Netflix Says No to Warner Bros. After Price War, Beltway Concerns

And just like that, Netflix has bowed out of its pursuit of Warner Bros. Discovery’s streaming and studio assets.

Late Thursday, the streaming colossus announced that it has decided against raising its $82.7 billion bid for a big chunk of the WBD properties, leaving Paramount Skydance with what amounts to the winning offer. Under Paramount’s latest revision to its original proposal, David Ellison’s media conglomerate will fork over some $111 billion for everything under the WBD tent, including the sports-heavy cable networks division.

Among the backers of Paramount’s $31 per share, all-cash bid are Bank of America Merrill Lynch, Citi and Apollo, which are providing a $57.5 billion debt commitment, and Ellison’s father/Oracle co-founder Larry Ellison, who has guaranteed a $45.7 billion equity commitment.

In a statement issued by co-CEOs Ted Sarandos and Greg Peters, Netflix noted that Paramount’s latest escalation made any further attempt to claim the WBD assets a bad bit of business. “The transaction we negotiated would have created shareholder value with a clear path to regulatory approval,” Sarandos and Peters wrote. “However, we’ve always been disciplined, and at the price required to match Paramount Skydance’s latest offer, the deal is no longer financially attractive, so we are declining to match the Paramount Skydance bid.”

Netflix went on to thank the WBD brass for “running a fair and rigorous process” before going on to characterize the assets as “a ‘nice to have’ at the right price, not a ‘must have’ at any price.”

Meanwhile, as part of its sweetened offer, Paramount will foot the bill for the $2.8 billion termination fee WBD now owes Netflix.

Netflix’s announcement arrived just hours after Sarandos met with White House staffers to discuss his company’s bid for the WBD assets. President Donald Trump was not on hand for the meeting.

Paramount’s updated offer all but guarantees that it will walk away with the WBD spoils. While shareholders must vote to approve the deal, the amount of cash in play and the absence of a viable alternative suggest that the transaction will get the green flag.

Upon closing, the Paramount deal will bring CBS Sports and Turner Sports under one roof, thereby creating a massive rights portfolio that includes the NFL, NHL, Major League Baseball, college football, the Masters, the UFC and March Madness.

Uniting the rights to the marquee men’s college hoops tourney would effectively close the circle on the partnership forged in 2010 by former CBS Sports chairman Sean McManus and ex-Turner Sports president David Levy. After McManus determined that CBS could no longer afford to go it alone with its coverage of March Madness, the two execs hashed out a 14-year, $10.8 billion rights deal that would see the Turner networks share the burden—and the spoils—with CBS.

Ten years ago, the two partners extended the deal through 2032, tacking on another eight years of Madness for an additional $8.8 billion.

Having been subjected to a Beltway cross-examination and at least one disapproving social media salvo by the president, Netflix may have come to the conclusion that the regulatory fix was in. Earlier this month, Sarandos was grilled by a Senate committee in an antitrust hearing that often teetered on the edge of the profoundly unserious. In one heated exchange, Sen. Josh Hawley (R-Mo.) asked why “so much of Netflix content for children promotes a transgender ideology?”

Hawley began his line of questioning by inquiring into relevant matters (labor concerns, theatrical windows), before veering into the culture war lane near the end of his allotted time. He concluded by expressing his concern that Sarandos and Netflix “don’t share my values or those of many other American parents,” a vibes-based assessment which the framers of the Sherman Act neglected to consider 136 years ago when they were going about the business of outlawing monopolistic practices.

Later in the hearing, Eric Schmitt, the junior senator from the Show Me State, told Sarandos that Netflix was responsible for creating the “wokest content in the history of the world.” Again, this was an antitrust hearing, not a meeting of a network standards and practices division.

Ellison turned down an invitation to testify at the hearing.

Netflix’s decision to bow out of the running was made shortly after the WBD board determined that Paramount’s latest bid was the “superior” offer. Paramount’s strategy to usurp Netflix as the front runner was reinforced by an aggressive campaign to assure WBD shareholders that it has a far better shot at successfully negotiating any potential regulatory hurdles.

Misgivings about Netflix’s chances were further amplified last weekend when President Donald Trump made a dig at a Netflix board member.

Trump on Saturday took to Truth Social to demand that Netflix bounce Susan Rice from its board of directors “IMMEDIATELY, or pay the consequences.” A former Obama and Biden administration official, Rice poked the bear during a podcast appearance in which she insinuated that “it is not going to end well” for corporations and news organizations that “bent the knee” to Trump.

When asked by the BBC about Trump’s anti-Rice salvo, Sarandos tried to shrug the whole thing off, saying of the president, “He likes to do a lot of things on social media.” Sarandos went on to assert that the executive branch has no say in the matter, and while that may be accurate from a legal standpoint, the Netflix co-CEO may want to take a gander at the big pile of nothing that used to be the East Wing of the White House. Stranger things (sorry) have happened.

“This is a business deal. It’s not a political deal,” Sarandos said. “This deal is run by the Department of Justice in the U.S. and regulators throughout Europe and around the world.”

The day after Sarandos brushed off Trump’s remarks, Paramount upped its offer to WBD to $31 a share, to be paid in all cash. This marked the 10th revision of Paramount’s original bid and included billions in additional financial incentives. Just hours after WBD acknowledged receipt of the beefed-up proposal, Ellison, the chairman and CEO of Paramount, attended the State of the Union Address as a guest of Sen. Lindsey Graham (R-SC).

The Justice Department, which just two weeks ago dismissed Gail Slater, the head of its antitrust division, is said to be looking into Paramount’s proposal. Under federal law, antitrust enforcers are at liberty to scuttle any deal that poses a threat to fair and competitive business practices.

On Wednesday, House Democrats petitioned U.S. Attorney General Pam Bondi to provide a full accounting of why the DOJ ousted Slater, noting that her ejection has left a “leadership vacuum” at a time when “the antitrust division is handling historic cases.” Signed by Jamie Raskin, the top Democrat on the House judiciary committee, and Jerry Nadler, a Democratic congressman from New York, the letter stated that Slater’s departure leaves the DOJ bereft of “any principled antitrust experts left to guard the antitrust division from [a] cascade of corruption.”

Hand-picked by Trump to lead the antitrust division, Slater was confirmed by the Senate last March by a 78-19 vote.