Paramount has launched a bold and hostile bid to acquire Warner Bros Discovery (WBD), setting the stage for a high-stakes battle with streaming giant Netflix. The company has submitted an all-cash offer of $US30 ($45) per share, valuing the entertainment conglomerate at $US108.4 billion (A$163.6 billion). This offer surpasses Netflix’s recent proposal by $18 billion (A$27 billion), a move that Paramount claims provides a more attractive and certain option for WBD shareholders.
The announcement comes as Netflix and Warner Bros Discovery revealed their own merger plans just last week, with Netflix projecting a 12-18 month timeline for completion. In contrast, Paramount has pledged to finalize its acquisition within 12 months, emphasizing its confidence in navigating regulatory hurdles more efficiently.
Strategic Implications and Industry Dynamics
The move represents a significant shift in the media landscape, with Paramount aiming to consolidate its assets with those of Warner Bros Discovery. Paramount’s offer includes cable channels such as CNN, TNT, TBS, and Discovery, which were notably absent from Netflix’s bid. The potential merger would combine Paramount’s extensive portfolio, including Paramount Pictures, CBS, Nickelodeon, and Paramount+, with WBD’s assets like HBO Max and major sports rights.
According to Paramount, this merger could generate over $US6 billion in cost savings while maintaining a strong commitment to theatrical releases and increased content spending. On Monday, Paramount pledged to release more than 30 films in cinemas if it successfully acquires WBD, a clear contrast to Netflix’s historical preference for streaming over theatrical distribution.
Regulatory Considerations and Competitive Landscape
Paramount has positioned its offer as providing greater regulatory certainty compared to Netflix’s proposal. The company argues that a merger between Netflix and Warner Bros Discovery would result in a 43% share of global streaming subscribers, potentially leading to “protracted regulatory challenges across the world.”
David Ellison, chairman and CEO of Paramount, stated, “WBD shareholders deserve an opportunity to consider our superior all-cash offer.” He further emphasized that the merger would be “pro-competitive, pro-creative talent, and pro-consumer,” contrasting it with what he described as the anticompetitive nature of a Netflix-WBD combination.
“So again, we really view this as, our deal is completely pro-competitive. It’s pro-creative talent, pro-consumer, as opposed to the [Warner Bros.] combination with Netflix [which] would give them such a scale that it would be bad for Hollywood and bad for the consumer, and is anticompetitive in every way that you can fundamentally look at it,” Ellison said.
Political and Market Reactions
The proposal has not only financial but also political implications, given Paramount’s ties to former President Donald Trump. Trump commented on the situation, suggesting that Netflix’s acquisition of Warner Bros could lead to a problematic concentration of market power in the film and TV industry.
“We’re really here to finish what we started,” Ellison told CNBC as Paramount made its sixth offer for Warner Bros since the bidding war began. The company is also offering a $5 billion breakup fee if its deal is accepted but not completed due to regulatory reasons.
Meanwhile, the potential merger would position Paramount+ and HBO Max with approximately 200 million global subscribers, putting them on par with Disney. This figure is significantly lower than the combined subscriber base of Netflix and HBO Max, which exceeds 400 million. Ellison highlighted this disparity, arguing that the Paramount-WBD merger would foster healthy competition in the industry.
Looking Ahead
The unfolding battle between Paramount and Netflix for Warner Bros Discovery is poised to reshape the entertainment industry landscape. With both companies vying for a larger share of the market, the outcome could have significant implications for content creation, distribution, and consumer choice.
As the situation develops, industry analysts and stakeholders will be closely monitoring the regulatory reviews and shareholder responses to these competing bids. The next steps in this high-profile acquisition saga will likely influence the strategic directions of major media players for years to come.
