Dragon and the upcoming A Knight of the Seven Kingdoms. There’s also a Harry Potter reboot series on the way.

Zaslav also instituted another change that would accidentally re-affirm the value of the HBO brand as a premium one.

He mandated that the company merger would also bring together two separate streaming services, HBO Max and Discovery,+ the latter being the home of cable channels such as TLC which was known for shows such as Dr Pimple Popper. The idea was that a super-sized streamer would be a general entertainment platform. It was rebranded to Max, which had no real meaning to anyone, and viewers who logged on for The Last of Us had no interest in Expedition Bigfoot.

The weird brand alignment didn’t last and Warner walked it back two years later in July when it rebranded, again, to HBO Max.

HBO is not a general entertainment offering, it never was, and the Max experiment was a lesson that you should never underestimate the value of HBO. Even in markets such as Australia, which until April has never had a direct-to-consumer subscriber relationship, we all knew what HBO was and what it stood for.

Behind the scenes, Foxtel, which had an exclusive licencing deal for HBO until earlier this year, would ask journalists to refer to HBO shows as “Foxtel”, “Showcase” or, eventually, “Binge” programs, but everyone understood the signal to the reader or viewer that this was something worth checking out was “HBO”. Those three little letters meant something.

Does Netflix recognise that worth? It wouldn’t be willing to pay $US82.7b for just the movie studio. A massive chunk of that is for HBO, so surely it would be foolish to just plunder the IP and absorb it into its existing platform.

Will Netflix continue to keep HBO Max as a separate service or will it integrate it into Netflix, perhaps as a tile? Disney has tiles for its sub-brands such as ESPN, Marvel and Hulu on its streaming platform, but Netflix has always thrown everything together (to be fair, it’s never had a sub-brand before).

Or will it offer HBO as an add-on subscription, perhaps $10 or $15 a month on top of your general subscription fees. That would involve a huge change for Netflix, which has never differentiated price points by content, for example, it doesn’t charge a separate fee for its games nor will it when it rolls out podcast videos next year.

HBO has the one thing Netflix no longer has, a prestigious brand with a nous for making excellent TV, especially as Netflix increasingly became the home of mostly middling, inoffensive and indistinguishable originals. In the past 10 years of the Emmys, HBO won best drama eight times. Netflix has only won once, ever.

The best case scenario is Netflix will allow HBO to continue to be HBO, and keep intact the brand’s ethos and its development and executive team, including boss Casey Bloys who has been at the helm for almost a decade. What Netflix could bring to HBO is its better tech (the HBO Max useability can be clunky), and more eyeballs.

The worst case scenario, the stuff nightmares are made of, is Netflix will steamroll over the legacy of HBO as it has the rest of the entertainment industry with its ruthless, Silicon Valley-imported culture, at the altar of the one thing it cares about, the Netflix brand.

In The Maltese Falcon, when Bogart delivers the line “It’s the stuff dreams are made of”, it’s not a case of wish-fulfilment.

Sam Spade has on his face an expression of contempt. This falcon statue that so many parties were after, that people were killed over, was not a symbol of hope, but one of greed and destruction.