Implications of the Netflix Deal for Warner Bros' Gaming Division

Following a challenging year marked by financial struggles, studio closures, and restructuring, Warner Bros. Games faces uncertainty with the prospect of a new corporate owner. The division is included in the sale of Warner Bros. Discovery to Netflix, which is being contested by a rival bid from Paramount Skydance. Both potential buyers are courting shareholders, and the outcome will require regulatory approval, which may take months or years. Regardless of the result, there are widespread concerns about the impact on Warner's gaming teams. Warner Bros. is the only major Hollywood studio to have maintained a strong presence in gaming, with a portfolio of successful mobile games and AAA studios like Netherrealm, Avalanche, Rocksteady, and TT Games, as well as support studios in the US and Canada. The company has had notable successes, including TT's Lego games, Rocksteady's Batman Arkham series, and Avalanche's Hogwarts Legacy, which has sold over 30 million units. In contrast, Netflix has yet to make a significant impact in gaming, despite years of effort. After a failed investment in AAA games and deciding against bidding for EA, the company has shifted its focus to casual, second-screen games, supported by licensed titles like GTA. Netflix's head of gaming, Alain Tascan, has committed to developing titles that utilize the phone as a controller, with a focus on multiplayer, kids, narrative, and mass appeal, as well as exploring the social layer that Roblox, Fortnite, and Minecraft offer. The company has cancelled unannounced publishing deals with external studios and has plans to borrow $59 billion to finance the acquisition of Warner Bros., which may lead to asset sales to reduce the debt. On the surface, the prospects for Warner's gaming division appear more promising under Paramount, given the company's history of licensing its IP for games and its recent success with VR titles under the leadership of David Ellison. Paramount's acquisition would likely result in a more stable environment for Warner's gaming studios, whereas Netflix's approach to gaming is more uncertain. While some industry experts believe that Netflix will reconsider its approach to AAA games after the acquisition, others are more pessimistic, suggesting that the company will eventually dismantle Warner's gaming division due to the financial burden of supporting AAA game development. The fate of Warner's gaming studios remains uncertain, with some experts predicting that Netflix will scale down the number of studios, while others believe that Paramount would be a more suitable owner, valuing the gaming studios more highly and potentially integrating them with their existing gaming operations.