Warner

It was a crowning moment. Netflix appeared to have prevailed in an audacious $82.7-billion deal to scoop one of the industry’s most prestigious studios: Warner Bros. The move seemed to cement Netflix’s status as the ultimate Hollywood gate-crasher and its dominance as the leading new player in media.

Now, nearly a year later, the plotline for Netflix has dramatically changed. The streaming giant lost out to Paramount Skydance in its bid for Warner Bros. Discovery and is facing headwinds on multiple fronts.

That was underscored this week when the streaming giant Netflix began shedding 6% of its workforce, or about 1,000 jobs — believed to be the largest layoff in the company’s history and exceeding the last round of job cuts in 2022, when it reported subscriber declines.

On Wednesday morning, Ted Sarandos and Co-Chief Executive Greg Peters sent a note to employees confirming the job losses, adding that the bulk of the cuts would affect the tech, product, legal and human resources teams.

“Our mission — to entertain the world — is ambitious, and delivering on it requires us to be disciplined about where we prioritize our people and resources,” wrote Sarandos and Peters in the memo obtained by The Times.

The cuts mark the latest reductions across the film and TV industry. Other entertainment and media companies have slashed their payrolls, including Walt Disney Co., Paramount and Sony Pictures Entertainment during a period of economic uncertainty in Hollywood.

But the scale of such downsizing is unusual for Netflix. Industry analysts and insiders chalk up the reversal of fortune to several factors. Although it still dominates the television business, the Los Gatos company hasn’t been able to produce enough new hit franchises to replace culture-defining shows from years past such as “Stranger Things” and “Squid Game.”

At the same time, Netflix faces rising competition from rivals such as HBO Max, Apple TV, Hulu and others that have upped their game. Free, ad-supported streaming platforms such as YouTube are increasingly taking a larger slice of consumer streaming hours. And Netflix’s efforts to diversify its business into new areas such as games have yielded mixed results.

A Netflix building on Sunset Boulevard in Los Angeles in 2025.

(Myung J. Chun / Los Angeles Times)

The upshot: Netflix continues to be the dominant video subscription streaming player with more than 325 million subscribers, but the time that consumers spend on the platform is growing at a slower pace than what investors want. In the first half of this year, consumer watch time on Netflix increased only 2% compared with a year earlier, even as content spending increased 11% to $20 billion this year. Netflix also narrowed its annual revenue forecast last summer, disappointing some investors.

“Netflix’s layoffs show that even the top streaming companies are not immune to stagnation and financial difficulties,” said Ross Benes, senior analyst at research firm Emarketer.

Amid the sobering signs, investors have grown restless. Netflix shares, which closed at $70.57 on Wednesday, have plummeted 42% in the last year. Part of that decline was fueled by anxiety among investors over Netflix’s deal to buy Warner Bros. Discovery, but the share price hasn’t rebounded even after that deal fell apart.

“They need to better prepare their balance sheet and economics since engagement has plateaued,” said Brandon Katz, director of insights and content strategy at Greenlight Analytics.

Katz said that Netflix’s five most-watched English-language scripted summer movie releases in their first eight weeks posted the lowest average hours watched compared with the streamer’s top five summer releases in 2025, 2024 and 2023, citing Nielsen data.

Sarandos acknowledged concerns about engagement at a Bloomberg Screentime event Sept. 30.

“Overall we’re not growing as fast as I want us to, and we’re working on making that move faster,” Sarandos said.

Netflix declined to comment on the layoffs.

“We’ll continue to invest aggressively in high-impact areas to improve our service and further drive growth and innovation,” Sarandos and Peters said in their memo to employees.

In some ways, Netflix has been victim of its own success. It has produced a string of shows and movies that have hit the cultural zeitgeist such as “KPop Demon Hunters” and “Squid Game.” But finding enough new popular shows that continue to drive subscriptions has been a challenge.

“A lot of these major hits are coming to an end at similar times, and they don’t yet really have heir apparents to replace them,” Katz said.

Sci-fi hit “Stranger Things” released its finale last year, followed by the young-adult drama “Outer Banks” and “Emily in Paris,” which ends this year. Netflix also announced that “The Witcher” and “The Lincoln Lawyer” will wrap after their next seasons.

What’s more, the second seasons of some shows with big followings have seen large view drop-offs compared with their first seasons. For example, the fantasy series “Avatar: The Last Airbender” season 1 debuted with 21.2 million views, but views for its second season dropped 59% to 8.7 million, according to Netflix data.

New series from Netflix also haven’t captured as much consumer demand as other competing shows from rival streamers, according to Parrot Analytics.

Last year, Netflix had just one show — the Japanese anime and manga series “Sakamoto Days” — that made it in Parrot’s top 10 list of first season original series on streaming platforms. Parrot’s ranking measures consumer demand in the U.S. and is based on digital interactions such as social media chatter and Google searches. By comparison, Netflix had three titles in 2022 alone: the true crime show “Monster,” the documentary series “Harry & Meghan” and the sci-fi mystery show “1899,” Parrot said.

Sarandos told investors in July that such declines are typical and that second season falloff is slightly improved this year. But popular shows on rival streaming services such as the medical drama “The Pitt” on HBO Max have not seen such declines. “The Pitt” drew even more viewers in its second season than the first.

To diversify its business, Netflix has expanded its programming offerings beyond TV shows and movies to include live sports, such as football and baseball games.

Although live programs have helped to spur significant subscription sign-ups, they still represent just 1% of watch time on Netflix while costing 5% of the company’s content budget, Sarandos has said.

Netflix also has added video podcasts that have helped to boost daytime viewing on the platform, and has made deals with YouTube creators to bring their content to the streaming service.

But some of the new content hasn’t clicked, particularly in games, analysts said. In August, Netflix shut down Hollywood-based Night School, the maker of supernatural adventure game “Oxenfree,” and said it was closing a Helsinki-based games studio.

“They are spending on a lot of things that haven’t necessarily proven to be effective yet,” said Rob Rosenberg, a partner at law firm Moses & Singer and former Showtime Networks general counsel. “It feels a lot like they’re trying to send a message to Wall Street that ‘we’re re-examining how we do business.’”

Meanwhile, Netflix continues to face more competition from rivals such as YouTube, which offers a free, ad-supported version of its video library.

Unlike Netflix, YouTube does not pay for the creation of many of the videos on its platform. Instead, creators or companies upload and produce the programs themselves and YouTube shares ad and subscription revenue.

YouTube’s share of streaming watch time in the U.S. on TVs has steadily increased. In July, YouTube represented 14.2%, compared with Netflix’s 7.8%, according to Nielsen.

The pressure to boost engagement on Netflix has caused tension within the company, particularly between the teams of people responsible for how programs are promoted on the platform and the employees responsible for bringing shows and movies on Netflix, according to people familiar with the matter who were not authorized to speak publicly.

Some blame the content for not being enticing enough, while others contend that the programs could be promoted better on Netflix.

“It’s a bit of a quagmire,” said one of the sources familiar with the matter. “There is a tension when things aren’t working. People tend to point fingers.”

In their staff memo, Sarandos and Peters said Netflix is on track to deliver its full-year forecast and will continue to invest in areas that improve its service and drive growth and innovation.

“Doing that means making focused choices across the business so we can keep delivering for our members, partners, employees, and investors,” they wrote.

Despite the downsizing, Netflix remains highly profitable. In the second quarter, the company generated $3.4 billion in net income, up 9% from a year earlier. Revenue rose 13% to $12.6 billion last quarter, including double-digit revenue growth in all of its regions. Next week, the company will share its third-quarter results.

The streamer is expected to get a boost from new seasons of popular shows — including season 4 of the political drama “The Diplomat” and spy series “Lupin: Part 4,” as well as Thanksgiving Eve and Christmas Day NFL games.

Having new seasons of popular shows such as “Lupin” and “The Diplomat” will help boost Netflix’s engagement, said Alejandro Rojas, vice president of applied analytics at Parrot Analytics.

“The new season is like a catalyst for people to watch the previous seasons,” Rojas said.

On the theatrical side, Netflix also has high hopes for upcoming movies including La Bola Negra, starring Penelope Cruz; and “The Further Mis-Adventures of Cliff Booth” featuring Brad Pitt. Next year, Netflix will release the Greta Gerwig-directed film, “Narnia: The Magician’s Nephew” on Imax screens.

Netflix has not signaled any changes to its strategy for releasing movies or TV shows. But some analysts said it could benefit from having more theatrical releases and by dropping episodes of shows once a week, instead of all at once, to generate more buzz for programs. They also expect that Netflix will be more disciplined in its content spending.

“While the company will expand its sports roles, it’s cutting back at a time when revenue matters much more than subscriber additions,” said Benes of Emarketer. “With pressure mounting, Netflix will look to turn the tide by getting a boost from low-cost content. The battle for top creators will become more pitched.”

Times staff writer Samantha Masunaga contributed to this report.

The Tom Cruise-led “Digger” is poised for a massive loss after ticket sales for the political satire fell 60% in its second weekend in theaters in the U.S. and Canada.

The Warner Bros. film made just $3.2 million in those theaters over the weekend, according to a studio estimate. Its opening weekend brought in $8 million, Cruise’s lowest opening as a leading man since 2007’s “Lions for Lambs.” Global ticket sales for “Digger” were only $35.3 million.

The tepid box-office returns mean the studio is now expected to lose at least $150 million on the film, including ancillary revenue streams such as premium video-on-demand and streaming, industry sources said. Historically, a film has typically needed to make 2½ to three times its budget to recoup its costs.

A Warner Bros. spokesperson did not respond to a request for comment.

It’s a tough result for the film, which stars Cruise as an aging oil tycoon whose company sets off an environmental catastrophe. Analysts have said that the film was challenging to market, given a major twist in the plot, and that Cruise’s nearly unrecognizable appearance could have dissuaded his fan base from coming out to support the film.

The film suffered from polarizing critical reviews, notching a 53% on aggregator Rotten Tomatoes. Opening-night audiences gave it a C+ on CinemaScore, a grade that typically points to weak word of mouth and steep drops in the weeks that follow.

The budget for “Digger” raised the stakes. Warner Bros. has said the film cost $125 million to produce, though some industry experts and trade reports have estimated the cost was at least $160 million, citing production delays.

That figure also doesn’t include marketing costs, which sources said could have increased in the days after the film’s opening since Warner Bros. began using the divided reviews in social media and TV ads to encourage people to see the film for themselves.

The film will have value to Warner Bros. — and Skydance, the newly combined company that now owns it — beyond its theatrical reception. “Digger” probably will make money through downstream revenue sources such as streaming. If Cruise wins his first competitive Oscar, that also would be a plus for the film.

But a film’s domestic reception, and to some extent, its international box office revenue, does play a role in the value of those downstream revenue opportunities, experts said.

“Even with respectable ancillary income based on the film’s pedigree, the movie is going to lose a lot of money,” David A. Gross wrote in his FranchiseRe movie industry newsletter shortly after the film’s opening.

The reception for “Digger” comes during a tough time for Warner Bros.

The film opened Oct. 2, the same day the studio’s film chiefs, Michael De Luca and Pam Abdy, departed. Four days later, Paramount completed its acquisition of Warner Bros. Discovery, and the combined company took the name Skydance.

The studio has had a string of disappointments this year, including Maggie Gyllenhaal’s “The Bride!” and DC Studios’ “Supergirl.” None of its 2026 releases has crossed $100 million at the domestic box office.

But the prospects for Warner Bros. should improve next year, according to the research and brokerage firm Bernstein. Skydance has said it will keep the Warner Bros. and Paramount studios distinct, though Paramount Pictures chiefs Dana Goldberg and Josh Greenstein are expected to oversee both. Bernstein expects the Warner Bros. film and TV studios to amass $11.7 billion in revenue, driven by strong titles that include the sequel to “Minecraft” and a new “Lord of the Rings” movie.

David Ellison said the merged Paramount and Warner Bros. Discovery will be called Skydance — the moniker he picked nearly two decades ago when the tech scion began building his Hollywood empire.

Ellison, currently the chairman and chief executive of Paramount, is aiming to finalize the acquisition of Warner Bros. Discovery by Tuesday. Then the combined company will assume the name and logo of his once small studio.

“We chose this name for a few important reasons,” Ellison wrote Friday in an X post. “As we bring Paramount and Warner Bros. together, we wanted to preserve what has made each of these studios iconic. Both have distinct identities, extraordinary legacies and brands that have resonated with audiences … We never wanted a new corporate identity to diminish, alter or overshadow either one.”

By calling the company “Skydance,” Ellison said the merged entity would have “an identity of its own while allowing Paramount and Warner Bros. — and all our extraordinary brands — to remain in the spotlight.”

In Hollywood, there had been much speculation over what jumbled mash-up of the corporate titles would be used, with WarnerMount and Paramount-Warner Bros. often mentioned as possibilities.

Both companies boast century-old studios, beloved media brands and a recent past that has included several fraught mergers. When AT&T sold WarnerMedia to David Zaslav’s Discovery in 2022, he selected Warner Bros. Discovery as the corporate name.

The merger is quickly reaching the finish line after U.S. District Judge Araceli Martínez-Olguín on Wednesday signed a settlement agreement, effectively ending an antitrust lawsuit brought in July by California Atty. Gen. Rob Bonta and 11 other state attorneys general who initially fought the formation of a new Hollywood colossus. Paramount now has won approvals by nearly 70 regulators for the industry-reshaping deal.

For more than a decade, Paramount has been the smallest of the major media companies, owning CBS, Comedy Central, BET, Nickelodeon and the Melrose Avenue studio. With the $111-billion merger with Warner, Skydance will gain more valuable assets including HBO, CNN, TBS, Food Network and Warner Bros. film and television studios, along with their massive libraries that include the Harry Potter, “Lord of the Rings,” and DC Comics franchises.

Earlier this week, Ellison announced he was bringing Ynon Kreiz, who has served as the CEO of toymaker Mattel for eight years, to run the new entity’s day-to-day operations. Kreiz, 61, brings years of operational experience that Paramount’s top executives had lacked.

Paramount released details of Kreiz’s contract on Thursday in a regulatory filing, saying he would receive an $5 million annual salary and an annual target bonus of $4.9 million. He will also qualify for a signing bonus of $31.5 million to come over to the new company, paid through restricted stock units.

In addition, HBO Chairman Casey Bloys is widely expected to become head of the merged company’s streaming programming. Paramount’s streaming chief Cindy Holland exited the company earlier this week to make way for Bloys.

During a Thursday appearance at the Bloomberg News Screentime media conference in Hollywood, Bloys declined to discuss his presumed new role. But he suggested that that Ellison’s company might bundle HBO Max and Paramount+ services, allowing the two services to remain for now, rather than try to fold them into one gigantic offering.

Skydance will carry than $80-billion in debt, much of it acquired to retire the holdings of Warner Bros. Discovery investors at $31.17 a share. The company also has promised investors that it would find $6 billion in cost-cuts within three years.

During a separate appearance at the Bloomberg conference, RedBird Capital Partners founder Gerry Cardinale, a Paramount investor and board member, said finding $6 billion in cuts would be relatively easy, and would not be focused solely on layoffs. It would include combining the technology stacks for the various streaming platforms.

But Cardinale acknowledged layoffs would be part of the cost-cuts, a prospect that frightened many in Hollywood after endless waves of job cuts at the two companies.

Warner’s outgoing chief executive Zaslav will leave with a golden parachute valued at about $887 million, which includes cash, stock and options valued at more than $550 million, according to regulatory filings.

In addition, Warner board members separately agreed to pay Zaslav’s tax bills, which could approach $330 million.

Tom Cruise is one of the bankable stars in Hollywood. But his pull may not be enough to lift his upcoming film “Digger” from a likely hard fall at the box office this weekend.

That would be unwelcome news for Warner Bros., whose movies have largely struggled to connect with audiences this year, in contrast to 2025, when the studio ran up a string of hits such as “Sinners” and “Weapons.”

All of this comes as the studio braces for an uncertain future with Paramount Skydance’s $111-billion acquisition of Warner Bros. Discovery set to close on Tuesday.

“No single film is going to capsize the boat,” said Stephen Galloway, dean of the Dodge College of Film and Media Arts at Chapman University. “However, it’s coming at a precarious time because it follows a series of less-than-successful releases at the very moment when the Warner Bros.- Paramount deal has been greenlit, and everybody — no matter how high up — is terrified for his or her job.”

Matching the success of the 2025 film slate was always going to be a tall order, particularly when so many of Warner Bros.’ movies that year overperformed.

So far this year, the studio’s domestic box office haul is $437.7 million, representing about 5.6% of the total theatrical revenue in the U.S. and Canada, according to Rentrak data.

Last year, Warner Bros.’ total at this time was $1.8 billion, aided by back-to-back successes starting with “A Minecraft Movie,” which went on to become the highest-grossing movie at the domestic box office during that calendar year.

The studio currently does not have any film in the top 20 of domestic box office earners this year, which includes some holdovers from 2025, with Emerald Fennell’s adaptation of “Wuthering Heights” ranking at 21 with $84 million. Bets on films like Maggie Gyllenhaal’s “The Bride!” cratered, while DC Studios’ “Supergirl” misfired.

“Digger” is unlikely to turn things around.

The satire from director Alejandro González Iñárritu about an impending climate change apocalypse has divided critics, yielding very mixed reviews. Tracking predictions for the film’s debut have steadily trended downward and settled between $15 million and $19 million.

That would be a major miss, given the film’s production budget was about $125 million (not counting marketing costs).

“Digger” faces several hurdles. For one, the film has a major twist, which complicates its marketing and makes it difficult to tell audiences what it’s about.

Then there’s Cruise’s nearly unrecognizable performance as Digger Rockwell, an eccentric oil tycoon whose drilling operations have led to the unfolding climate disaster. Clad in prosthetics with a head full of graying hair, Cruise is far from his usual stunts-heavy, bravado-filled roles, which could make his typical audience less likely to come out to theaters, analysts said.

“It has a lot of question marks,” said David A. Gross, who writes the movie industry newsletter FranchiseRe. “It doesn’t look like it’s heading for financial success.”

The film will have value to Warner Bros. beyond its theatrical reception. “Digger” probably will also make money through ancillary revenue streams such as premium video on demand and streaming, industry experts said. And if Cruise wins his much-coveted Oscar for his role as Digger, that is also a plus, Galloway said.

Beyond the fate of “Digger,” Warner Bros.’ theatrical business will be of prime importance to the combined Paramount-Warner company.

Last year, Warner’s studio business, which includes both film and television production, brought in $12.6 billion in revenue. This year, it’s projected to generate $11.1 billion, according to market expectations. On a positive note, Warner Bros. still has its animated “The Cat in the Hat” film releasing in November and the popular “Dune: Part Three” at the end of the year.

The prospects for Warner Bros. should improve next year, when the film and TV studios are expected to amass $11.7 billion in revenue, driven by strong titles including the sequel to “Minecraft” and a new “Lord of the Rings” movie, according to Bernstein research.

Aside from theatrical revenue, Warner Bros.’ film and TV properties have been key drivers of business to HBO Max and will also provide valuable content to Paramount+, particularly as the linear cable networks continue to decline.

“I would argue the studios are the very reason Paramount Skydance is buying Warner Bros.,” said Laurent Yoon, senior analyst at Bernstein. “Everything starts with the studios.”

The combined company is also legally required to release at least 30 films a year as part of a settlement agreement over antitrust claims with 12 state attorneys general, including California’s Rob Bonta. Paramount Chief Executive David Ellison has previously said the two studios would each release 15 films a year.

But the type of content the studios release could change after the merger is completed. Under film chiefs Pam Abdy and Mike De Luca, Warner Bros. developed a reputation for auteur-driven, original stories, particularly after the success of the 2025 slate. Ellison’s slate has trended toward blockbuster fare.

The combined company will also face a massive debt load of more than $80 billion after the merger closes, meaning there may be greater pressure for future films to be hits.

“Ellison is primarily in the business of delivering blockbusters,” Galloway said. “That’s going to be even more important as he tries to right the ship of his debt.”

Mammoth deal has raised questions about corporate consolidation and editorial independence in media.

A United States judge has entered an order giving the green light for the media giant Paramount to complete its $110bn acquisition of entertainment company Warner Bros., despite fears about the long-term impacts of media consolidation.

On Wednesday, US District Court Judge Araceli Martinez-Olguin approved a settlement between Paramount, Warner Bros, and a group of 12 states that had sued to block the merger.

In her ruling, Martinez-Olguin described the proposed deal as a “fair, reasonable, and good faith approach to address the competitive harms”.

Analysts have long raised concerns about the acquisition, one of the largest media mergers in history.

The coalition of states that sued to block the deal, led by California, had argued that combining Paramount with Warner Bros would effectively stifle media competition. They estimated that nearly one-third of all theatrical releases and basic cable programming would be consolidated under the merger.

But the states abandoned their lawsuit in favour of a settlement on September 21.

The five-year agreement requires Paramount to abide by theatrical film release quotas, committing to 30 releases per year in the US.

It also mandates that the combined company must keep negotiations with cable providers for Warner-owned channels separate from its deals for Paramount-owned channels.

The settlement approved on Wednesday also includes the creation of a five-member panel meant to safeguard the editorial independence of CNN and CBS, two major news networks.

But sceptics have pointed out that the merger puts a large swath of US media under the control of David Ellison, who leads Paramount.

Under Wednesday’s agreement, Ellison is in charge of appointments to the board that would oversee news independence.

The Paramount CEO is the son of billionaire Oracle founder Larry Ellison, a strong backer of pro-Israel causes who has close ties to the administration of President Donald Trump.

The founder of the film production company Skydance, David Ellison acquired Paramount last year as part of another controversial merger.

The 2025 Paramount-Skydance deal brought CBS under Ellison’s control. Ahead of the merger, sceptics questioned the abrupt cancellation of the CBS comedy show The Late Show with Stephen Colbert, which had been critical of Trump.

Ellison later installed Bari Weiss, a pro-Israel media figure, as the head of CBS News in a move that also raised questions about diminished independence within major journalism outlets.

Some critics depicted Wednesday’s settlement as a further capitulation to powerful corporate interests.

“Allowing one Trump-aligned, foreign-owned conglomerate to dominate American news and entertainment is a disastrous outcome,” Senator Elizabeth Warren of Massachusetts said in the wake of the settlement’s announcement.

But public officials like California Governor Gavin Newsom had called on his state’s Attorney General Rob Bonta to scrap the 12-state effort to block the deal and to pursue a settlement instead.

Paramount emerged victorious from a bidding war with the streaming giant Netflix in February to win control of Warner Bros’s holdings.

That includes a series of media and entertainment services, including the film studio Warner Bros Pictures, CNN and HBO Max. The Trump administration approved the deal without alterations in June.