Netflix Withdraws from Warner Bros. Discovery Deal, Paramount Steps In

Netflix announced its decision to withdraw from a deal to acquire Warner Bros. Discovery’s (WBD) streaming and movie studio operations on Thursday night. This development follows a series of negotiations that began with Netflix’s initial proposal on December 5, 2023, when it intended to pay an equity value of $72 billion for a portion of WBD.

Paramount Skydance now stands poised to take over WBD, which includes popular intellectual properties such as Game of Thrones and DC Comics, as well as the HBO Max streaming service and cable channels like CNN and TBS. Paramount’s interest in WBD has been longstanding, and it recently escalated its takeover attempts following Netflix’s initial merger intentions.

On Tuesday, Paramount raised its offer for WBD by $1 per share and agreed to substantial financial terms to enhance the attractiveness of its bid. This included a $7 billion regulatory termination fee and an additional $0.25 per share for each day the merger remains unclosed after September 30. Paramount also offered to cover WBD’s $2.8 million termination fee for cancelling its deal with Netflix.

WBD’s board deemed Paramount’s revised offer “superior” and granted Netflix a period of four business days to match it. In a decisive turn, Netflix chose not to pursue the acquisition further. The streaming giant’s co-CEOs, Ted Sarandos and Greg Peters, stated that the WBD merger was always viewed as a “nice to have” rather than an essential acquisition. Their statement underscores Netflix’s strategic approach to mergers, particularly in light of recent financial assessments.

This withdrawal occurred amidst a decline in stock prices for both Netflix and Paramount, which have faced market pressures since the merger announcement. Following the news of Netflix’s exit from the bidding, the company’s shares experienced a boost of over 10 percent in after-hours trading, while Paramount’s shares rose by 5 percent.

In response to the impending merger with Paramount, WBD President and CEO David Zaslav expressed optimism, stating, “Once our board votes to adopt the Paramount merger agreement, it will create tremendous value for our shareholders.” He emphasized the potential for collaboration, eager to explore the stories that a combined Paramount Skydance and Warner Bros. Discovery can tell.

As the entertainment landscape continues to evolve, this shift marks a significant moment for both companies, impacting their strategic directions and market positions. The upcoming merger is anticipated to reshape the competitive dynamics within the streaming and entertainment sectors.