Netflix Swipes Left on Warner Bros. After Paramount Swoops In
Dmitry Kropachev
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In December, it looked like Netflix was all set to take over Warner Bros. Discovery in an $82.7 billion deal. However, in a surprising twist, the streaming giant has stood up and walked away from the negotiating table, declining to compete with a $111 billion bid from Paramount Skydance.
Netflix was close to making a deal that would have seen the world’s most popular streaming service acquire Warner Bros., HBO, and HBO Max in a massive cash-and-stock deal. However, Paramount, which has been vying to pick up the entire operation for months, made a last-minute final offer for $111 billion.
Netflix decided that number was “no longer financially attractive” and opted to drop out.
In a Thursday announcement, Netflix co-CEOs Ted Sarandos and Greg Peters said:
The transaction we negotiated would have created shareholder value with a clear path to regulatory approval. However, we’ve always been disciplined, and at the price required to match Paramount Skydance’s latest offer, the deal is no longer financially attractive, so we are declining to match the Paramount Skydance bid.
We believe we would have been strong stewards of Warner Bros.’ iconic brands, and that our deal would have strengthened the entertainment industry and preserved and created more production jobs in the U.S. But this transaction was always a ‘nice to have’ at the right price, not a ‘must have’ at any price.
In addition to the offered $31-per-share offer, Paramount has committed to a $7 billion reverse break-up fee should regulators block the deal, providing a massive safety net for WBD shareholders. Paramount is also willing to dig into its apparently deep pockets to cover a $2.8 billion termination fee, which Warner Bros. will have to pay to Netflix for ending the merger plans.
The stock market responded well to the news. Netflix shares surged by 8.5% in after-hours trading — a strong indication that investors appreciated the streaming giant’s decision to avoid overpaying for Warner Bros. Discovery.
Warner Bros. Discovery’s board, which repeatedly rejected Paramount’s advances last year, relented on Thursday, saying that while it still recommends the Netflix offer, it now views the Paramount bid as “superior” — a surprising about-face for a suitor that it originally saw as “hostile” when the battle for the soul of WBD began last summer.
Warner Bros. CEO David Zaslav was quoted as saying Paramount’s offer “will create tremendous value,” and that the studio was “excited about the potential of a combined Paramount Skydance and Warner Bros Discovery.”
Assuming the deal doesn’t run into regulatory approval issues, which seems unlikely considering the current political climate and close ties between Paramount owner Larry Ellison and US president Donald Trump, it looks like Paramount’s offer will be the winning bid in the battle for WBD. Still, weirder things have happened, and nothing is set in stone until the deal is all tied up in a bow.
HBO Max is already the number 3 streaming service in the US, with 100 million subscribers. In December, Senator Elizabeth Warren — a Democrat who has been quite vocal in her opposition to large conglomerates — had called the Netflix-WBD deal “an anti-monopoly nightmare” that would put control of half the US streaming market in the hands of one company.
In a rare moment of bipartisan consensus, the Trump administration was also said to be concerned about giving Netflix, which already has market dominance, even more control over Hollywood, with rumors the Justice Department was preparing to launch an antitrust investigation into the deal.
While the Trump administration is likely to be more receptive to the Paramount bid, Warren and other Democrats may still rally opposition to the deal, as it shifts the potential monopoly problems from streaming to television, studio production, and news media.
Once the deal is finalized, Paramount Skydance will not only own Warner Bros. and HBO, but also CBS News and the CNN network. It will also take ownership of several popular properties, including The Big Bang Theory, The Sopranos, Game of Thrones, The Wizard of Oz and the DC Universe — both the publishing and cinematic universes. It will also acquire the production of hit Apple TV shows like Ted Lasso and Shrinking.
While some speculated that Apple may have also considered its own bid for Warner Bros., the iPhone maker seems to be sitting this one out on the sidelines, likely waiting to see what will become of Paramount+ — with which it reportedly discussed a bundle deal at one time — and HBO Max in the new world order.
