Paramount Skydance set to win war for Warner Bros Discover as Netflix walks away
In a surprising twist, Netflix has walked away from the bidding war to purchase Warner Bros Discovery (WBD) after rival Paramount Skydance submitted a final “superior” offer.
The final offer valued at $111bn (£83.4bn including debt) will most likely end the back-and-forth process, provided WBD’s board gives its blessing; however, the board seems to have changed tone toward the previously dubbed ‘hostile bidder’.
Despite being given four working days to make another offer, Netflix responded by pulling out hours later, stating the deal was “no longer financially attractive” — paving the way for Paramount Skydance.
The deal will still have to withstand significant regulatory scrutiny, which media analyst Alex Degroote stated there’s “no guarantee it will get through this unscathed.”
Analysis: Happy to walk away
Up until this point, Netflix had been the favourite for the WBD board after making an offer valued at $83bn (£61.6bn including debt), and the streamer’s exit marks an unexpected shift.
Co-CEOs Ted Sarandos and Greg Peters said, “We believe we would have been strong stewards of Warner Bros’ iconic brands. But this transaction was always a ‘nice to have’ at the right price, not a ‘must have’ at any price.”
The prospective deal was arguably reflective of the streaming giants’ hopes that, in expanding its scale and quality of its output, it would hold an advantage over its competitors in the streaming market.
Madison & Wall media industry analyst Brian Wieser previously estimated the combined Netflix-WBD entity would drive $2.3bn in US ad revenue, maintain a 10% share of total US TV viewing, and spend $13.4bn on annual US-based content production (equivalent to 17% of video expenditure excluding YouTube).
Speaking on a potential Netflix takeover Mike Proulx, research director at Forrester, previously told The Media Leader: “Netflix will cement itself as the Goliath of streaming services now with the combined weight of HBO Max and the content studios behind it all.”
It seems that Netflix has undergone a strategic shift in its vision, with the expected costs of the deal now outweighing the prospective gains.
A new global media market
The deal, should it occur, would combine some of the world’s largest media properties under one roof, something which Proulx has stated “would redefine the streaming landscape through further consolidation.”
He further suggested that a new streaming service, created by combining HBO Max with Paramount+, would “have the scale to better compete against Netflix and the unified Disney+ and Hulu library.”
The risk here is that while consumer cost-savings would improve, there would be reduced marketplace choice.
In response to the potential Paramount Skydance-Warner Bros merger, the US senator Elizabeth Warren stated it was “an antitrust disaster threatening higher prices and fewer choices for American families.”
Paramount’s chair and chief executive, David Ellison, is the son of billionaire Larry Ellison, an ally of the US president, who has put up tens of billions of dollars to satisfy funding guarantees for the WBD bid.
Officials at the White House have long preferred Paramount’s bid, and Ellison’s friendship with Trump could make the deal more likely to surpass regulatory scrutiny.
Tom Harrington, head of TV at Enders Analysis, told The Media Leader that “theoretically” the deal should have many more regulatory hurdles to overcome than the Paramount-Skydance deal, particularly given the overlap in services between Paramount and WBD.
But he remarked: “As always, favourable relationships in government can at least speed up the process.”
Through the deal, Paramount Skydance would also own CNN and CBS News, sparking concerns about the independence and survival of the former, which may be merged with CBS News.
This marks a consistent and growing trend of extremely wealthy oligarchs buying news and entertainment companies to own information channels that influence international discourse.