The credits could begin. Netflixthe world’s largest streaming company, announced on December 5 that it would take majority control Warner Bros. Discoveryone of the biggest names in traditional cinema, with a deal worth $83 billion. But on December 8th of utmost importancea much smaller rival, has suspended the transaction. He bypassed Warner management and appealed directly to shareholders to accept his alternative offer of $108 billion for the entire company, promising a deal that was “superior to Netflix in every way.”
The Looney Tunes amounts could rise even further: Paramount’s owners, the Ellison family, have made it clear they are willing to spend more if necessary; Netflix, whose market value exceeds $400 billion, can also afford to bid higher if necessary. However, the main difference between the bidders is not the offer price. Netflix and Paramount see different aspects of their goal. The question of who stays at Warner Bros. will determine the future of Hollywood and entertainment in general.
For months, Paramount was the favorite to buy the century-old studio. David Ellisona 42-year-old Hollywood producer, acquired Paramount in August for $8 billion with the backing of his father. Larry Ellisonwhose stake in Oracle, a software company, made him the second richest person in the world. Once they got the keys to the Paramount lot on Melrose Avenue, they announced they would also approach Warner about building a media colossus. The Ellisons had the money, the motive and a friendly relationship with the president Donald Trump. What could stop him? Netflix.
When David Ellison sent increasingly frantic text messages to Warner management on December 4, it emerged that Netflix was the preferred bidder; The agreement was announced the next day. Documents released by Paramount this week show the company was caught off guard. Paramount now claims that its latest, improved offer was not properly considered by Warner management. He has become hostile, arguing that shareholders deserve the chance to accept his offer, regardless of what executives have agreed to with Netflix.
The two offers value Warner at a similar level. Paramount is offering $108 billion in cash for the entire company. Netflix is offering $83 billion in cash and stock for the company’s studio and streaming service. Under the deal with Netflix, Warner shareholders would keep the declining television and cable channels in a disposal company named by Hollywood “ShitCo”. In most cases, ShitCo’s market value would be enough for the Netflix deal to reach roughly the same amount as Paramount’s, albeit with greater uncertainty.
However, both deals also represent different possible futures for the entertainment industry. Paramount’s motive is clear. It currently lacks the scale required to compete with the major streaming companies. Together with Warner, it would be big enough to be a serious competitor to companies like Netflix and Disney. The streaming war that Netflix practically won is being reignited. But if Paramount doesn’t reach that agreement, “it will find itself much closer to an existential crossroads,” he insists. Moffett NathansonResearch company.
Paramount also promises to revitalize the film industry. David Ellison, a film enthusiast who has produced films such as “Top Gun: Maverick,” said this week that a merger between Warner and Paramount would do more than deliver 30 films per year in the cinema. Netflix has promised to continue releasing Warner films in theaters. But no one in Hollywood believes the original streaming service will be the savior of the big screen. Co-CEO of Netflix earlier this year Ted Sarandosstated that the visit was to the cinema “An outdated idea for most people”.
Instead, Netflix sees something else in Warner: its ideas. Netflix hardly needs scaling. With around 325 million subscribers, it is already almost twice as big as its closest competitors. But what it has in quantity, it lacks in quality. UBSa bank, points out that Netflix has about twice as many titles on its streaming service in the US as Warner, but that the titles have at least nine out of ten ratings IMDBa review website, HBO Max Warner has 141 versus 120 for Netflix. Netflix sees the potential to get more market share from these blue-chip titles. He’s already shown how he can make hits out of dated shows like “Suits,” a forgotten legal drama he was licensed to make NBCUniversal a few years ago and became a success. What could be done with gold-plated intellectual property (IP) like Warner’s “Game of Thrones”? As Mr. Sarandos put it: “Your assets work best in our business model, and our business model works best with those assets“.
Netflix appears to view these assets as weapons in a larger battle with rivals outside of Hollywood. Although the city is obsessed with streaming wars between rival studios, Netflix now sees YouTube as its biggest rival. According to Nielsen, which measures these factors, the Google-owned social media platform accounted for 28% of streaming on TVs in the U.S. last quarter, compared to 19% for Netflix (HBO Max accounted for less than 3%). Netflix could now be the king of Hollywood. But it is bracing for stiffer competition, pitting its professional shows against homegrown, algorithmically rated content on platforms like YouTube. By acquiring Warner, the company would have an arsenal of high-quality weapons for this war.
That will be the argument Netflix will present to competition authorities if its bid is successful. Hollywood’s largest streaming service seems unlikely to absorb the fourth-largest, especially when Paramount’s alternative deal promises to create a viable new competitor by merging the fourth-largest and fifth-largest providers. Netflix hopes regulators will take seriously the idea that Silicon Valley’s social media platforms are the real threat to Hollywood, currently winning the battle for the attention of young viewers.
Both Netflix and Paramount’s offerings are complicated by political issues. Paramount claims it would complete its deal more quickly than Netflix, partly because competition concerns would be less severe and partly because the Ellisons are friends of the president. Trump said the Netflix deal “could be a problem” because it has a “large market share.”. Sarandos is a Democratic donor whose wife was an ambassador during Washington’s presidency Barack Obama.
However, Paramount’s offer is not without controversy. Affinity partneran investment firm run by Trump’s son-in-law, Jared Kushneris part of his consortium. Paramount says its bid has the support of the Ellison family RedBird Capital Partnersanother American investment firm. However, in a regulatory filing on December 8, the company revealed that the biggest backers of its offering were actually a group of Gulf sovereign wealth funds. In a bid submitted to Warner earlier this month, the Ellisons were to contribute $12 billion, while Abu Dhabi, Qatar and Saudi Arabia would contribute a combined $24 billion (and the rest with debt). A previous offer included financial backing from Tencent, a Chinese technology giant.
Paramount claims that Tencent is no longer on the board and Gulf investors have no voting rights or representation on the new company’s board. He argues that this was intended to prevent interference by the Committee on Foreign Investment in the United States, the regulator of foreign direct investment in the United States. However, it would be controversial to say the least if a large part of one of the largest media companies in the US were owned by the Gulf monarchies and the president’s son-in-law. A merger of Paramount and Warner would own it cnn And CBS News.
The show isn’t over yet. Netflix could raise its price; Paramount has made it clear that its own twelve-figure offer is not the be-all and end-all. But no matter the dollar amount, two paths are already set for the future of American entertainment. On the one hand, Paramount would use Warner to keep something similar to yesterday’s Hollywood alive, fighting the streaming wars and releasing theatrical releases, while supporting that mission with billions of dollars from Gulf investors. Netflix, on the other hand, promises to accelerate trends of recent years and reduce the number of independent Hollywood studios to build an intellectual property powerhouse capable of winning the battle for attention with Silicon Valley. Warner shareholders must choose between a nostalgic sequel and a radical reboot.
© 2025, The Economist Newspaper Limited. All rights reserved.
About The Author
