The Journal. - Netflix’s Fight for Warner Just Got Harder

Episode Date: December 8, 2025

This morning, Paramount Skydance launched a $77.9 billion hostile takeover offer for Warner Bros. Discovery. It occurred just days after Warner had agreed to a $72 billion deal with Netflix. WSJ’s Joe Flint reports on the twists and turns of the battle to control Warner and, if Netflix succeeds, how it would change Hollywood. Ryan Knutson hosts. Further Listening: - Will Paramount Settle With Trump? - She Swore Off Legacy Media. Now She's Running CBS News. Sign up for WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

On Friday, there was big news in Hollywood. One media juggernaut, Netflix, announced it was buying another giant, Warner Brothers Discovery, for $72 billion. The streaming giant will acquire Warner Brothers Film Studio and streaming service HBO Max. This is a deal that could reshape it. Hollywood, comprising some of Hollywood's most prized movies and shows. Look, this has seismic effects on the entire entertainment landscape. But Netflix isn't the only company that's been courting Warner. Over the past few weeks, another massive entertainment company, Paramount Skydance,

has also been in hot pursuit. And this morning, it went public with a hostile counteroffer. Paramount launching a hostile takeover bid for Warner Brothers Discovery just days after Netflix announced an $83 billion deal to purchase the studio. Paramount, it's not done. Paramount has upped its bid now for Warner Brothers. It is now offering all cash at $30 a share, a bid that it says is superior to Netflix's bid.

This morning, I got on a call with my colleague Joe Flint, who's been covering every twist in turn. And now it's kicked into Fifth Gear this morning. Fifth Gear was right around 6 a.m., my time, Los Angeles time, when Paramount officially launched their hostile takeover for Warner Brothers Discovery. It's a heavyweight showdown between Netflix and Paramount over one of Hollywood's most storied companies. And no matter what happens, the business of Hollywood is about to change. I'm sorry if there's a Paramount conference call in six minutes.

minutes to talk about their hostile bid. I'm guessing you probably need to be on that call. I need to be on that. Should we just get back on the phone when this call is finished? Yeah, that'd be great. Appreciate it. It's part of your drama. Exactly. This is going to be a weather of a cliffhanger. Welcome to The Journal, our show about money, business, and power.

I'm Ryan Knudsen. It's Monday, December 8th. Coming up on the show, the showdown over Warner Brothers. This episode is brought to you by Fidelity. You check how well something performs before you buy it. Why should investing be any different? Fidelity gets that performance matters most. With sound financial advice and quality investment products, they're here to help accelerate your dreams.

chat with your advisor or visit fidelity.ca slash performance to learn more. Commissions, fees, and expenses may apply. Read the funds or ETFs prospectus before investing. Funds and ETFs are not guaranteed. Their values change and past performance may not be repeated. Canada's Wonderland is bringing the holiday magic this season with Winterfest on select nights now through January 3rd. Step into a winter wonderland filled with millions of dazzling lights, festive shows, rides, and holiday treats. Plus, Coca-Cola is back.

with Canada's kindness community, celebrating acts of kindness nationwide, with a chance at 100,000 donation for the winning community and a 2026 holiday caravan stop. Learn more at canadaswunderland.com. The company that's being acquired, Warner Brothers Discovery, is itself the product of a giant merger just a few years ago. In 2022, Discovery Networks, which owned a small streaming service and a bunch of cable channels combined with Warner Media, which owned the Warner Bros. Movie Studio and HBO. When I got Joe back on the phone, about an hour later, I asked him about the original vision for Warner Brothers Discovery. And the idea was that they'd have

this supercharged streamer of the best of HBO, the best of discovery, you'd have CNN in there, and then you'd still own these movie and TV studios, and it would be the ultimate Hollywood giant. But instead of becoming the ultimate Hollywood giant, Warner Brothers' discovery stumbled. Joe says its CEO, David Sazlov, actually took on a lot of headaches. Its cable business was challenged by cord-cutting, and building a streaming business was expensive. The company was saddled with heavy debt, and its stock price was in decline for much of its existence. So how did Warner Discovery become a takeover target? Warner decided earlier this year to break itself into two separate companies.

they were going to put the streaming and studios into one standalone company and then the cable networks such as CNN into another publicly traded company. The cable networks were seen as a drag on the Warner stock. So they thought that if they split the company apart, you'd have this one company that would have the movie studios and TV studios and HBO Max, all these sexy properties, and then the other company would have, you know, what is still a good cash business, but seen as a melting ice cube in the Claibble Network universe. So they did that, and there was always an anticipation that doing that when it was all done,

there might be some interest from big players in buying those Hollywood entertainment assets. But before Zazlov could split the company up, Paramount decided to pounce. And earlier this year, it put in several unsolicited bids to buy Warner, and not just one part, but the whole thing. So introduce us to Paramount. Who's behind this company and why does Paramount suddenly decide to make an unsolicited bid for Warner?

Paramount was recently acquired by David Ellison and his Sky Dance Media Group. Now, Ellison, in the back of his mind, had the idea of getting Paramount and then going after Warner. So once he got Paramount, you know, he started to turn his eye immediately to Warner. So the idea of combining Paramount and Warner, and you've got this tremendous library and the real potential to build a streaming service that could rival Netflix, that was what was appealing to Ellison. I feel like this is like nesting dolls.

It's just like there's one merger inside of another merger inside of another merger that's now trying to, you know, go inside another giant merger. Yes, a lot of consolidation, a lot of mergers. Paramount decided we don't want to wait a couple years and face a potential bidding war. So we're going to try to buy the whole company right now. Joe says Paramount thought that by moving early,

it could have a clean shot at a takeover. So Paramount makes these unsolicited bids for Warner Brothers Discovery. How did David Zazlaw at Warner Brothers respond to those bids? Well, from my own reporting, I don't think they were necessarily thrilled by unsolicited kind of aggressive bids that they also felt were lowball offers. But the challenge is once you've had a certain number of offers

and they've become public, we're all writing about them, is a company you're kind of forced to at least address it and perhaps do what they did, which was open up a process to begin and auction. The auction, which was primarily over those sexy parts, HBO Max and the movie studios, drew bids from Comcast and Netflix. So what would they appeal for Netflix to own Warner Brothers? So even though Netflix is kind of steered clear of big mergers, big deals,

they always say we're a builder, not a buyer, an asset like Warner Brothers that has a lot of classic IP, superhero franchises, great old TV shows, a lot of content that Netflix already knows works on its platform because they've aired a lot of those shows and movies there. So they know this is good stuff. The deal stunned Hollywood, because many assumed that Paramount had the upper hand, but Netflix's bid won out.

Its $72 billion offer was just for part of the company, only HBO Max in the movie studios, and it doesn't include the cable channels like CNN. Netflix has said it would continue Warner Brothers operations, including selling shows to other networks, as Warner has done in the past. It also plans to continue releasing Warner films and theaters. Paramount, meanwhile,

isn't giving up. It wrote a letter to Zazlov last week, saying the company had, quote, embarked on a myopic process with a predetermined outcome that favors a single bidder. Warner wrote in response on Thursday that it fully and robustly complies

with its fiduciary obligations and will continue to do so. Earlier today, Paramount announced that hostile takeover bid, which was for $77.9 billion, not including debt, for the whole company. How big of a fight does Warner Brothers and Netflix have on its hands.

Yeah, we're in Squid Game territory right now. They're taking it to shareholders. And so now this will get uglier between Netflix and Warner and Paramount. You know, we'll see how it all plays out. After the break, we hear about what Joe heard on that phone call. Hello, everyone. Thank you all for joining us today, especially on such short notice. Okay, so let's go back to this phone call that just happened earlier this morning that you had to step out for.

What did Paramount say? This was them making their case to the analysts why they were doing this. By bringing together the complementary strengths of Paramount and Warner Brothers Discovery, we can unlock greater scale, reach, and create a potential. So basically they were saying that they firmly believed that their offer is better than Netflix's offer and that this process to bid on these assets has not been fair, that it was inherently biased in favor of Netflix versus Paramount. On Thursday, we submitted our fully financed superior offer, an offer that directly addressed every concern with our previous bid that they laid out, yet we did not receive a single callback.

That brings us here today. So they're taking their case to the Warner shareholders here and that they believe their deal has a better chance of passing from a regulatory standpoint. Basically, that was, I mean, if they were already hostile, they've now turned it up to super hostile, when they've gone to 11. We're here to fight for value for our shareholders and for WBD shareholders. Why won't, why not just give it up and say, okay, we're going to let this one go if you're paramount? Why fight so hard? So Paramount Stock took a hit last Friday when it emerged that Netflix had been Warner's chosen partner. I think because the street and everyone else felt that Paramount really needs Warner to scale up and be a competitor.

Otherwise, you're still the same old Paramount. So they really feel like they need these assets. They will tell you that they feel like they will be a better steward for these assets than Netflix. But that's really what's striving is, the old he who has the most toys wins. On Monday, Netflix co-CEO Ted Sarando said that Paramount's tender offer was, quote, entirely expected, and he said that Netflix is, quote, super confident its deal will get done. Today, Paramount accused Warner of never meaningfully engaging with its offers

over the past 12 weeks. So if this deal with Netflix and Warner Brothers goes through, this company will be huge. It'll have two streaming services, Netflix and HBO Max, It'll have a giant movie studio plus, you know, the movies that Netflix makes, tons of valuable IP from Superman to Harry Potter to Stranger Things. Could you talk about the antitrust concerns? Because the government will have to review this deal in order for it to go through. Yeah, there's a few major antitrust concerns.

The biggest thing that this will turn on for Netflix is how are we defining the streaming marketplace? Netflix, when they put out their earnings letter, every quarter when Netflix does an earnings letter, they used to like to say that they don't just view their competitors as Disney Plus, Fortnite is a competitor. Sleep is a competitor. Yeah, I remember that. Yeah, sleep is a competitor. So they view anything as a competitor. They would argue that the streaming market includes TikTok, includes Facebook with all their videos now, Instagram.

You can't just look at Netflix versus Disney Plus versus Paramount Plus. In fact, in that world, they argue that they actually, as a company, have a smaller market share of TV viewing than Paramount. But what Paramount is going to argue, and what the Justice Department will have to decide is whether that is just too broad a way to look at this marketplace, that it needs to be looked in a more narrow fashion of subscription video service providers. Paramount kind of dismisses the idea that TikTok or Instagram can be seen as competitors in the streaming world. David Ellison said, look, that's like Coke tries to buy Pepsi and the deal gets approved because Budweiser is seen as an alternative to Coca-Cola. It's not. And he said, you know, the next maker of Game of Thrones isn't going to go to Instagram or TikTok to make their show.

They're going to go to a Hollywood powerhouse. So that's going to be really what the thrust of the argument will be. There will be other issues, too, about the consolidation of movie studios and what that could mean for the theatrical business, what it means for creative talent. But those are issues both companies are going to have to answer. So it really comes down to defining what the streaming marketplace is. Netflix co-CEO Ted Sarando said Friday that the company is highly confident the deal will win approval, because it's, quote, pro-consumer and pro-innovation.

If the Netflix deal goes through, would it mean that Netflix has pretty much taken over Hollywood? I think it's both those things. I think some would argue in many ways Netflix has already taken over Hollywood, or at least radically change the landscape out here. But Hollywood is always, even now, all these years later, a little distrustful of Netflix. They're still seen as a disruptor. So Netflix, in many ways, already is the big force out here, and that's why so many people are a little bit scared about them even getting bigger with Warner.

And that leads to the next question about the future of Hollywood and which way Hollywood will go. President Donald Trump was asked about the Netflix deal at an event on Sunday, and he expressed some skepticism. They have a very big market share, and when they have Warner Brothers, you know, that chair goes up a lot. So I don't know.

That's going to be for some economists to tell. And also, and I'll be involved in that decision, too. But essentially at this moment, Warner is sitting there looking between two suitors and has to decide which ones it thinks it's the most attractive? Pretty much, yes. Warner has 10 business days to respond to Paramount's offer. So we have to see how all that plays out. And that's kind of what we're waiting for next.

And also just in theory, Netflix could try to come back with a bigger offer if Warner were to suddenly change its mind. Conversely, if Netflix fields are getting into a bidding war that they don't want to be in, or this is just too much of a public battle that's not necessarily their style, maybe they would walk. I don't know. But those are the questions we'll all be waiting to see answered. in the next few weeks. And what would it mean for us, binge TV watchers, for everyone on their couches?

Well, eventually, I mean, if Netflix is successful, they will have an even bigger library of TV shows and movies. And with Paramount, same sort of thing in terms of building up a library and a stronger streaming product. I guess either way, though, it seems very possible that there's going to be less competition with this type of consolidation. Any one of these deals takes one by or out of the marketplace, really. Even if they say, well, we're running it separately and everything. No, it's all part of the same company.

So that's always a concern just to have fewer places to shop your products to. It gives someone more control to set pricing. I mean, one of the reasons Netflix is sort of viewed still, you know, warily by Hollywood is when they came in, and started making original programming, of course, they threw money at everyone, tons of money. Then once they got all the talent, of course, then they started the belt tightening. Suddenly it's like, yeah, no, we're not making it rain anymore.

So that's always a challenge for the creators, writers, producers, actors, just fewer people to play off one another. All right, Joe, I know you've got a busy day, so I really appreciate your time. Sure, sure. That's all for today. The journal is a co-production of Spotify and the Wall Street Journal. Additional reporting in this episode by Lauren Thomas.

Thanks for listening. See you tomorrow. Thank you.