Shares of Netflix (NFLX 5.01%) declined nearly 5% on Wednesday, following reports of ongoing acquisition talks between the streaming leader and its rival, Warner Bros Discovery (WBD +0.16%).
Image source: Netflix.
Market share gains might not materialize
Netflix is interested in purchasing Warner Bros Discovery's studio assets and HBO Max streaming service, according to Reuters. A deal would allow Netflix to bundle HBO Max with its own streaming offerings -- at a lower overall cost for consumers. A combination would also bolster Netflix's content library with popular shows like Game of Thrones, Succession, and The Wire.
NASDAQ: NFLX
Key Data Points
Yet investors are questioning whether the potential benefits are worth the sizable cash offer Netflix has reportedly made to acquire its smaller competitor. Reuters noted that most of HBO Max's subscribers are already Netflix customers, so a deal is not likely to produce significant market share gains for the entertainment titan.
A merger between the two streaming companies would also draw regulatory scrutiny. Netflix's focus on lowering costs for bundled subscribers might be geared toward pre-empting regulators' concerns.
A bidding war may be brewing
Yet the ballooning cost of an acquisition remains a major sticking point for investors. Reuters reported in October that Warner Bros Discovery rejected a $60 billion buyout bid from Paramount Skydance.
In recent days, Netflix, Paramount, and Comcast made larger offers to entice Warner Bros Discovery to sell, according to Reuters. That's sparking fears of a bidding war that could drive up the price of a potential purchase to nearly $70 billion, which would further dampen any potential gains for Netflix or its fellow suitors.
