Netflix has emerged victorious with what appears to be the highest and so far the winning bid for Warner Bros. Discovery, Deadline has learned, and will start exclusive talks to finalize a deal. This caps a tumultuous day that saw Paramount move aggressively to counter the giant streamer and seal a deal of its own for WBD.
Netflix offered around $28 a share for WBD, according to sources, mostly in cash.
It’s been a fast moving auction and one that will reshape the entertainment landscape dramatically. WBD put itself on the block in October to open up the process after receiving three consecutive offers from Paramount. Warner has hoped to get a deal in place by mid-to-late December.
Netflix would acquire the Warner Bros. Studios and HBO Max streaming assets. Paramount’s offer was for all of WBD. Bloomberg is reporting that Netflix offered a $5 billion breakup fee if the deal fails to close. Comcast also bid for the studio and streaming businesses.
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Paramount has argued that it was the only one of the three with a clear path to closing, insisting in a letter to WBD that the rival offers from Netflix and Comcast both “present serious issues that no regulator will be able to ignore.” It believes Netflix, being the dominant streamer in the U.S. and globally, would face major antitrust hurdles adding HBO Max to the fold.
David Ellison’s company also called the sale process unfair and tilted towards Netflix. WBD countered that its board “attends to its fiduciary obligations with the utmost care, and that they have fully and robustly complied with them and will continue to do so.”
In a veiled attack on WBD CEO David Zaslav, Paramount claimed the “sales process has been tainted by management conflicts, including certain members of management’s potential personal interests in post-transaction roles and compensation as a result of the economic incentives embedded in recent amendments to employment arrangements.”
Paramount had offered Zaslav a role if the companies were to merge. Zaslav’s compensation agreement was recently restructured to take into account a sale of WBD — versus the formal separation of its businesses into two public companies that was originally planned. Zaslav would have become CEO of a slimmed down Warner Bros. with WBD’s current CFO Gunnar Wiedenfels running a standalone linear television company called Discovery Global.
It seems fair to say that a good deal of ill will has built up between the two camps.
It’s not clear what role Zaslav would play in a Warner-Netflix merger.
Warner Bros. Discovery shares are up nearly 6% at $26 in very late trading, a 52-week high and nearly four times a low for the year of $7.50. The shares had been sluggish pretty much since Discovery acquired WarnerMedia in April of 2022 but perked up dramatically of late when it emerged as a takeover target.
All three buyers were offering a significant premium to the stock price pre-merger chatter.
They were “willing to pay for the elimination of a competitor, the acquisition of franchise control, and the synergy potential of integrating one of the most valuable content and IP libraries in the world into their platforms,” wrote Bank of American analyst Jessica Reif Erlich in a recent note. She called Warner Bros. Studio, with IP from Harry Potter to DC Comics to Game of Thrones, a “crown jewel.”
It’s hard to overstate what a major pivot this deal would be for Netflix, which has made very few acquisitions in its history, preferring to grow organically.
“While Netflix is the clear streaming leader in subscribers, it still lags other media companies on deep IP libraries that could offer potential use cases for theme parks, experiences, Broadway shows, gaming and merchandising. While Netflix has long maintained that M&A was a distraction and that the company could build its own franchises more efficiently than buying them, the landscape has shifted,” Erlich said.
“Acquiring DC Comics, Harry Potter, Hanna-Barbera and other WBD library properties would provide Netflix with a deep set of well-known IP. Further, the acquisition would provide Netflix with physical production capacity and prestige that could help to court talent at another level.”
As per WBD’s original split plans, the Warner Bros. studios and streaming business consists of Warner Bros Television, Warner Bros Motion Picture Group, DC Studios, HBO and HBO Max, as well as their film and television libraries.
Global Networks, or the businesses that would likely not go to Netflix, include entertainment, sports and news television brands and channels globally including CNN, TNT Sports, Discovery networks, top free-to-air channels across Europe, the Discovery+ streaming service and Bleacher Report.
Should the deal go through, Netflix would gain a global theatrical distribution apparatus, a massive library that includes titles from the DC Studios, Turner Entertainment, HBO, New Line, and the MGM pre-May 1986 catalog.
Exhibition and the film community in general has been fearful of a Warner Bros-Netflix union. Netflix has reportedly said it will honor Warner Bros.’ theatrical commitments in a merger. But the company led by co-CEOs Ted Sarandos and Greg Peters has repeatedly emphasized over the years that its focus is squarely on serving its streaming subscribers.
Netflix is known to favor a 17 day exclusive theatrical window before movies arrive in the home, while the No. 1 circuit AMC has been lobbying for a 45-day window. The two sides have been so far apart that the streamer’s awards contenders this year House of Dynamite, Wake Up Dead Man, Jay Kelly and Frankenstein did not receive any screens in the top three circuits (AMC, Regal and Cinemark). To date, Netflix’s only movie to No. 1 was KPop Demon Hunters Singalong during the last weekend of August which made $19M over two-days (all circuits played it except AMC).
Anthony D’Alessandro contributed to this report
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