Netflix’s move, announced on December 5, to acquire Warner Bros. Discovery (WBD) for a gargantuan $83 billion — and the counter hostile bid by Paramount at $108 billion — has roiled Hollywood and the global entertainment industry. It signals that the already tight monopoly of big entertainment players — Disney, Paramount, Warner Bros., Sony Pictures, and Comcast — is getting even tighter; that the battle is now entirely about streaming; and that the days of the “big screen” may be nearing their end.
Through the acquisition, Netflix co-CEO Ted Sarandos said the streaming giant hopes to gain access to a film and series content library stretching back nearly a century — from classics like Citizen Kane and Casablanca to more recent hits such as Harry Potter and Friends.
Paramount, which lost the initial round to Netflix, has decided it will not give up without a fight. It made a hostile bid of about $108 billion, but the WBD board expressed doubts about whether the offer was backed by guaranteed capital. On December 17, the board officially rejected Paramount’s proposal, citing an “opaque” financial structure. Concerns included several questionable Middle East investors backing the bid and Paramount’s controlling family — the Ellisons — not personally committing sufficient funds.
In response, on December 22, tech titan Larry Ellison — Oracle’s founder and chief, and the father of Paramount CEO David Ellison — personally guaranteed $40.4 billion in equity required for Paramount’s proposed takeover of Warner Bros. The revised offer, however, did not change the bid price of $30 a share or the overall valuation of $108 billion.
Warner Bros. investors now have until January 21 — extended from January 8 — to accept or reject the new, firmer offer. So far, the Warner Bros. board continues to lean in favour of Netflix.
Failed M&As
Historically, Warner Bros. has a disastrous record of mergers and acquisitions, with shareholders often losing out. Respected management analyst Roger Martin has examined each of these deals — the first in 2001, when AOL bought Time Warner at a valuation of $166 billion, and the second in 2018, when AT&T acquired Time Warner for $85 billion.
The AOL–Time Warner deal collapsed soon after it was signed, when it became clear that AOL was largely worthless. AOL was later spun off for a mere $3 billion in 2009, but Time Warner shareholders had already been bamboozled into giving up 55% of their company in exchange for an asset worth just $3 billion.
Martin also documents how the AT&T–Time Warner deal turned out to be another disastrous acquisition. Just three years later, Time Warner’s assets were sold to Discovery for $43 billion — a massive discount from the original $85 billion price tag. As Warner Bros. enters its third major deal cycle, are things once again spinning out of control?
What’s at stake
The stakes this time are enormous. A Netflix acquisition would give the streaming giant access to a potential combined base of more than 400 million subscribers worldwide, further entrenching its market dominance. A Paramount takeover, on the other hand, would combine two major film studios and two influential news organisations — CBS News and CNN — under the control of the Ellison family.
For both Netflix and Paramount, the motivation is clear: access to vast content libraries they currently lack. Netflix has mastered aggregated streaming content but has struggled to consistently produce blockbuster films. Warner Bros.’ studio capabilities would neatly fill that gap.
For Paramount, the deal would deliver critical scale by combining Paramount Pictures and Warner Bros.; streaming platforms Paramount+ and HBO Max; and networks with deep reach such as CNN, TBS, and Discovery. Projections suggest the merged entity could attract 200 million subscribers and generate $70 billion in annual revenue.
Competition evaporates
Over time, the top of the media and entertainment (M&E) pyramid has grown thinner. Fewer players are reducing consumer choice and constraining editorial independence across news organisations.
Paramount itself became a larger entity just six months ago after merging with Ellison family–promoted Skydance Media in a deal valued at $8 billion. Earlier, in 2019, The Walt Disney Company acquired Rupert Murdoch’s 21st Century Fox.
The past decade has seen an intense scramble for content as the big screen waned and streaming transformed the industry. Disney, in particular, embarked on a buying spree over the last 10–15 years, snapping up franchises such as Marvel, Star Wars, and Pixar — all aimed at driving subscriber growth for Disney+.
As competition shrinks in media and entertainment, US news networks are also feeling the squeeze. CBS, Paramount’s flagship news outlet, faced a lawsuit filed by Donald Trump at a time when the Paramount–Skydance merger was awaiting approval from the US regulator, the FCC. By then, Trump was in his second term as president.
Although the lawsuit, which alleged election interference, was widely considered baseless, Paramount agreed to pay $16 million to settle the case to ensure FCC approval. It also shut down The Late Show with Stephen Colbert, a vocal Trump critic, and hired Bari Weiss, a Trump ally, as editor-in-chief of CBS News.
One does not have to strain too hard to imagine what might happen to Warner Bros.’ openly anti-Trump news network, CNN, if and when Paramount takes control.