Netflix drops Warner Bros bid, ceding to Paramount

What happened

Netflix Thursday dropped its bid for Warner Bros. Discovery, shortly after Warner’s board deemed a counteroffer from Paramount Skydance “superior.” That gave Netflix four business days to match Paramount’s $31-a-share offer. Instead, the streaming giant said the deal was “no longer financially attractive” at that price and walked away. “This transaction was always a ‘nice to have’ at the right price, not a ‘must have’ at any price,” Netflix co-CEOs Ted Sarandos and Greg Peters said in a statement.

Who said what

Netflix’s exit was a “stunning move that effectively puts Paramount in a position to take over its storied Hollywood rival,” plus HBO, CNN and other cable networks, The Associated Press said. The “prospect of such a combination,” notably putting both CNN and CBS under the control of Paramount’s David Ellison, “poses both antitrust concerns and questions of political influence.” Ellison and his father, Oracle billionaire Larry Ellison, are close with President Donald Trump, who has already demanded changes at CNN.

Netflix “has the cash to raise its offer” to match Paramount, a company “one-thirtieth” its size, said The New York Times. But Netflix shareholders have “questioned” the wisdom of spending so much on a “legacy movie business” that was “trading as low as $12 a share” in September. The Ellisons are paying and borrowing an irrational amount, a Netflix adviser told Reuters, and “there’s no point in playing chicken with someone who won’t turn the wheel.”

What next?

Paramount’s purchase must be approved by Warner’s board and shareholders and regulators in the U.S. and Europe. “Approval from federal regulators seems likely given the political environment,” TD Cowen analysts said in a note. But California Attorney General Rob Bonta (D) said on social media that the “two Hollywood titans have not cleared regulatory scrutiny” in his state and “we intend to be vigorous in our review.”