After months of bidding that began in December, the race between Netflix and Paramount Skydance to control Warner Bros. The acquisition came to a dramatic conclusion on Feb. 26, when Netflix officially withdrew, paving the way for David Ellison’s Paramount to acquire the entire WBD for $111 billion. In interviews this week, Netflix CEO Ted Sarandos and Greg Peters expressed this loss, striking an uncharitable tone. Both suggested that Paramount had overpaid and warned that the financial difficulties of the deal could reverberate throughout Hollywood.
Netflix proposed an offer of $82.7 billion for WBD studios and streaming platform HBO Max, or $27.75 per share. Paramount offered $30 per share for all of WBD, including its TV networks, and eventually won by raising its bid by one dollar to $31. The speed of Netflix’s withdrawal surprised some industry observers, who believed the company was matching or surpassing Paramount’s last bid.
Sarandos told Bloomberg on Sunday (March 1) that Netflix weighed several bidding scenarios, including Paramount increasing its offer, and felt free to walk away if the price exceeded its internal limits. “We really wanted this property. We didn’t need it,” he said, adding, “The truth is, somebody is going to lose a dollar. And the sooner you accept that, the better.”
Peter emphasized that in an interview with the Financial Times on Monday. “See [Paramount] they bid and won these deals at prices that I can’t control, they don’t look economic,” he said. [Netflix] they can’t make it work economically, I don’t know how they can. So I’m honestly a little nervous about this industry.”
Sarandos also noted that Netflix founder and chairman Reed Hastings, while “not a big fan of M&A in general,” had supported the WBD deal.
The deal is now facing legal review, although Sarandos said he hoped Netflix would have avoided antitrust scrutiny if its bid had been successful. He noted that Netflix was already working closely with regulatory bodies around the world before exiting the process.
Both Sarandos and Peters expressed concern about the future of Ellison’s media empire and its impact on the broader entertainment industry. WBD’s purchase of Paramount follows its Skydance merger last summer and leaves the combined company carrying tens of billions of dollars in debt.
According to Sarandos, Netflix estimated that Ellison would need to cut $16 billion from WBD within 18 months to make the economics work. Those cuts could affect studio production and personnel.
“It would be less production, less people working,” Sarandos said.
Peter was blunt, warning that “a lot of people are going to lose their jobs” under Paramount’s ownership.
A small win for Netflix is that, because it previously signed a deal with WBD before Paramount repackaged the picture, it will walk away with a $2.8 billion breakup fee, which Paramount will pay under the terms of its deal. Sarandos jokes that there are “easy ways to make $2.8 billion,” adding that he and Peters spent a lot of time and energy on the deal, including meeting with more than 200 WBD employees.
Peters described the payment as a “good concessionaire” that would allow Netflix to “deliver more value to our members,” pointing to potential investments in emerging formats such as video podcasts and interactive games.
