Netflix (NASDAQ:NFLX) fell 2.7% on Wednesday as markets reacted to reports that the company is evaluating a possible bid for key Warner Bros. Discovery (NASDAQ:WBD) assets — a move that would represent one of the largest strategic pivots in the streamer’s history.

According to multiple reports, Netflix has hired a financial advisor and begun reviewing Warner Bros. Discovery’s financials as part of early-stage due diligence. The development comes even after CEO Ted Sarandos recently told investors that although Netflix continues to explore M&A opportunities, the company has typically been “more builders than buyers.”

Morgan Stanley analyst Benjamin Swinburne weighed in on the speculation, noting both the logic behind such a move and the high barriers it would face. “A deal, if announced, could introduce strategic questions & potentially face regulatory hurdles unique to Netflix as a buyer,” Swinburne wrote.

Swinburne pointed to several strategic advantages Netflix might be pursuing: Warner Bros.’ extensive film and television library, a roster of iconic franchises such as Harry Potter, DC Comics, and Lord of the Rings, and the strength of HBO’s reputation in premium TV — all assets that could deepen Netflix’s content moat globally.

Still, the note underscored a variety of operational challenges. Netflix could upend Warner Bros.’ theatrical release model in favor of direct-to-streaming exclusivity, as well as unwind long-standing third-party licensing deals. Such steps would likely weigh on near-term earnings for the acquired operations.

For HBO, Swinburne suggested Netflix might even consider discontinuing the standalone service and merging the content into its own platform — foregoing nearly $2 billion in adjusted EBITDA in exchange for greater long-run monetization through Netflix’s global distribution scale.

Regulation represents perhaps the largest uncertainty. “As the largest streaming company in the world, we believe Netflix would likely face regulatory hurdles should it bid for and reach an agreement with Warner Bros.,” Swinburne wrote, adding that theater chains, labor groups, and rival streaming platforms would likely mount opposition.

The analyst emphasized that Netflix would only proceed if it believed the long-term upside of controlling such exclusive IP outweighed both the acquisition cost and the profit impact from any strategic restructuring. Based on preliminary estimates, a potential offer could value Warner Bros. Discovery at roughly $20–$30 per share, financed mainly with cash and debt.

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