NEW YORK (AP) — In an unexpected turn of events, Netflix has chosen not to increase its acquisition offer for Warner Bros. Discovery’s studio and streaming operations, paving the way for Paramount to potentially take over the venerable Hollywood entity. This decision follows Warner's board announcement that Paramount's bid, backed by Skydance, is superior to Netflix's previously agreed-upon terms.
On Thursday, Warner's board declared that Paramount's latest offer, which values the company at $31 per share, represents a “company superior proposal.” In contrast, Netflix's management stated that the new pricing would make the deal “no longer financially attractive.” Paramount’s approach aims to acquire not only Warner’s streaming services but also its extensive networks, which include CNN and Discovery, thus merging the media properties under one umbrella.
A takeover by Paramount would greatly influence Hollywood and the broader media landscape, as it has been aggressive in acquiring assets. Previously, the owner of HBO Max, DC Studios, and renowned franchises like "Harry Potter," had supported Netflix's proposal. However, the recent revision from Paramount threatens to alter the bargaining dynamics significantly. If successful, this merge would lead to a concentration of two of Hollywood's last five major studios, allowing Paramount to absorb a multitude of valuable titles, including Warner's franchises such as "Superman," "Barbie," and popular television series like "The White Lotus" and "Succession."
Currently, Paramount maintains a notable catalog, featuring celebrated films such as "Top Gun," "Titanic," and "The Godfather," alongside its ownership of CBS, MTV, Nickelodeon, and the Paramount+ streaming service. While executives at Paramount argue the merger would benefit consumers and the industry as a whole, there is substantial concern among lawmakers and entertainment groups regarding the potential for increased industry consolidation, job losses, decreased diversity in content creation, and higher subscription costs for consumers already facing rising streaming fees.
The proposed merger raises significant antitrust implications, prompting the U.S. Department of Justice to begin reviewing the situation, with other nations expected to follow suit. Both Netflix, Warner, and Paramount have engaged in a public discourse over which proposal offers a more favorable regulatory outlook and benefits Warner's shareholders. The announcement of Paramount's increased offer coincided with its commitment to covering a $7 billion regulatory termination fee, along with a revised “ticking fee” which stated that $0.25 per share would be paid for any delay in finalizing the acquisition past September.
However, taking on Warner represents a significant financial risk for Paramount, as it must grapple with billions in additional debt to facilitate this acquisition. David Ellison, the son of Oracle founder Larry Ellison, who is in strong support of the bid, adds a layer of scrutiny given his family's close ties to political figures, including former President Donald Trump. Previous to this development, Trump suggested possible involvement in the deal before clarifying that regulatory approvals would remain the responsibility of the Justice Department.
This proposal arrives less than a year after Skydance completed its own acquisition of Paramount, a merger that was mired in controversy and which garnered attention for the relationship between the Ellison family and Trump. Despite the complications surrounding executive influence and regulatory concerns, Paramount's management maintains that the acquisition of Warner's assets could lead to beneficial changes in the media environment, although many within the industry remain skeptical of these claims.
