Netflix Considered Buying Disney Before Pivoting to Warner Bros.

Late last week, Netflix struck an $82.7 billion deal to buy Warner Bros. However, a recent report from Bloomberg suggests that before the Warner Bros. bidding war started, the streaming giant had flirted with the idea of pursuing EA Games, Fox (before the Disney merger), or Disney itself.

According to Bloomberg, what held the streamer back from making a move was that “executives could never coalesce behind a deal.” What’s unclear is how committed those within Netflix were, as the discussions reportedly took place during meetings where Netflix was simply determining its long-term strategy.

Building or Buying

Netflix’s co-CEO Greg Peters is on record as saying, “One should have a reasonable amount of skepticism around big media mergers, they don’t have an amazing track record.” That statement led many to believe that Netflix wasn’t interested in pursing Warner Bros. However, it’s becoming clear that the company’s skepticism was based in caution, not complete dismissal of the possibility.

Outside of the boardroom, Netflix has always presented itself as a company focused on making its own path. In an investor call after the Warner Bros. announcement, Netflix co-CEO Ted Sarandos acknowledged this, saying, “I know some of you are surprised that we’re making this acquisition, and I certainly understand why. Over the years, we have been known to be builders, not buyers.”

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Evidently, there were some within Netflix that were looking to build its portfolio, whether that be in pre-established game or film IP. While Disney has long been viewed as the crown jewel in entertainment, Netflix brass may have been biding their time, waiting for the right moment to pursue a major acquisition. When Warner Bros. unexpectedly went up on the auction block, Netflix decided to make a big move.

“This is a rare opportunity. It’s going to help us achieve our mission to entertain the world and to bring people together through great stories,” Sarandos told investors.

One reason Netflix may have decided against making a bid for Disney was that the executives were afraid such a move could “hurt their stock price by overpaying for an asset that traded at a much lower multiple.” The idea of overpaying for an asset is something that has been heavily discussed ever since Paramount’s David Ellison made increasing offers to buy Warner Bros.

Big Moves and Bigger Risks

Days after Warner Bros. and Netflix announced that they had come to an agreement, Paramount took its offer directly to Warner Bros. stockholders in an attempted hostile takeover. Should it be successful, Netflix will walk away empty-handed and Ellison will control the assets of two legacy studios.

Since the battle for Warner Bros. reignited Monday morning, Investopedia noted some flux in all of the stock values of all the major players. Monday afternoon they reported, “Warner Bros. stock was recently some 3%, rising to near $29 on Monday, while Paramount’s was up more than 8%. Netflix, meanwhile, was moving in the other direction, down more than 4%.”

Ultimately, those on the Netflix board who discouraged pursuing Disney out of fear it would negatively affect their stock may be proven right, just with a different studio merger in the equation. Even if Ellison is unsuccessful, Netflix still faces regulatory hurdles. If the deal fails to pass antitrust or foreign regulatory scrutiny, Netflix will have to pay Warner Bros. $5.8 billion.

Big moves require big risks. Netflix decided not to take a risk by moving on Disney. If the Warner Bros. deal collapses—whether due to Paramount’s hostile bid or regulatory scrutiny—Netflix may wish it had continued building, not buying.

Do you think Netflix was seriously interested in buying Disney? Let us know in the comments!