Movie Theaters Warn Warner Bros.–Netflix Merger Could Trigger “Tipping Point” for Hollywood

The film industry is on edge as movie theater owners sound alarms over Netflix’s proposed $82.7 billion acquisition of Warner Bros., calling it a potential “existential threat” to the theatrical business. The backlash comes amid growing fears that another legacy studio could disappear only five years after Disney’s takeover of 20th Century Fox.

The controversy escalated this week after Netflix co-CEO Ted Sarandos defended the streamer’s plans to continue releasing Warner Bros. titles theatrically — even as exhibitors warned that further industry consolidation could lead to fewer films, smaller release slates, and a collapse of the cinema ecosystem.

Sarandos Promises Commitment to Theatrical

Speaking at an investor conference in New York on Monday, Sarandos insisted that Warner Bros. would remain committed to movie theaters.

“We didn’t buy this company to destroy that value,” Sarandos said. “We have not talked a lot in the past about wanting to do theatrical because we’ve never been in that business. When this deal closes, we will be in — and we’re going to do it.”

He emphasized that Warner Bros.’ box office success this year with titles like A Minecraft Movie, Weapons, and Sinners wouldn’t have been possible without wide theatrical releases.

Still, Sarandos’ assurances did little to ease concerns among cinema owners, who fear Netflix’s business model — prioritizing streaming releases and shorter theatrical windows — could undermine the already fragile exhibition landscape.

Theater Owners Fear “System Collapse”

Leaders across the exhibition industry say the Netflix deal could push cinemas past a “tipping point.”

“Further consolidation in the industry is a real and potentially existential threat to cinemas,” said Mike Bowers, chairman of Cinema United and CEO of Harkins Theatres. “We have fixed costs. You reach a tipping point where it doesn’t just get smaller — it crumbles. And at that point, you don’t have an ecosystem that can support it.”

Michael O’Leary, CEO of Cinema United, issued a statement calling the proposed acquisition “an unprecedented threat to the global exhibition business.”

“Netflix’s stated business model does not support theatrical exhibition — in fact, it’s the opposite,” O’Leary said. “Regulators must look closely at this proposed transaction and understand the negative impact it will have on consumers, exhibition, and the entertainment industry.”

A Shrinking Pipeline and Post-Pandemic Pressures

Hollywood’s theatrical recovery remains uneven nearly five years after the pandemic shuttered theaters and accelerated the rise of streaming. Domestic box office revenue has struggled to surpass $9 billion annually, compared to pre-pandemic levels of around $11 billion.

Industry analysts cite a persistent 15–20% decline in regular moviegoers who have not returned to theaters. The slowdown has been compounded by production delays from the 2023 labor strikes, leaving fewer major releases on the calendar.

If Netflix’s merger is approved, many fear the number of films released theatrically will shrink even further. Since Disney’s 2019 acquisition of 20th Century Fox, combined annual output from Disney and Fox has dropped 46%, while total box office grosses from those labels are down 63%.

The Battle for Warner Bros.

Netflix’s deal is still in early stages and faces fierce competition from David Ellison and his father Larry Ellison, whose $108.4 billion bid for Warner Bros. could derail the streamer’s plans. Comcast also entered the race earlier this year.

Both Ellison and Sarandos have pledged to preserve theatrical releases. Ellison told investors his version of the studio would produce more than 30 films annually, promising to “satisfy the appetite of the moviegoing public.”

However, skeptics remain unconvinced that any merger — even one led by theatrical-friendly executives — would reverse the industry’s downward trend.

Can Netflix Keep Its Promise?

While Sarandos claims Netflix will maintain Warner Bros.’ traditional release model, many insiders doubt the company’s long-term commitment to theaters. The streaming giant has historically offered only one- to two-week exclusive runs for select titles before debuting them online, frustrating filmmakers who value the big-screen experience.

Netflix has also purchased historic venues like Los Angeles’ Egyptian Theatre and New York’s Paris Theatre to secure limited runs for prestige titles, but the streamer still refuses to share box office data publicly.

A studio executive told The Hollywood Reporter that Netflix’s real goal may be to “eliminate theatrical windows entirely.”

“That’s what this merger is all about — getting content and doing away with windows,” the executive said, referencing Sarandos’ comment that theatrical timelines will continue to “evolve to be more consumer friendly.”

Analysts Warn of Long-Term Risk

Eric Handler, a senior analyst at Roth Capital Partners, noted that Warner Bros. is contractually bound to release its films in theaters through 2029, offering temporary stability.

“That’s not really a near-term risk,” Handler said. “The bigger question is how much marketing support Netflix will provide. Are they going to spend 1:1 on P&A like other studios? That could be a big concern.”

Without adequate promotional investment, theater owners worry the already precarious box office may erode further, accelerating a future where fewer films reach the big screen — and fewer audiences fill the seats.

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