Netflix Backs Out of Warner Bros. Discovery Deal, Paramount Skydance Now Expected To Win Acquisition War

With Paramount Skydance increasing its bid for Warner Bros. Discovery to to $31 per share, it looks like Netflix is now backing out of its deal to acquire the media entity in a stunning turn of events, per an official press release from the streaming giant. Netflix, Inc. announced today that the streamer is declining to raise its offer for Warner Bros. after Netflix had received notice from WBD and its Board of Directors determined that the latest offer from Paramount constitutes a “Superior Proposal” under the terms of WBD’s existing merger agreement with Netflix.

Netflix co-CEOs Ted Sarandos and Greg Peters later issued a joint statement, saying, “The transaction we negotiated would have created shareholder value with a clear path to regulatory approval.” They continued, “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.” The statement continues:

Warner Bros. is a world-class organization, and we want to thank David Zaslav, Gunnar Wiedenfels, Bruce Campbell, Brad Singer and the WBD Board for running a fair and rigorous process. We believe we would have been strong stewards of Warner Bros.’ iconic brands, and that our deal would have strengthened the entertainment industry and preserved and created more production jobs in the U.S. But this transaction was always a ‘nice to have’ at the right price, not a ‘must have’ at any price.

Netflix’s business is healthy, strong and growing organically, powered by our slate and best-in-class streaming service. This year, we’ll invest approximately $20 billion in quality films and series and will expand our entertainment offering. Consistent with our capital allocation policy, we’ll also resume our share repurchase program.

We will continue to do what we’ve done for more than 20 years as a public company: delight our members, profitably grow our business, and drive long-term shareholder value.

Netflix had won a previous bidding war to acquire WBD, which would encompass Warner Bros. Pictures, its IP, and HBO Max. It would not have included WBD’s TV networks, which Paramount Skydance wanted as part of the acquisition. WBD entered an exclusive negotiating period with Netflix to finalize the deal.

However, Paramount Skydance continued, placing multiple hostile bids. WBD then reopened talks with Paraamount last week. Additionally, The Hollywood Reporter notes that Paramount added multiple other “sweeteners” in its latest proposal to acquire WBD, including a ticking fee payable to shareholders equal to $0.25 per quarter beginning after Sept. 30, 2026, as well as a $7 billion regulatory termination in the event the transaction does not close due to regulatory matters.

Additionally, Paramount has agreed to pay the $2.8 billion termination fee that WBD now has to pay to Netflix to terminate their existing merger agreement they entered last year. It’s not a bad deal for Netflix, as the company’s shares increased 10% in after-hours trading after the decision was announced.

THR reports that Netflix will receive that payout “sooner rather than later.” Of course, the deal will be subject to federal regulation, so Paramount Skydance will be liable for $7 billion to WBD if the deal does not meet regulatory approval.

Paramount Skydance Appears as Winner in Bidding War With Warner Bros. Discovery After Netflix Backs Out

WBD is AEW’s major broadcast partner, with WBD also confirmed as owning a minority stake (less than 10%) in the wrestling promotion. Under the Netflix acquisition plan, WBD’s linear TV networks were going to be spun off into Global Linear Networks, while AEW’s weekly shows and PPV events would likely stay on HBO Max.

Of course, now that Paramount Skydance looks to be the new prospective owner of WBD, that plan is off the table. Netflix is a major streaming partner for WWE, with Netflix being the home for Raw in the U.S., and all of WWE’s live weekly programming and PLEs internationally. Meanwhile, Paramount+ is the major streaming partner for UFC, which is also owned by WWE parent company TKO.

AEW has a multi-year broadcast agreement with WBD, believed to be a three-year length with an option for a fourth. Even with Netflix backing out of the WBD acquisition, that doesn’t mean Paramount Skydance will become WBD’s new owner tomorrow. The deal will undergo a federal regulatory process before the merger is complete.