What Does Netflix's Withdrawal Mean for Paramount's Ambitious Bid for Warner Bros.?

Netflix Steps Back from Warner Bros. Acquisition

In a surprising turn of events, Netflix has decided not to pursue its offer to acquire Warner Bros. Discovery's studio and streaming operations, paving the way for Paramount to potentially take over its Hollywood competitor.

On Thursday, the board of Warner Bros. revealed that Paramount, backed by Skydance, had presented a more attractive offer of USD 31 per share, surpassing Netflix's previous agreement.

Warner Bros. granted Netflix four business days to submit a counteroffer, but Netflix quickly declined, stating that the new price rendered the deal "no longer financially appealing."

Netflix's co-CEOs, Ted Sarandos and Greg Peters, expressed their belief that they could have effectively managed Warner Bros.' iconic brands, but emphasized that the acquisition was not essential at any cost.

If Paramount successfully acquires Warner Bros. Discovery, it would significantly alter the Hollywood landscape. Unlike Netflix, which was only interested in Warner's studio and streaming assets, Paramount aims to acquire the entire company, which includes HBO Max, beloved franchises like "Harry Potter," and CNN, alongside Paramount's own CBS and Paramount+ service.

This potential merger, which still requires approval from Warner's shareholders and regulatory bodies, raises concerns regarding antitrust issues and political influence.

Netflix's withdrawal marks a significant moment in a protracted corporate struggle over Warner's future. Despite the outcome, Sarandos and Peters thanked Warner's leadership for their collaboration.

Warner had consistently supported its agreement with Netflix since December, right up until Thursday evening, when the board acknowledged Paramount's bid, valued at approximately USD 111 billion, as "superior."

Previously, Netflix had proposed a USD 27.75 per share offer for Warner's studio and streaming business, totaling nearly USD 83 billion.

In a statement, CEO David Zaslav praised Netflix executives as "extraordinary partners" and wished them well moving forward.

Following months of intense negotiations amid Paramount's aggressive campaign to acquire Warner without board approval, Warner's stance on the remaining potential buyer shifted.

While Warner's board has yet to formally adopt Paramount's merger proposal, Zaslav indicated that it would create significant value, expressing excitement about the prospects of a combined Paramount Skydance and Warner Bros. Discovery.

Paramount has not yet responded to requests for additional comments, but CEO David Ellison previously commended Warner's board for recognizing the "superior value" of their offer.

A merger between Paramount and Warner would unite two of Hollywood's remaining legacy studios, along with their theatrical distribution channels.

In addition to "Harry Potter," Warner's film library includes titles like "Superman," "Barbie," and "One Battle After Another," along with popular TV shows such as "The White Lotus" and "Succession," which would join Paramount's extensive collection.

Paramount's portfolio features classics like "Top Gun," "Titanic," and "The Godfather," and it also owns networks like MTV and Nickelodeon, in addition to the Paramount+ streaming platform.

Should the merger proceed, CNN would operate under the same umbrella as CBS, which has already undergone notable editorial changes under new Skydance ownership.

Paramount has made efforts to attract a more conservative audience in its news operations, particularly with the appointment of Free Press founder Bari Weiss as editor-in-chief of CBS News. Critics warn that similar shifts could occur at CNN if Paramount's acquisition is successful, given the network's history of criticism from Trump.

"Concerns about Netflix owning Warner Bros. are amplified by the possibility of Paramount acquiring all of WBD. However, it may not even matter," stated Mike Proulx, vice president and research director at Forrester, in an email. "Politics are playing a significant role in this deal, and they have consistently favored Paramount from the beginning."

Former President Donald Trump has a close relationship with billionaire Larry Ellison, the father of Paramount's CEO David Ellison, who is strongly supporting Paramount's bid for Warner.

Paramount's aggressive pursuit of Warner comes just months after Skydance completed its own acquisition of Paramount, a contentious merger that was approved shortly after the company agreed to pay the president USD 16 million to settle a lawsuit regarding editing at CBS's "60 Minutes" program.

Despite this, Trump has continued to publicly criticize Paramount over editorial choices at CBS's "60 Minutes." While he previously suggested he might influence a Warner deal, he has since retracted those statements, asserting that regulatory approval will be determined by the Justice Department.

Top Democratic lawmakers have raised alarms about the implications of Trump's connections to companies like Paramount and the potential ramifications of increasing corporate power.

"A small group of billionaires aligned with Trump are attempting to control what you watch and charge whatever prices they choose," remarked Democratic Senator Elizabeth Warren, a long-time advocate for antitrust measures, in a statement Thursday night. She described a potential Paramount-Warner merger as an "antitrust disaster."