Netflix exits Warner Bros deal, opens door for Paramount
Netflix has opted not to increase its bid for Warner Bros Discovery’s studio and streaming operations, a surprising decision that strategically positions Paramount to potentially acquire the renowned Hollywood entity. On Thursday, following the announcement from Warner’s board that the offer from Skydance-owned Paramount was superior to its prior agreement with Netflix, the streaming giant stated that the price necessary to acquire Warner rendered the deal “no longer financially attractive.” In contrast to Netflix’s approach, Paramount seeks to acquire the entirety of Warner’s operations, encompassing networks such as CNN and Discovery. This would align CNN with Paramount’s CBS, effectively merging two of the last five remaining studios in Hollywood. Warner Bros Discovery has concluded that Paramount’s most recent acquisition proposal surpasses the streaming and studio arrangement it established with Netflix, indicating a significant change in the dynamics of the competition for the renowned Hollywood entity. The proprietor of HBO Max, DC Studios, and renowned franchises such as “Harry Potter” had supported Netflix’s initiative for several months. Following the increase of its rival bid for the entire company to USD 31 per share by Skydance-owned Paramount, along with other adjustments, Warner’s board stated on Thursday that the offer “constitutes a company superior proposal.” This development may signal the onset of a renewed bidding war for Warner. Netflix has a window of four business days to potentially align its proposal with Paramount’s, which is currently set at USD 27.75 per share for Warner’s studio and streaming operations. Warner on Thursday asserted that Netflix’s offer is still available.
Despite the decision made on Thursday, the board indicated that it “has not withdrawn or modified” its earlier recommendation supporting that transaction. In the interim, Paramount’s CEO David Ellison expressed approval regarding the development, highlighting in a statement that the company was “pleased WBD’s Board has unanimously affirmed the superior value of our offer.” A buyout of all or parts of Warner’s business would significantly alter Hollywood and the broader media landscape. The current takeover battle is intricate, as Netflix and Paramount have divergent objectives. In contrast to the streaming giant, Paramount seeks to acquire all of Warner’s operations, encompassing networks such as CNN and Discovery. This development would align CNN with Paramount’s CBS, which has undergone considerable editorial changes, particularly following the appointment of Bari Weiss, now under the new ownership of Skydance. Should Paramount’s acquisition of Warner prove successful, it is anticipated that the impact of these changes will expand significantly. A merger between Paramount and Warner would unite two of the five remaining legacy studios in Hollywood, alongside their theatrical distribution networks. In addition to “Harry Potter,” Warner’s cinematic offerings such as “Superman, Barbie,” and “One Battle After Another,” alongside successful television series like “The White Lotus” and “Succession,” are set to become part of Paramount’s content repository.
Today, Paramount’s portfolio features “Top Gun, Titanic,” and “The Godfather.” In addition, the company possesses networks such as MTV and Nickelodeon, along with the Paramount+ streaming service. Executives at Paramount, along with Netflix in its distinct pursuit of Warner, have contended that consolidation will benefit consumers and the broader industry. However, legislators and representatives from the entertainment sector have raised concerns regarding the potential implications of both transactions, cautioning that an acquisition of all or portions of Warner’s operations would exacerbate the concentration of influence within an industry that is already dominated by a limited number of significant entities. Critics argue that this may lead to job losses, a decrease in diversity within filmmaking, and possibly increased challenges for consumers already grappling with the rising costs of streaming subscriptions. The combination raises significant antitrust concerns, and the potential sale of Warner may ultimately hinge on which party secures regulatory approval. The US Department of Justice has commenced its reviews, with other nations anticipated to follow suit. The firms have engaged in an intense public discourse over the past few months, debating which proposal presents a more favorable regulatory trajectory and delivers greater value for Warner shareholders. Thursday’s announcement came promptly following Paramount’s increased offer. In addition to raising its proposed acquisition price for Warner, the company has consented to a regulatory termination fee amounting to USD 7 billion.
Paramount has committed to accelerating the implementation of a previously-announced “ticking fee.” The company initially stated it would disburse 25 cents per share for each quarter the agreement extends beyond the year’s conclusion. It has been established that the specified amount will be disbursed should the transaction not be finalized by the conclusion of September, as stated by Warner. Paramount is incurring billions of dollars in debt to fund its proposal. David Ellison’s father, Oracle founder Larry Ellison, is providing substantial support for his son’s company’s bid. Foreign sovereign wealth funds have additionally supplied equity for the offer, attracting scrutiny. The Ellisons maintain a close relationship with President Donald Trump, thereby raising further political considerations. Trump previously made unprecedented suggestions regarding his role in facilitating a deal, only to later retract those statements, asserting that the responsibility for regulatory approval lies with the Justice Department. The initiative to acquire Warner comes shortly after Skydance finalized its acquisition of Paramount—a contentious merger that received approval just weeks following the company’s agreement to pay the president USD 16 million to resolve a lawsuit. Nonetheless, Trump has persistently criticized Paramount and “60 Minutes” in public statements since then.
