Netflix is declining to raise its offer to buy Warner Bros. Discovery’s studio and streaming business, in a stunning move that effectively puts Paramount in a position to take over its storied Hollywood rival.
On Thursday, after Warner’s board announced that Skydance-owned Paramount’s offer was superior to the agreement it had previously struck with Netflix, the streaming giant said the new price it would have to pay to acquire Warner would make the deal “no longer financially attractive.”
“We believe we would have been strong stewards of Warner Bros.′ iconic brands,” Netflix’s co-CEOs Ted Sarandos and Greg Peters said in a joint statement. “But this transaction was always a ‘nice to have’ at the right price, not a ‘must have’ at any price.”
Sarandos and Peters also thanked Warner leadership. Warner had repeatedly backed the deal it struck with Netflix since December—and even when announcing that Paramount’s latest offer was superior earlier Thursday, the company said its board stood by its previous recommendation in favor of Netflix.
Paramount and Warner did not immediately respond to requests for comment about Netflix’s choice to walk away. Thursday’s news arrived after Paramount upped its rival bid for the entire company to $31 per share, in addition to other revisions.
A Warner Bros. Discovery buyout would reshape Hollywood and the wider media landscape. And unlike Netflix—which only wanted to buy Warner’s studio and streaming business for $27.75 per share—Paramount wants the entire company. That means HBO Max, cult-favorite titles like Harry Potter, and even CNN could soon find themselves under a new roof.
Paramount’s CBS has seen significant editorial shifts, notably with the installation of Free Press founder Bari Weiss at CBS News, under new Skydance ownership. And if Paramount’s acquisition of Warner is successful, critics warn of similar changes at CNN.
A Paramount-Warner combo would also combine two of Hollywood’s five legacy studios that remain today, in addition to their theatrical channels. Beyond Harry Potter, Warner movies like Superman, Barbie, and One Battle After Another—as well as hit TV series like The White Lotus and Succession—would join Paramount’s content library.
Paramount’s titles include Top Gun, Titanic, and The Godfather. And beyond CBS, it owns networks like MTV and Nickelodeon, as well as the Paramount+ streaming service.
Executives at Paramount have argued that merging will be good for consumers and the wider industry. But lawmakers and entertainment trade groups have sounded the alarm—warning that a Warner takeover would only further consolidate power in an industry already run by just a few major players. Critics say that could result in job losses, less diversity in filmmaking, and potentially more headaches for consumers who are facing rising costs of streaming subscriptions as is.
Combined, that raises tremendous antitrust concerns. The U.S. Department of Justice has already initiated reviews, and other countries are expected to do so, too.
Netflix, Warner, and Paramount have spent the last couple of months in a heated, public back-and-forth over whose deal has a better regulatory path—and offers more value for Warner shareholders. Thursday’s announcement arrived shortly after Paramount upped the ante on its offer.
Beyond increasing its proposed purchase price for Warner, the company also agreed to a regulatory termination fee of $7 billion. And Paramount pledged to move up a previously promised “ticking fee.” The company initially said it would pay 25 cents per share for every quarter the deal drags on past the end of the year. Now it’s agreed to pay that amount if the deal doesn’t go through by the end of September, Warner said.
But Paramount is taking on billions of dollars in debt to finance its offer. And David Ellison’s father, Oracle founder Larry Ellison, is heavily backing the bid for his son’s company. Foreign sovereign wealth funds have also provided equity for the offer, drawing scrutiny.
The Ellisons also have a close relationship with President Donald Trump—bringing more politics into question. Trump previously made unprecedented suggestions about his involvement in seeing a deal through, before walking back those statements and maintaining that regulatory approval will be up to the Justice Department.
The push to acquire Warner also arrives mere months after Skydance closed its own buyout of Paramount—in a contentious merger approved just weeks after the company agreed to pay the president $16 million to settle a lawsuit over editing at CBS’s 60 Minutes program. Still, Trump has continued to publicly lash out at Paramount and 60 Minutes since.
—By Wyatte Grantham-Philips, AP Business Writer