How the Studios Lost Netflix -- and Other Failed Media Deals

How the Studios Lost Netflix -- and Other Failed Media Deals

Published: October 19, 2010 @ 7:00 pm
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By Dylan Stableford & Brent Lang

The failed talks between Tina Brown, Barry Diller and Newsweek owner Sidney Harman over merging the magazine and the Daily Beast are not the first time that a high-profile media merger fell apart on its way to the altar.

In fact, "It's a surprise deals ever get done," said Reed Phillips, partner at media investment firm Desilva + Phillips. "There are so many moving parts, so many financial intricacies, plus the personalities have to mesh."

After the talks broke down on Monday, TheWrap dug around for some of the biggest that never materialized.

We found some undiscovered ones including:

Netflix and All the Hollywood Studios

Hard to believe now, but there was a time when the studios could've had Netflix under their collective thumb.

In the late 1990s, Warner Brothers made a deal with Netflix founder Reed Hastings to share revenues on DVD rentals in exchange for a significant number of warrants in the fledgling DVD-by-mail company. 

At the time, Warners was looking for leverage against the Blockbuster behemoth's demands -- and as with other DVD pacts, studios followed suit, each taking pre-IPO took stock in Netflix, according to two individuals with knowledge of the deal.

Funny thing happened: following Netflix's 2002 IPO, the studios sold their stock. Within a year, none of the studios maintained a stake (Dreamworks was a late holdout).

“Netflix could have been owned by the industry,” said one of the dealmakers.

Now Netflix is growing at a record clip and Blockbuster, the company the studios were so worried about, is in Chapter 11. Listed as creditors in the filing were many of the same companies that could have owned a piece of Netflix.

Of course, the innovation that has fueled Netflix's success and move into digital distribution might not have happened had so many sprawling publicly traded companies owned a piece of it.

That said, they definitely sold low: During the time of its IPO, common shares of the company sold for $15. Today, it trades at nearly $150 a share.

MSNBC-Huffington Post / Yahoo-Huffington Post

A recent New York magazine profile of MSNBC (“Chasing Fox”),  included this anecdote as part of president Phil Griffin’s newfound “ratings religion”: “Recently, MSNBC tried to buy the Huffington Post.”

Such a move would certainly qualify as “Leaning Forward” -- MSNBC’s new slogan – and rank among the more shocking old-new media partnerships in memory. But HuffPo co-founder Ken Lerer rejected the offer.

Then again, there are lots of media companies that kick HuffPo’s tires. This past spring, the company was in talks to be acquired by Yahoo! -- where HuffPo CEO Eric Hippeau is on the board of directors -- in the spring, but those talks broke off after the two sides could not agree on a valuation.

Tags: Daily Beast, deals, Huffington Post, Media, MSNBC, Newsweek, Tina Brown, Yahoo
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