The streaming and entertainment industry just witnessed one of its most high-stakes megadeals ever, stunning industry observers. Not only is it historic in its size, but it is also predicted to disrupt Hollywood and the media business as we know it.
After years of Warner Bros. Discovery struggling under the weight of billions of dollars in debt, compounded by declining cable viewership and fierce competition from streaming platforms, the company began considering major strategic changes, including selling its entertainment assets.
Several major players saw the potential in acquiring the media giant. In December, Netflix announced it would acquire WBD’s studios and streaming assets for $82.7 billion. But in a surprise eleventh-hour move this month, it now looks like the David Ellison-run Paramount will actually be the winner of this bidding war, offering $111 billion to acquire all of Warner Bros. Discovery’s assets. This includes its studios, HBO, streaming platforms, games, and TV networks such as CNN and HGTV. Paramount was itself recently acquired by Ellison with significant support from his father, Oracle chairman Larry Ellison.
Paramount’s offer still awaits formal approval from WBD’s board of directors, and any potential agreement may also face pressure from regulators.
This all started back in October when Warner Bros. Discovery revealed it was exploring a potential sale after receiving unsolicited interest from several major players. The bidding process quickly became competitive, with Paramount and Comcast emerging as serious contenders. Paramount was initially viewed as the frontrunner. However, WBD’s board eventually determined that an offer from Netflix for just the film, television, and streaming assets was the most attractive.
Thus began the bidding war. Paramount believed its bid, of approximately $108 billion for all of Warner’s assets, was superior. Netflix amended its agreement in January to an all-cash offer. Paramount persisted, but the Warner board repeatedly rejected its offers, citing concerns about Paramount’s heavy debt load and the investors bankrolling its bid, which included Saudi, Qatari, and Abu Dhabi sovereign wealth funds.
In January, Paramount filed a lawsuit seeking more information about the Netflix deal. A month later, the company sought to sweeten its deal by announcing a per-share fee for shareholders for each quarter the deal failed to close, and said it would pay a breakup fee if Warner backed out of the Netflix deal.
Then, in a final attempt, Paramount increased its offer in February. This prompted the WBD board to prolong discussions with Paramount, considering it a superior offer. Netflix declined to increase its bid and withdrew from negotiations. In addition to the billions Paramount already holds in debt, the company is also set to assume approximately $33 billion in debt from Warner Bros. Discovery.
In addition to the substantial debt, Paramount faces several other hurdles. Ellison has warned about significant job reductions expected in the near future. Ellison is also a controversial figure, and his ownership of CBS News has been seen as sympathetic to the administration of Donald Trump, whom his father, Larry Ellison, has supported. This has led to concern among employees at Warner-owned CNN.
Regulatory scrutiny is another major hurdle. Such a large-scale merger has attracted attention from lawmakers. California Attorney General Rob Bonta stated that the companies have not cleared regulatory scrutiny and that an open investigation is underway. A coalition of state attorneys general also urged the U.S. Department of Justice to review the merger over concerns it will stifle competition and increase prices. U.S. senators have previously warned that the merger could have serious consequences for consumers and the industry.
The deal is not yet final. Initially, a deal with Netflix was expected to lead to a stockholder vote around April, with closing anticipated within 12 to 18 months. The transition to the Paramount deal will likely create a new timeline, pending regulatory approvals which could shape the final outcome.