Netflix Says WB Games Is Relatively Minor – Here Is Why That Might Be A Big Mistake

When Netflix announced its gigantic 82.7 billion dollar agreement to acquire Warner Bros. Discovery’s Streaming and Studios business, the fine print hid a surprising detail: WB Games was bundled into the deal, yet the gaming division was treated as if it were worth essentially nothing. No shout-out in the press release, no slide in the investor deck, and, as executives have now confirmed, no explicit value assigned in Netflix’s internal model.

For a publisher that just delivered Hogwarts Legacy, the best-selling game of 2023 and a 34 million unit phenomenon as of early 2025, that stance feels almost paradoxical.

Speaking at the UBS Global Technology Conference, Netflix co-chief executive Gregory Peters framed WB Games as a nice bonus rather than a pillar of the transaction. In his words, the teams have done strong work in games, but relative to the overall size of the streaming and studio assets, the division is minor and therefore did not factor into the valuation model. In practical terms, Netflix seems to be treating WB Games as a free call option on future upside: if it works, great; if it does not, the deal still makes financial sense in their eyes.

That conservative posture clashes with the track record of Warner Bros. Interactive. Hogwarts Legacy was not a modest hit; it broke a 14 year run during which either Call of Duty or a Rockstar title topped the US sales charts. It showed how potent the Harry Potter license can be when translated into an accessible, open world power fantasy that families and core players can both enjoy. At the same time, the portfolio has scars: the commercial and critical stumble of Suicide Squad: Kill the Justice League, the shutdown of Monolith Productions and other studios, and a painful restructuring that narrowed focus to four key universes: DC, Game of Thrones, Harry Potter, and Mortal Kombat.

Yet even after those cuts, there is substantial unrealised potential. Behind the logo wall is a roster of teams that any platform holder would covet: Rocksteady with its Batman heritage, Avalanche Software proving it can ship a global blockbuster, NetherRealm refining fighting games through Mortal Kombat, TT Games owning the family friendly Lego niche, and more. Layered on top are valuable technical assets, such as the Nemesis style system made famous by the Shadow of Mordor games, a design approach that dynamically personalises enemies and rivalries in a way few competitors have matched. Even if you argued the studios themselves are easier to replace in an era of outsourcing and AI assisted workflows, those systems and pipelines embody years of learning.

Crucially, the crown jewels are not just the studios but the intellectual property. WB Games sits at the intersection of some of the most adaptable franchises in modern entertainment. Harry Potter is almost uniquely suited for repeatable game design: a school structure, clear progression, recognisable spells, and room for new heroes and villains in almost any era without trampling canon. By contrast, The Lord of the Rings, which WB holds significant rights to exploit, is famously more constrained. Tolkien’s world is tightly defined, and fans are quick to reject stories that feel like loose fan fiction. That is one reason we have seen flashes of brilliance, like the Shadow titles or an earlier MMO, alongside long stretches of underused potential. The opportunity is not that these IPs are easy; it is that, done well, they can support entire ecosystems of games, live services, and spin-offs.

So why would Netflix still label this portfolio as relatively minor in the context of the deal? Part of the answer is scale. When you are spending over eighty billion dollars on streaming rights, linear channels, and production infrastructure, even a multibillion dollar game business can mathematically look like a low single digit percentage of the pie. Conservative acquirers often prefer to underwrite only the most stable, forecastable revenue streams and treat everything else as upside. The climate around games, where hit driven economics and volatile budgets collide, does not encourage aggressive modeling. One could draw a parallel with certain market darlings in AI or semiconductors whose valuations are driven largely by speculative future cash flows; Netflix appears determined not to repeat that kind of exuberance around content verticals it still considers experimental.

That said, the strategic fit is hard to ignore. Netflix already bundles a growing library of mobile titles into its subscription, mimicking in some ways Apple Arcade and Google Play Pass. With WB Games, it suddenly has access to properties that can anchor a far more ambitious push: think a cross device game hub where you can jump from watching a DC series to playing a co op Gotham adventure, or from binging a fantasy drama to exploring its world in an action RPG, all using the same login, cloud saves, and social layer. A cloud first model, effectively a Game Pass style service powered by the Netflix app, is no longer science fiction; it is an obvious strategic endpoint if the company chooses to invest aggressively.

The competitive pressure is real. While Netflix closed its only internal AAA studio last year, Paramount via Skydance is circling the entire Warner Bros. Discovery group with its own 108.4 billion dollar hostile bid. Unlike Netflix, Skydance already operates multiple high end game teams, including Skydance Interactive on the VR front and Skydance New Media under industry veteran Amy Hennig, which is building Marvel 1943: Rise of Hydra and a Star Wars project slated for the second half of 2026 or later. A Paramount controlled Warner would plug those efforts directly into globally recognised IP, creating a rival ecosystem where narrative, film, television, and high end games are conceived together from day one.

That raises a crucial question: is Netflix quietly underestimating what it has negotiated, or is the market overhyping the value of traditional publishers in a world where engines, outsourcing houses, and AI tools are commoditising parts of development? Some investors insist that the true value lies in the IP catalog, not in what they dismiss as overpriced, ego driven creative staff. Reality is messier. Technology can accelerate asset creation, but it cannot replace the judgement required to make a combat system feel satisfying, a story arc land emotionally, or an adaptation respect its source material while inviting in new audiences. The fate of Suicide Squad versus the success of Hogwarts Legacy illustrates how thin that line can be.

In the end, Netflix’s zeroed out valuation of WB Games tells us less about the intrinsic worth of the division and more about the companys current priorities. It is buying a streaming giant first and a game publisher almost by accident. If regulators, rival bids, or shifting market conditions derail the transaction, that stance gives Netflix an easy narrative: the model never depended on games. But if the deal closes and the company genuinely leans into interactive entertainment, the same choice will look like sharp discipline. It will have secured a powerful set of studios, technologies, and universes for a bargain line item on an eighty plus billion dollar invoice. Whether that becomes a missed opportunity or one of the most underappreciated parts of the acquisition will depend on what Netflix builds from here.