Here we go again! For the third time within a quarter century, the Warner Bros. studio assets have been acquired for more than $70 billion. Since I commented very sharply on the first two, lots of people are asking me my thoughts on the just-announced purchase of Warner Bros. by Netflix. I provide my response in this Playing to Win/Practitioner Insights (PTW/PI) piece. And as always, you can find all the previous PTW/PI here.
Third Time Lucky?
The first of these mega deals was in 2001 when AOL bought Time Warner in a deal that valued Time Warner equity at $166 billion. (While it was more of a merger than a takeover, it was technically structured as an acquisition). The next one was in 2018 when AT&T bought Time Warner for $85 billion. Both deals routinely make lists (like this one) of the worst takeover deals in business history.
The AOL Time Warner deal cratered almost immediately as the market realized that AOL was largely worthless, which was confirmed when AOL was spun off for a mere $3 billion in 2009. The selling shareholders initially thought they got an awesome deal because Time Warner shares were valued at a massive 70% premium over the preannouncement price. However, the payment was in what turned out to be wildly overvalued AOL stock. In the end, Time Warner shareholders gave up 55% of their company—worth about $55 billion based on preannouncement value of Time Warner—in exchange for an asset worth $3 billion. As a combination, AOL Time Warner was a disaster, but the shareholders of AOL made off like bandits.
In the AT&T Time Warner deal, AT&T learned not long after the dust had settled that this was a disastrous acquisition and, a mere three years later, sold the Time Warner assets to Discovery for $43 billion—a massive discount. As I have pointed out before, that is the equivalent of the AT&T executives holding a bonfire of $38 million of shareholder cash every day for three consecutive years.
On December 5, 2025, Netflix reached an agreement to acquire the Warner Bros. assets for $72 billion. Of course, we don’t know yet how it will turn out. The first two deals destroyed over $50 billion of value for Time Warner shareholders and over $40 billion for AT&T shareholders, respectively. The hope is that this will be third time lucky—but the track record around the transfer of Warner Bros. assets hasn’t been good thus far.
Deeply Flawed Strategic Rationales
I knew the first two deals were doomed from the outset because the (so-called) strategic rationale for both was deeply flawed.
The stated strategic logic of the AOL Time Warner combination was that AOL would benefit competitively in the internet access business, in which it was then the market leader, by having proprietary access to Time Warner content. Sounds great!
But the logic just doesn’t track. Time Warner’s value was based on its ability to broadly distribute its content. Content creation is a fixed cost business. Creators invest an enormous amount in creating the content and then to amortize that fixed cost, they strive to sell their content to as many users as possible.
AOL led in the internet access business with 30% market share at the time. One of two things could have happened after the combination. First, Time Warner content could have given AOL a meaningful advantage over its competitors. That would have validated a key tenet of the rationale. But had that happened, the other 70% of the market would have boycotted Time Warner content because it was helping their competitor, which would have sabotaged the business model of Time Warner. Alternatively, Time Warner content may not have been able to move the needle on AOL advantage over its competitors, invalidating the entire premise of the combination.
That is, there was zero probability of the strategic success of the combination, which I described in this Harvard Business Review piece.
On AT&T Time Warner, the rationale was owner economics, a concept I hate in the general case, as I discuss in this piece, and my antipathy applies in spades to this case. The idea was that by buying Time Warner, AT&T gained the advantage of owner economics. Rather than buying content from outside providers and having to pay a profit-margin premium for it, AT&T would get it from Time Warner at cost—improving the (owner) economics of AT&T. Yup, that would be true. But then all the business Time Warner would have with its giant customer, AT&T, would be at zero profit, thus tanking the profitability of Time Warner, ensuring that its value would never be close to the $85 billion for which it was purchased.
Days after the merger, I pointed out this logical flaw to Fortune reporter Jeff Colvin, who had called me for my opinion, and I predicted that: a) the acquisition would be an unmitigated disaster; b) would be divested within five years; c) at a price half of the acquisition price; and d) would cost AT&T CEO Randall Stephenson his job—predictions that Colvin confirmed in an article at time of divestiture. The only thing on which I was (slightly) wrong is that I predicted AT&T would salvage 50% of the purchase price—it was 50.6%.
Both illustrate what I call the Impossibility Theorem, which describes a situation in which for the logic to hold, two things must be true, but if one is true, the other can’t possibly be. For example, if AT&T does benefit from owner economics, Time Warner can’t maintain its value. If Time Warner can maintain its value, AT&T can’t benefit from owner economics. Not understanding the Impossibility Theorem cost shareholders roughly $100 billion across these two acquisitions.
Netflix-Warner Bros.
This all begs the question, is this just another Warner deal based on a fundamental strategic fallacy? No, it is not. There is no insane argument about owner economics or vertical integration. This is a plain, old-fashioned bulk-up move. With the acquisition of Warner Bros., Netflix bulks up in its two core businesses: content creation and content streaming.
Netflix started in media content distribution and led by pioneering internet streaming, becoming the dominant player in that arena. It distributed the content created by the traditional major players in that space, such as Universal, Paramount, Warner Bros., etc. However, during the 2011-2015 period, all the new streaming players, including Netflix, started spending aggressively in content creation of their own. As a result, Netflix is now a major player in both content streaming and content creation.
However, in streaming, Netflix is no longer the sole dominant player. Based on recent numbers, Netflix still has the biggest U.S. subscriber base with 81 million. But Amazon is close behind with an estimated 75 million. Disney’s Hulu has 64 million. But if you combine the three Disney streaming platforms (Hulu with 64 million; Disney+ with 55 million; and ESPN+ with 25 million), it is far ahead of Netflix with 134 million streaming subscribers. Globally, Netflix leads with 302 million subscribers to Disney’s 221 million (combined) and Amazon’s estimated 200 million.
But with the Warner acquisition, which includes its HBO Max service, Netflix jumps slightly ahead of Disney in the U.S. (139 to 134 million) and dramatically widens its global lead with 430 million to Disney’s 221 million and Amazon’s 200 million.
This is simple straightforward bulking up in Netflix’s core streaming business—overcoming its scale deficit in the U.S. and extending its scale advantage globally. That is a simple and powerful strategy logic.
In content creation, Netflix was a big part of the dramatic transformation by which the players that have entered content creation since 2011 now make up 50% of the estimated content creation spend. But prior to this deal, Netflix was a mid-tier player in that game, spending an estimated $17 million in 2024 compared with Comcast-Universal at $37 million or Disney at $28 million. However, adding in Warner’s $14 million makes Netflix one of the top tier content creators.
To the extent that scale matters in streaming and content creation—and I think it does—the strategic logic of this makes lots of sense, in stark contrast to the previous two trades of Warner Bros. assets.
The Rub
When the AOL Time Warner and AT&T Time Warner deals were announced, there was huge uproar in the press over antitrust concerns. Would the vertical integration hurt consumers? Would AOL and AT&T become dangerously dominant in their primary markets because of their ownership of Warner content? I didn’t worry for a second because regulators don’t have to protect consumers from mergers that are going to crater and I knew both deals were destined to fail miserably. Regulators only need to worry about mergers that are likely to succeed!
And they should worry about this one.
The Netflix press release is quite something. It makes two claims aimed specifically at potential antitrust concerns. Bold-type callouts claim that the combination will: 1) Offer More Choice and Greater Value for Consumers, and 2) Create More Opportunities for the Creative Community. I understand why companies do this kind of thing. Netflix would love to have readers be insipid enough to believe these two things because that would suggest there are no antitrust problems about which regulators should be concerned.
The problem is that both claims are flat out false. When you reduce the number of major competitors by one, you do not provide more choice or greater value for consumers. If you buy the competitor and leave it alone, at best, you provide the same choice and the same value. But to leave it alone is not why a company pays a huge takeover premium to buy a competitor.
And when you reduce the number of major industry players by one, you do not provide more opportunities for suppliers to that industry. You reduce by one the number of customers who compete for their services.
I can totally understand why Netflix wants to reduce competition from other streamers and other content creators. In streaming, it started with a near monopoly but has lost its lead in the U.S. market and is no longer far ahead globally. Getting rid of one major streaming competitor and bulking up makes lots of sense. In content creation, when all the new players entered, including Netflix itself, they created a bonanza for content creation talent. It has never been a better time for talent, as exemplified by Shonda Rhimes’s $450 million production deal with Netflix. Bulking up to have more buying power over content talent, plus eliminating one major content competitor makes total sense.
But dissimulating about it? Not a good look.
Practitioner Insights
You will be fed all sorts of ridiculous so-called strategy logic on a regular basis. It can be vertical integration, owner economics, or having one less competitor will deliver more choice for consumers. Some are the product of utter cluelessness, others fundamental dishonesty. Sometimes somebody else (like me) will help you expose the logical fallacies.
Other times, you will be on your own. For those times, it is important to practice your critical eye for strategy logic. When you read or listen to someone espousing a strategic logic, practice interrogating it. Don’t just accept it. Instead, take it under advisement and ask whether there is a better, more profound logic to explain the situation—e.g. Time Warner shareholders were about to be taken to the cleaners by AOL shareholders, owner economics is a fraudulent concept that will cost AT&T shareholders dearly, and Netflix isn’t motivated by consumer choice or creative community welfare but rather by increasing its scale and reducing competitive intensity in its core businesses.
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Organizations often describe change as a technical exercise: Adjust a workflow, update a reporting line, reorganize a process or two. On paper, it all looks relatively contained. But the lived experience of change rarely aligns with the tidy logic of a project plan.
Recently, I worked with a team in the midst of what leadership kept referring to as a “small restructuring.” And technically, it was. The core work wasn’t shifting, no one’s job was threatened, and the strategy made sense.
Yet the emotional climate thickened almost immediately. One manager became more reserved than usual, answering questions with careful brevity. Another grew unusually fixated on minor details. A third found herself more irritable, though she couldn’t articulate why. Nothing dramatic—just a low hum of unease moving through a group of otherwise steady professionals.
What struck me was how quickly this supposedly minor adjustment stirred up deeper questions for people. That’s the part of change we tend not to acknowledge. Even modest shifts can unsettle the psychological architecture we rely on to feel competent, grounded, and connected. The disruption isn’t about the logistics of the change; it’s about the quiet, internal recalibration that follows.
The Psychology Beneath Transition
In both coaching and clinical work, clients often describe this experience in vague terms: “I don’t hate the change. Something just feels . . . off.” That feeling isn’t superficial. It’s a signal that the change is brushing against something important—identity, capability, belonging, autonomy, the sense of who we are in relation to the work and the people around us.
Most reactions to change are not reactions to the actual change. They are reactions to what the change is interpreted to mean.
A new workflow can raise doubts about whether one’s skills remain relevant. A shift in reporting lines can evoke questions about trust or status. A more efficient structure may unexpectedly trigger fears of being left behind. Even when the change is welcome or long overdue, it can still destabilize the sense of continuity that makes daily work feel predictable.
When these emotions aren’t acknowledged, they tend to surface indirectly—as tension, withdrawal, hypervigilance, or that familiar sense that the team is slightly out of sync without being sure why.
A Leader’s Turning Point
I saw this play out with a director who couldn’t quite understand why her team seemed anxious. “We’re not changing their jobs,” she said. “Why is this causing so much stress?”
She was looking at the content of the change rather than its psychological implications. So I asked her, “If you were sitting in their chair what might this change symbolize?”
She thought for a long moment. “Probably that I’m losing control,” she said quietly. “Or that leadership thinks our judgment isn’t strong enough.”
Once she recognized that meaning-making—not mechanics—was driving the reaction, she changed her approach. Instead of doubling down on explanations of the strategy, she met individually with team members to ask how the transition was landing for them. These weren’t troubleshooting conversations; they were opportunities for people to articulate the emotional subtext of the change.
Over the next two weeks, the atmosphere settled. People began to reengage. The same plan, once met with tension, now felt workable. The difference wasn’t procedural. It was psychological.
What Effective Leaders Actually Do
Leaders often assume that smooth change management depends on clear plans and well-communicated timelines. Those matter, of course, but they’re not what ultimately determines whether people adapt. The leaders who navigate transition well understand that the emotional environment carries more weight than any formal framework.
1. They acknowledge the wobble
Effective leaders don’t pretend everyone is fine, nor do they treat every raised eyebrow as a crisis. They simply name what’s happening in a way that feels matter-of-fact and compassionate: “This kind of shift can throw people a bit. If you’re feeling unsettled, you’re not alone.”
The acknowledgment isn’t performative; it’s grounding. It signals that disorientation is expected—not a personal failing or a sign that someone is “resistant.” When the leader names the wobble, the team doesn’t have to expend additional energy hiding it.
2. They offer predictable touchpoints
In times of transition, people instinctively look for something steady to hold onto. Leaders who understand this create simple, reliable anchors: a weekly check-in that doesn’t get rescheduled, updates that arrive when they’re promised, a shared understanding of what will happen next—even if “what happens next” is simply another conversation.
Predictability doesn’t remove uncertainty, but it gives people a rhythm they can orient themselves around. It restores a sense of temporality—I know where we are, and I know when I’ll hear something again—which has a surprising regulating effect on the nervous system.
3. They reinforce continuity
One of the most destabilizing parts of change is the fear that everything is up for grabs. Leaders who navigate change well remind people of what isn’t shifting: the team’s shared values, their collective purpose, the norms that shape how they work together, the relationships that predate the change.
This isn’t about offering false reassurance; it’s about locating the throughline. People need to know what they can still rely on so they can make sense of what is genuinely new. Continuity is the psychological counterweight to upheaval.
4. They return a sense of agency
Change often creates a feeling of being acted upon, which is why even small choices can make a disproportionate difference. Leaders who understand this invite their team to help in decision-making in thoughtful, bounded ways: How should we sequence this work? What would make the new process feel more workable? Which aspects should we test first?
It’s not about democratizing every call; it’s about restoring a sense of authorship. When people have a hand in shaping even a small part of the transition, the experience shifts from something happening to me to something I’m participating in.
5. They make room for emotion without absorbing it
Every change process brings emotion along for the ride—frustration, anticipation, grief, relief, confusion. Strong leaders don’t pathologize those reactions, nor do they try to rescue people from them. They stay steady enough to listen without absorbing the emotional charge, and curious enough to understand what the emotion is pointing to.
When they respond, they don’t personalize the feelings or interpret them as pushback. They treat emotional reactions as data—information about needs, fears, assumptions, or blind spots in the transition. That stance alone often lowers the temperature.
Final Thought
Change will always involve more than new workflows or org charts. It touches people’s sense of competence, identity, and place in the system—and that’s where the real work of leadership happens. When managers pay attention to the emotional experience of change—not just the operational rollout—teams stay steadier and transitions land more cleanly. The leaders who succeed aren’t the ones with the perfect plan; they’re the ones who help people find their footing as the ground shifts.
An HBR Executive exclusive Q&A with Zak Brown, CEO of McLaren Racing.
