Netflix Co-CEO Ted Sarandos Expects Paramount's Warner Bros. Takeover To Result In Cost Cuts Worth $16 Billion: 'I Hope I'm Wrong…'
Netflix Inc’s (NASDAQ:NFLX) co-CEO Ted Sarandos warned that a rival deal to merge Paramount Skydance Corp (NASDAQ:PSKY) with Warner Bros. Discovery (NASDAQ:WBD) will likely trigger steep cuts across Hollywood, saying the combined company will need to slash costs "in excess of $16 billion" over the next 18 months to make the numbers work.
Sarandos Calls Paramount Bid ‘Unusual’
In an interview with Bloomberg on Sunday, Sarandos called Paramount's winning bid "unusual" and "irrational," and said the acquisition could become a seismic event for the U.S. media landscape, one that forces the new owner to shrink headcount and production to service the debt required for the deal.
"There'll be cuts in excess of $16 billion. They are telling people who lend them the money that's gonna happen in 18 months or so. It would be less production, less people working," Sarandos said, describing what he believes lenders have been promised to finance the transaction.
Netflix Exits Bidding War, Eyes Fallout
Sarandos made the remarks days after Netflix walked away from the bidding war for Warner Bros. Discovery's studio and streaming assets rather than match Paramount's higher offer, a move he said was driven by price. He said the outcome likely means less overall content production and fewer jobs as the merged company seeks to cut costs.
He said the next phase will be "fascinating" once the acquisition becomes official, adding, "I have been on the record a lot in the last two weeks talking about what I think the future looks like," Sarandos said. "I'm confident in our future that we're not impacted by all that. In fact, maybe it's to our advantage. But I hope I'm wrong for the sake of the industry."
Breakup Fee, Regulation, And Stock Reaction
Even after losing the bid, Netflix is set to collect a $2.8 billion breakup fee tied to its earlier agreement with Warner Bros. a payment Bloomberg reported Paramount agreed to cover. Sarandos suggested consolidation could ultimately benefit Netflix by thinning competition for talent and content.
It is worth noting that the deal still faces regulatory review, with a Senate Judiciary Committee hearing scheduled for Wednesday, March 4.
Netflix shares closed 13.75% higher on Friday at $96.24 on Friday, but slid 0.70% in after-market hours to $95.57, according to data from Benzinga Pro.
Photo courtesy: Shutterstock
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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