By Zaheer Kachwala Jan 21 (Reuters) – Netflix's co-CEOs found themselves in an unusual position after the company's latest earnings report: on the backfoot. The streaming pioneer's decision to plunk down nearly $83 billion on Warner Bros' assets marks a significant departure from the company's long-standing mantra: build, don't buy. Investors still aren't buying it. Shares were already under pressure even before Netflix made an offer for Warner Bros Discovery's studio and streaming assets. The stock, which has lost more than 15% since Netflix made its first offer on Dec. 5, was down nearly 4% in early trading on Wednesday as co-CEOs Ted Sarandos and Greg Peters found themselves having to explain their aggressive push that has forced them to suspend share buybacks. Sarandos noted how tech giants such as Alphabet's YouTube had changed what television viewing meant, forcing Netflix to change tack to keep up. The two said they had not expected to make an offer for the Warner assets when they first started the due diligence process. "When we got into the hood, there were several things we saw that were just really exciting," Peters said. Netflix is trying to stay ahead of Paramount Skydance with its $82.7 billion all-cash offer for Warner Bros' film and television studios, its extensive content library and major entertainment franchises – including "Game of Thrones" and "Harry Potter." "We have often in our Netflix history debated building a theatrical business, but we were busy investing in other areas, and it never became our priority. But now with Warner Bros, they bring a mature, well-run theatrical business with amazing films, and we're super excited about that addition," he said, in a reversal of Netflix's former position that theaters were an outdated model with audiences preferring stay-at-home streaming. "And then you get to the streaming side of things, HBO. It is an amazing brand. It says prestige TV is better than almost anything. Customers know it. They love it. They know what it means," Peters said, adding that Warner's television studio was also a healthy business and complemented Netflix's own, expanding its production capability. INVESTORS ARE NOT CONVINCED With the expensive deal hanging over its head, Netflix delivered a tepid revenue beat for what is usually one of its strongest quarters, and forecast equally dull prospects for the new year. While a strong content line-up, including the final season of hit sci-fi series "Stranger Things," helped revenue growth, high costs associated with the Warner Bros acquisition have made people apprehensive about the long-term payoff, analysts said. Netflix said previously that it had obtained commitments for a $59 billion bridge loan to support the Warner Bros' deal. On Tuesday, it increased the bridge loan commitment by $8.2 billion to support its all-cash $27.75 per share offer. The deal is expected to face considerable scrutiny from lawmakers and competition regulators as high-profile acquisitions threaten to monopolize the market and leave consumers with fewer choices. But Sarandos on Tuesday moved to ease those concerns by reiterating the deal would be "pro-consumer" and "pro-worker", and that the acquired businesses would require new teams and would allow more opportunities for creatives. The deal "allows us to gain access to 100 years of Warner Bros deep content and IP for development and distribution in more effective ways that will benefit consumers and the industry as a whole," he said. (Reporting by Zaheer Kachwala in Bengaluru; Editing by Sayantani Ghosh and Anil D'Silva)
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