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Investing.com -- Bernstein analysts said in a note Monday that Netflix’s reliance on licensed content from Paramount and Warner Bros. Discovery is limited, even if a potential merger between the two were to disrupt licensing arrangements.
“The potential acquisition of WBD by PSKY (according to WSJ) has raised a near-term question for Netflix: How reliant is Netflix on licensed content from them, and what would be the impact if the combined entity pulled the plug?” Bernstein wrote.
The analysts noted that “PSKY and WBD have stabilized their media businesses, with growth in streaming and studios partially offsetting declines in linear.”
Both have increased licensing to Netflix, creating what Bernstein called a “mutual beneficial, complex relationship.”
“Could a combined entity PSKY-WBD pull the plug on Netflix? It’s possible, but we view it as unlikely,” Bernstein said.
The firm argued that both companies “still depend on Netflix not only as a licensee of content, but also as an effective marketing platform… and a likely a bundle partner in the future.”
Using Netflix’s own data, Bernstein found that “over 90% of TV hits are Netflix Originals YTD.” Of 151 unique titles making Netflix’s Global Top 10 this year, only five were licensed from PSKY or WBD. “We expect the impact on Netflix to be immaterial,” the analysts said.
Movies could present more exposure. “Roughly 70% of hit movie titles YTD were licensed, with about ~30% (of the 70%) coming from PSKY and WBD,” Bernstein wrote. But films contribute less engagement than TV series.
“Net-net, we are not overly concerned about the potential impact,” the analysts concluded, reiterating an Outperform rating and a $1,390 price target.