WB Games may not have been valued in deal model for Netflix's $82.7 billion Warner Bros. bid

WB Games, an interactive segment that recently generated over $1 billion in sales with Hogwarts Legacy, apparently was not included in Netflix's valuation of Warner Bros.'s studios & streaming business.

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Netflix wants to buy Warner Bros.'s most valuable parts for $82.7 billion. The streamer is interested in WB's studios & streaming business, which includes HBO, HBO Max, catalog TV shows and film, the studio in Burbank, and the interactive entertainment division WB Games responsible for numerous platinum-selling games.

Interestingly enough, it now appears that Netflix may not have included WB Games in its $82.7 billion deal model; when companies want to make an acquisition, they put together what's called a deal model, or an in-depth brief that puts a value on the business that they want to buy. Now at this year's UBS Global conference, Netflix co-CEO Greg Peters seems to indicate that Netflix didn't assign a value to WB Games when putting together its deal model for WB's studios & streaming business.

• Read more: Hogwarts Legacy hits 40 million sales, one Harry Potter game has now outsold entire franchises
• Read more: Netflix to acquire Warner Bros for $82 billion, includes WB Games studios and IP
• Read more: Netflix to bid on WB Games and full Warner Bros Discovery Streaming & Studios business

WB Games is responsible for some top-selling video games, including Hogwarts Legacy, which is one of the only games to beat Call of Duty sales in the United States for any given year, as well as the highly popular Mortal Kombat series, which has sold over 100 million units across its lifetime.

Below we have a quick copy of the exchange about WB Games, as per the event's transcript.

Do note the final point about how WB Games content could also be used in a similar fashion to how Netflix currently uses its IPs for gaming experiences on the service, e.g. more smaller-scale linear micro-games.

It's hard to determine exactly whether or not Peters is referring to the value of WB Games as a whole, or the value that could come from any sort of cross-synergies or IP acceleration/enhancement from WB Games as a result of the deal.

John Christopher Hodulik - UBS Investment Bank, Research Division

Does the Warner Bros. assets enhance the - or accelerate the success on the gaming side?

Gregory K. Peters - Co-CEO, President & Director

Yes, and [it's] maybe worth going back again to sort of how we thought about the deal and building our valuation model.

While they definitely have been doing some great work in the game space, we actually didn't attribute any value to that from the get-go because they're relatively minor compared to the grand scheme of things.

Now, we are super excited, because some of those properties that they've built--Hogwarts is a great example of that--have been done quite well, and we think that we can incorporate that into what we're offering.

They've got great studios and great folks working there. So we think that there's definitely an opportunity there. But just to be clear, we haven't built that into our deal model.

Theodore A. Sarandos - Co-CEO, President & Director

Got it. And by the way, I'll just - IP enhancements that will come from gaming would apply to all those.

Gregory K. Peters - Co-CEO, President & Director

Yes. That's right.