Warner Bros. Battle: Netflix Withdraws from Competition, Paramount's Top Dance Expected to Go Official

On the evening of February 26, Warner Bros. Discovery (NASDAQ: WBD) announced that Paramount Sky Dance (hereinafter “Paramount Sky Dance”) had submitted a new bid of $111 billion, which is more favorable to shareholders than the previous agreement with Netflix (NASDAQ: NFLX). Subsequently, Netflix announced its withdrawal from the acquisition battle, clearing the way for the competing bidder, Paramount Sky Dance.

While reviewing the development of Warner Bros. Discovery’s acquisition case, the China Business Journal found that before reaching an agreement with Netflix, Warner Bros. Discovery had rejected a bid of over $60 billion from Paramount Sky Dance. The agreement Warner Bros. Discovery reached with Netflix in December last year raised the price directly to $82.7 billion. Later, Paramount Sky Dance increased its bid to $108.4 billion and continued to adjust the details of the proposal, with the latest bid rising to $111 billion.

During months of bidding, Paramount Sky Dance set a record-breaking high price in Hollywood history; meanwhile, the pursuit by competitors drove the price even higher. Netflix, having failed in the competition, no longer needs to raise huge amounts of acquisition funds, which could impact short-term performance and stock buyback plans. But at what cost? Is this a win-win deal?

Bringing a Huge “Bride Price” but Facing Netflix’s “Poaching”

In the summer of 2025, as the Sky Dance Media acquisition of Paramount was nearing completion, Warner Bros. Discovery had already come into the sights of the former CEO David E. Ellison.

As the son of Larry Ellison, founder of Oracle (NYSE: ORCL), David Ellison has been deeply involved in Hollywood for many years. His Sky Dance Media, founded in 2010, co-produced the Coen Brothers’ “True Grit” with Paramount, and has collaborated multiple times with Tom Cruise, playing key roles in films like the “Mission: Impossible” series (Parts 4-8) and “Top Gun: Maverick.”

According to reports from The New York Times, Bloomberg, and Variety, Paramount Sky Dance had made multiple bids for Warner Bros. Discovery, with amounts reaching over $60 billion.

“Honestly, I think over $60 billion is already a lot. For comparison, Disney’s acquisition of 21st Century Fox in 2019 was just over $70 billion, but the industry environment then was much better than now. Streaming’s influence wasn’t as big, traditional studios weren’t yet overwhelmed, and cable TV was still viable. Audiences still wanted to buy tickets to theaters,” said Kim Yeon, a film producer. “Moreover, Sky Dance Media probably used leverage to finance the acquisition, facing financial pressure, and integration takes time. But Sky Dance Media kept leveraging further to pursue Warner Bros. Discovery.”

On December 5 last year, Netflix announced a $82.7 billion total acquisition of Warner Bros. Discovery’s film and streaming-related businesses. Three days later, Paramount Sky Dance (the new combined company) immediately followed up with a full cash offer to acquire Warner Bros. Discovery’s assets at $30 per share, with a total potential deal value of up to $108.4 billion. Paramount Sky Dance stated that the proposed transaction would cover all of Warner Bros. Discovery’s businesses.

This not only meant Paramount Sky Dance had to pay more cash but also take on the responsibility of disposing of declining businesses like Warner Bros. Discovery’s traditional cable TV.

According to incomplete statistics, in 2022, Warner Bros. Discovery merged its TV networks TBS, TNT, truTV, Discovery Channel, HGTV, Food Network, disbanded WarnerMedia’s unscripted programming division, and laid off over 1,000 employees from The CW’s sales and development teams; in 2023, it cut original documentary teams for CNN’s linear channels, digital video units, and political analysis teams in Washington, and merged Discovery Asia with HGTV Asia in India and Southeast Asia, with hundreds of layoffs; in 2024, it shut down Discovery Sports (formerly Discovery Channel Sports), merged local teams for Discovery, TLC, and HGTV in markets like the UK and Germany, with hundreds of layoffs. In the Q4 FY2025 report released on February 26, Warner Bros. Discovery further disclosed a 13% year-over-year decline in cable TV-related revenue, with losses in paid TV subscribers and advertising revenue impacting profits.

Pursuit of Higher Bids and the Ellison Family’s Entry

However, Warner Bros. Discovery executives had not agreed to Paramount Sky Dance’s pursuit. On December 17 last year, Warner Bros. Discovery told shareholders that the Ellison family planned to fund the deal through a revocable trust, but the documents submitted by Paramount Sky Dance contained “gaps, loopholes, and restrictions,” posing significant risks to Warner Bros. Discovery and its shareholders. CEO David Zaslav also stated: “Paramount Sky Dance’s market cap is only about $14 billion, yet they are trying to complete a deal requiring nearly $947 billion in debt and equity financing, which is nearly seven times their market value. Compared to typical M&A structures, this aggressive arrangement significantly increases risks for Warner Bros. Discovery and its shareholders.”

But David Ellison and Paramount Sky Dance did not give up. On December 23, they updated their bid, maintaining the total price at $108.4 billion, while adding an $40.4 billion “irrevocable personal guarantee” from Larry Ellison, founder of Oracle. Additionally, Larry Ellison promised to restrict transfers of his family trust assets during the pending transaction, a rare level of personal asset locking in Hollywood M&A history. To show sincerity, Paramount Sky Dance disclosed details of the trust assets to increase transparency and increased the regulatory reverse termination fee to $5.8 billion. This means that if the deal fails due to regulatory reasons, Paramount Sky Dance will receive a substantial compensation.

This bid finally gained some support from Warner Bros. Discovery shareholders. In early January, Warner Bros. Discovery publicly stated that 93% of shareholders rejected Paramount Sky Dance’s bid, and its executives urged shareholders to support Netflix.

Meanwhile, David Ellison actively mobilized his network to pressure Warner Bros. Discovery. In an interview with CNBC, he claimed Netflix’s model signaled “the death of cinemas,” and Paramount Sky Dance would work to protect theatrical windows. He cited Netflix co-CEO Ted Sarandos’s previous comments about cinemas being “outdated,” warning that Netflix would destroy the traditional theatrical release window.

Industry groups like the Directors Guild of America (DGA) and Writers Guild of America (WGA) also publicly opposed Netflix’s acquisition of Warner Bros. Discovery, arguing it would lead to job losses and reduce content diversity. Additionally, Bloomberg reported that former U.S. President Donald Trump said Warner Bros. Discovery should “sell to the highest bidder.”

This standoff lasted about a month. Paramount Sky Dance ultimately added new safeguards, promising to pay up to $7 billion in regulatory termination fees if the deal was blocked by antitrust regulators, cover the $2.8 billion breach penalty from tearing up the Netflix agreement, and if the transaction was not completed by the end of September this year, to pay Warner Bros. Discovery shareholders $0.25 per share quarterly in cash. This brought the overall valuation of the deal to $111 billion.

Faced with Paramount Sky Dance’s aggressive approach, Netflix chose to withdraw. Netflix co-founders Sarandos and Peters stated that matching Paramount Sky Dance’s overall bid was no longer financially attractive.

“That’s just crazy,” Kim Yeon exclaimed. “It’s like Paramount Sky Dance isn’t strong enough on its own, so they brought in the family and backers. The record-breaking amount isn’t the only thing to watch; the unfolding story is more interesting.”

Angel investor Guo Tao believes that Paramount Sky Dance’s original financing plan was high-risk. With limited market value, it needed to leverage far beyond its capacity, relying on opaque equity commitments and high leverage debt, creating serious repayment risks. The Ellison family’s involvement and guarantees ultimately “scared off” Hollywood newcomer Netflix.

Zaslav’s Influence on Bidding

Throughout the months-long tug-of-war, David Zaslav’s actions also pushed Warner Bros. Discovery shareholders to higher returns.

From Warner Bros. Discovery’s performance and market value, Paramount Sky Dance’s initial bid of over $60 billion already represented a premium. Before July last year, Warner Bros. Discovery’s stock traded below $10 per share, with a market cap under $25 billion.

After rejecting Paramount Sky Dance, Warner Bros. Discovery was rumored to be in talks with Comcast, Apple, and Netflix, and its stock price continued to rise. From September to December 2025, its monthly stock gains were 67.78%, 14.95%, 6.9%, and 20.8%. On December 15, it hit a high of $30 per share, with a market cap of about $74.4 billion.

However, Warner Bros. Discovery’s financial performance was poor. In fiscal years 2022–2024, net profits were -$7.297 billion, -$3.079 billion, and -$11.482 billion, respectively. In the Q4 FY2025 report released on February 26, revenue declined 5.6% year-over-year to $9.46 billion, with adjusted EBITDA down to $2.22 billion, and a per-share loss of $0.10.

On December 5 last year, Netflix announced an agreement to acquire Warner Bros. Discovery’s film and streaming businesses for about $82.7 billion. Warner Bros. Discovery planned to divest its cable TV businesses and form a new publicly listed company.

At first glance, Warner Bros. Discovery sold part of its business at a high price of $82.7 billion; selling all assets could have fetched even more. The subsequent bid of $108.4 billion from Paramount Sky Dance seemed to confirm this.

Industry analysts believe that the high valuation is partly due to Warner Bros. Discovery needing a large payout to handle its cable TV business, which both Netflix and Paramount Sky Dance included in their bids.

However, Warner Bros. Discovery’s top executives, led by Zaslav, were dissatisfied with Paramount Sky Dance’s plan. Publicly, Zaslav didn’t oppose the $108.4 billion figure outright but emphasized the lack of safeguards—whether the deal could proceed smoothly, whether compensation was sufficient if it failed, and whether funds could be delivered on time.

Thus, Warner Bros. Discovery did not completely reject Paramount Sky Dance but remained open to a more attractive final offer. When the Ellison family entered the scene, the dynamics shifted. “In January this year, Warner Bros. Discovery’s leadership urged shareholders to reject Paramount Sky Dance, but some shareholders started supporting them,” Kim Yeon said.

Later, on January 19, Netflix, under competitive pressure, announced it would switch from a “cash + stock” bid to a full cash offer. Sarandos said the all-cash plan could accelerate shareholder voting and provide greater certainty for investors.

Guo Tao believes that Netflix’s available cash and free cash flow are vastly insufficient compared to the hundreds of billions of dollars in total deal value. Most of the remaining funds would need external financing. Market reports indicate Netflix previously secured large bridge loans from Wall Street syndicates and planned to refinance via bonds and credit lines, essentially leveraging debt to fund the acquisition.

However, Netflix’s revised plan did not increase the overall bid.

By February, Warner Bros. Discovery, rejecting Paramount Sky Dance’s $30 per share offer, also gave the latter seven days to submit a “best and final” bid. On February 16, multiple media reported that Warner Bros. Discovery was considering restarting negotiations with Hollywood rival Paramount Sky Dance, having received the latest revised bid from the hostile bidder.

Finally, on February 26, the day Warner Bros. Discovery released its FY2025 Q4 earnings, Netflix decided not to pursue Paramount Sky Dance’s bid. This meant that if the acquisition was approved by regulators, Zaslav and the management team would realize far higher returns than the initial plan.

“Almost double the initial $60+ billion, and all in cash—shareholders can cash out faster,” Kim Yeon said.

For Netflix, this saved a lot of money but also meant losing Warner Bros. Discovery’s top assets. Jin Junhao, founder of Fujian Huace Brand Positioning Consulting, stated that top IPs like Harry Potter and Batman, HBO, quality studios, and 128 million streaming users could help Netflix fill IP gaps and boost production capacity.

Meanwhile, if the Warner Bros. Discovery and Paramount Sky Dance merger succeeded, a new streaming giant would emerge, becoming a competitor to Netflix. Ellison previously told the media that if Paramount Sky Dance merged with Warner Bros. Discovery, the combined user base of Paramount+ and HBO Max—about 200 million—could rival Netflix and Disney.

Additionally, with the Ellison family’s deep involvement, the new company’s streaming business could benefit from Oracle’s support in bandwidth storage, cloud services, and related areas.