Netflix vs Paramount Skydance: The Battle for Warner Bros

Media Consolidation: Warner’s Moment

The media industry is in a phase of consolidation, with major acquisitions in the last few years: Disney (DIS +1.12%) acquired successively Marvel (2009), Lucasfilm (2012), and 21^st Century Fox (2019), along with full ownership of Hulu (2023), while Amazon (AMZN +2.48%) acquired Twitch (2014) and MGM Studios (2022).

The latest episode in this trend is the competing bids for the acquisition of Warner Bros. Discovery (WBD).

After a series of initial bids, it appeared that the acquisition would be a battle between Netflix (NFLX -0.83%) and Paramount Skydance (PSKY -0.31%).

So far, it would seem that Netflix is ahead, despite a lower bid.

Of course, this deal is not without controversy, as many are already critical of the role of Netflix in the entertainment industry.

“Today’s News that Warner Bros. Discovery has accepted a purchase bid is an alarming escalation of the consolidation that threatens the entire entertainment industry.”
— Jane Fonda

Or, for that matter, further consolidation with an acquisition by Paramount is not without its own critics.

Source: Elizabeth Warren

How Important Is Warner?

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Warner is one of Hollywood’s major film studios and owns many important intellectual properties (IPs).

Warner’s extensive IP library is too long to list fully, but key franchises include:

• Harry Potter movies.
• “Monsterverse” (Godzilla, King Kong).
• The Matrix.
• DC Universe (Superman, Batman, etc.).
• HBO (Game of Thrones, Westworld, The Sopranos, Band of Brothers, etc.).
• Friends, Big Bang Theory, and other sitcoms.
• Animation (Looney Tunes, Cartoon Network, etc.).

Together with its many channels, networks, and studio films, Warner is an important part of the US and international media landscape.

With HBO controlling 13% of the streaming market share in 2024, Netflix 21%, and Paramount+ 9%, the merger will inevitably create a major streaming company able to rival or overcome leaders like Disney+/Hulu (23%) and Amazon Prime (22%).

Source: Wikipedia

The Bidding So Far

The initial bidders included Netflix, Paramount Skydance, Starz, and Comcast. In a second round, the choice became restricted to Netflix vs. Paramount.

Paramount Skydance’s offer of $108.4B seems at first glance more generous than Netflix’s $82.7B.

However, Warner’s management does not seem to think so, as it remains committed to its deal with Netflix.

“As a Board, we have now conducted another review and determined that PSKY’s tender offer remains inferior to the Netflix merger. The Board continues to unanimously recommend the Netflix merger, and that you reject the PSKY offer and not tender your shares.

PSKY has consistently misled WBD shareholders that its proposed transaction has a “full backstop” from the Ellison family. It does not, and never has.”
Warner Bros. Discovery’s Board

Netflix vs Paramount: Two Very Different Deals

Netflix’s Offer

Netflix is primarily looking at Warner’s movie studio and HBO’s rich catalog of content to provide these directly to its subscribers through streaming.

As HBO has been one of the major competitors of Netflix in the “streaming wars“, this will boost Netflix’s position by a wide margin.

“This acquisition will improve our offering and accelerate our business for decades to come.

With our global reach and proven business model, we can introduce a broader audience to the world’s Warner Bros create—giving our members more options, attracting more fans to our best-in-class streaming service, strengthening the entire entertainment industry, and creating more value for shareholders.”
Greg Peters – Co-CEO of Netflix

The issue of streaming versus traditional studios was best summarized by Paramount itself in 2019, in “Why the Streaming Wars Will Change the TV Industry Forever”:

“Why would traditional media companies sell the rights to their content to a platform that’s threatening their business model?

In response, many companies—including Disney, Comcast-owned NBCUniversal, and WarnerMedia are creating their own streaming services.”

But Netflix is not interested in the traditional pay-TV channels, nor in channels like CNN and TNT. So these would likely be sold off, closed, or spun off into a separate company that would lack the backing of the former Warner group.

Netflix expects the deal to close by Q3 2026. It also acknowledges this is a departure from its previous strategy, which focused on building its own original content.

“I know some of you are surprised we are making this acquisition, as the company historically has been more “builders” than “buyers.”
Ted Sarandos – Netflix Co-CEO

Paramount’s Offer

Paramount is more of a direct competitor and a similar group to Warner. So the deal would allow it to acquire some of the major competitors to its own channels, like CBS, Nickelodeon, MTV, and Showtime.

It is unclear if it ultimately could trigger an alarm from the regulators, which could be concerned that this will reduce further consumer choice when it comes to news channels and entertainment.

This would also result in a growing control of the media landscape by the Ellison family, as Paramount is controlled by David Ellison (CEO and owner of 50% of its voting rights), the son of Larry Ellison, who co-founded the software company Oracle (ORCL +0.88%).

Lately, the Ellisons have rapidly expanded their media reach, notably with the forced sale of TikTok’s US operation to an Oracle-led investor group.

The Political Angle

It is no secret that most of Hollywood, as well as Netflix’s management, is rather hostile to the current Trump administration.

”It’s so bad for America if he wins, it’s secondary for the economy.”
Reed Hastings (2016) – Netflix Co-founder

However, Larry Ellison is considered a friend of Trump, who largely chose Ellison & Oracle to take over TikTok and form a keystone of the US plans to dominate the AI landscape, notably with Oracle’s alliance with OpenAI and “Project Stargate”.

So, as the media and entertainment landscape consolidates, and the culture war still rages on, who gets to acquire Warner might have a partisan angle as well.

Regarding risks of forming a monopoly, it seems that the risks are higher for the streaming markets in the case of acquisition by Netflix, and stronger for the news and cable TV markets in the case of acquisition by Paramount.

Ultimately, it will be Warner shareholders’ votes that will decide the final acquisition results.

Them, and the eventual veto of US or EU regulators over concerns of an ever-decreasing diversity in the media landscape.

Effects On Entertainment’s Tech Landscape

When an algorithm-driven company (Netflix) battles versus a family of tech/media moguls (Paramount/Ellison) over a significant bulk of Hollywood’s IPs, the role of technologies in the future of Warner cannot be ignored.

Cinema vs Streaming: The Future of Hollywood Windows

Paramount Option

With a Paramount acquisition, it is likely that Warner and HBO would still work in a relatively familiar fashion: theatrical release for movies, direct to streaming for HBO content.

Especially as Paramount is already committed to releasing 30 films in theaters a year.

HBO streaming services could also merge with Paramount+, which already has 79.1 million subscribers worldwide, adding to HBO’s catalog Star Trek, Yellowstone, Halo, etc.

Netflix Option

A Netflix acquisition would likely speed up the move of Hollywood toward streaming over theaters, with at the very least a much shorter time between movie time in theaters before reaching streaming services.

“It’s not like we have this opposition to movies going into theaters.

My push back has been mostly in the fact of the long exclusive windows, which we don’t really think are that consumer-friendly.”
Ted Sarandos – Netflix Co-CEO

Combined with an admitted disdain for cinemas, a Netflix acquisition might not bode well for the industry.

“I want to make movies on a gigantic screen and have strangers watch them [and to have them] play in the theater for two months, and people cry and sell-out shows … It’s an outdated concept.”
Ted Sarandos – Netflix Co-CEO

AI Content & Algorithm

Netflix has been alluding regularly to using AI more for content creation, including movies and video games. Meanwhile, the “New Paramount” is placing AI creation at its core.

Allison identified AI as a tool to “turbocharge” content growth.

For the first time, a studio head has actually called out the growth opportunity behind AI, rather than fretting about the disruptive implications of the emerging technology.

Meanwhile, AI tools like Sora, Pika, Runway, and others are starting to make movie-making a potential activity for outsiders to the industry, with fan-made content and CGI getting on par with big productions’ quality.

So for both companies, the acquisitions of major IPs that include cultural landmarks could be a way to protect themselves from an upcoming flood of AI-generated content taking away viewers from mainstream movie and series companies, be it traditional cable TV or streaming platforms.

And in any case, the **user data** from HBO viewers and other Warner content will be highly valuable to get them to watch other channels, movies, and series as well, following customized algorithm & AI-driven recommendations.

Videogames

While less known for it, Warner is also a video game company, with massive hits using its IP like Hogwarts Legacy, Batman Arkham Trilogy, other DC comics games, Middle-earth games, etc.

This part of Warner seems not be really a focus for Netflix, as admitted by its CEO:

“While they definitely have been doing some great work in the game space, we actually didn’t attribute any value to that from the get-go because they’re relatively minor compared to the grand scheme of things.”
Gregory Peters – Netflix Co-CEO

For that matter, Netflix has closed or sold off the studios it made such a big point of having just a few years previously.

It is unclear if Paramount really cares either, as little mention has been made of Warner’s gaming division in its bidding discussion. Existing department might not help much either: Skydance Interactive is basically solely focused on VR experiences, and Paramount Game Studios exists, but is described as “but it doesn’t really…make anything”.

Conclusion

As the Board’s recommendation tends to carry a lot of weight during acquisitions, it seems the highest probability skew toward Netflix managing to acquire Warner, and then spinning off its news channels, while likely merging HBO and Netflix streaming services.

A greater concentration in streaming services is also less likely to trigger alarm with regulators compared to merging even further news channels and bringing to the Ellison family further control over global media and IT infrastructure (including Oracle and US TikTok).

Still, this is not yet certain, and the final vote on the matter of Warner’s shareholders will be the ultimate judge.

In any case, this hotly contested acquisition is a sign that legacy media companies are under increasing pressure to consolidate, especially as other platforms like short-form videos, social media, tech companies like Amazon (Prime) and Google (YouTube) are taking away from them the public’s time and attention.