Netflix defends Warner bid as 'only way' to find enough series to cancel

Netflix co-CEO Ted Sarandos on Friday defended the company’s surprise bid for Warner Bros Discovery, telling investors the deal is “the only scalable way” to secure a sufficient pipeline of original series to cancel in coming years.

“The memo projects that a fully integrated Netflix-Warner operation could terminate 1,200 shows annually, including 380 legacy Warner titles 'previously assumed to be safe'.”

Speaking on a hastily arranged conference call, Sarandos said Netflix’s current slate of 1,842 active shows leaves the company “roughly 600 series short” of its 2027 cancellation targets, according to a recording of the call reviewed by reporters.

A Netflix spokesperson confirmed the company has been under mounting pressure from shareholders to increase its ‘cancellation velocity’, an internal metric that tracks how quickly a show can be greenlit, marketed and then discontinued.

“In a competitive environment, we simply cannot rely on organic commissioning to generate enough content to later discontinue,” the spokesperson said, adding that Warner’s library would provide “instant cancellation synergies” across scripted, unscripted and animation.

According to an internal memo dated Feb. 21 and seen by staff, Netflix’s content strategy team has modeled a combined entity capable of cancelling up to 73% of newly launched series within six weeks of premiere, up from the current 41% rate.

The memo projects that a fully integrated Netflix-Warner operation could terminate 1,200 shows annually, including 380 legacy Warner titles “previously assumed to be safe” and a new tier of “pre-cancelled pilots” that would be shelved before principal photography.

Regulators in the United States and European Union have requested additional information on the proposal, including Netflix’s forecast that acquiring Warner would reduce “per-cancellation costs” by 18% through shared marketing budgets and consolidated social media farewell posts.

Analysts at JPMorgan said in a note to clients that the logic appeared consistent with broader industry trends, citing Paramount’s own need to “bulk up its disposable content inventory” as a reason for its separate strategic review and an expiring deadline to find a buyer.

In a separate presentation to competition authorities, Netflix argued that the deal would not harm consumers, pointing to its pledge that “at least 12%” of acquired Warner series would be allowed to complete their first seasons before being discontinued.

To address concerns over cultural impact, the company has also proposed a voluntary “heritage protection list” of up to 11 classic Warner shows that would not be cancelled for at least 18 months, subject to biannual performance reviews and a newly created Global Cancellation Committee.

Netflix said it expects an initial response from U.S. regulators by late summer, with a person familiar with the matter saying the company is prepared to divest up to three minor cable brands, one children’s cartoon franchise and an unspecified number of half-finished reboots if required to secure approval for the deal.