Why a higher bid keeps getting rejected
Warner Bros Discovery has handed Paramount Skydance a seven-day ultimatum to table its best offer, even as the company's board continues to recommend shareholders back Netflix's agreed £61.2bn acquisition of its studio and streaming assets. The deadline lands on 23 February, after which the streaming giant could absorb one of Hollywood's most storied content libraries without further interference.
The manoeuvre reveals just how dramatically the streaming wars have shifted. Netflix, the company that once existed purely to disrupt traditional studios, is now acquiring the very libraries it used to license. For Warner Bros Discovery chief executive David Zaslav, the message is clear: Paramount can bid, but Netflix remains the preferred suitor despite offering substantially less for a smaller slice of the business.
The arithmetic appears straightforward. Paramount Skydance's £79.4bn proposal values the entire Warner Bros Discovery operation, whilst Netflix's £61.2bn offer excludes the cable networks altogether. Yet Warner Bros has now rejected Paramount's approach multiple times, citing what it delicately terms "unresolved deficiencies" in previous offers.
Those deficiencies likely centre on financing credibility and regulatory risk. Paramount Skydance, itself the product of a merger between a struggling legacy studio and a well-funded private equity play, would need to raise considerable debt to consummate a deal of this magnitude. The company makes Mission: Impossible and Star Trek franchises, but its balance sheet hardly inspires confidence for an acquisition approaching £80bn.
What's particularly revealing is Warner Bros Discovery's willingness to carve itself up to accommodate Netflix's preferred structure. The streaming company would acquire the studio business, the extensive film and television library, and the HBO Max platform. Left behind: CNN, TBS, and TNT Sports UK, all destined for a spin-off that would complete before any Netflix transaction closes.
That spin-off raises uncomfortable questions about what happens to cable assets nobody particularly wants to own. CNN's brand carries weight, but its viewership and advertising revenue have faced sustained pressure. TBS occupies an even less enviable position in an entertainment ecosystem that has largely moved beyond scheduled programming. These aren't complementary businesses that could thrive independently—they're the remnants left over after the valuable IP gets extracted.
Strategic desperation on three sides
Each party brings its own form of urgency to these negotiations. For Netflix, subscriber growth in developed markets has effectively plateaued, with the company's recent earnings reports showing expansion primarily in lower-revenue territories. Acquiring Warner Bros Discovery's studio operation delivers the scale and content depth to maintain pricing power whilst competitors like Disney+ and Amazon Prime Video continue investing billions in original programming.
Netflix would inherit the entire Harry Potter franchise, HBO's prestige drama catalogue, and Warner's film library spanning decades. More importantly, it would remove a competitor from the streaming landscape permanently, consolidating market position through acquisition rather than the endless content spending race that has characterised the past five years.
Warner Bros Discovery, meanwhile, carries approximately £43bn in debt following its own 2022 merger. Zaslav has spent two years cutting costs, cancelling projects, and searching for strategic alternatives. Selling to Netflix provides both an exit for shareholders and validation that the streaming model ultimately defeats traditional studio economics. His statement that the board has "provided clear direction on the deficiencies" in Paramount's offers suggests those deficiencies aren't small technical issues but fundamental problems with deal structure and financing.
Paramount Skydance represents the most precarious position of all. The company attempted its own transformation through merger, combining Paramount's library with Skydance's production muscle and private equity backing. But the streaming economics haven't worked, and buying Warner Bros Discovery would represent a desperate attempt to achieve the scale that might finally make the mathematics viable. That the bid keeps getting rejected despite offering £18bn more for the full business suggests Warner Bros' board doesn't believe the financing exists or fears regulatory scrutiny of two major studios combining.
Cable channels face uncertain future
The fate of those spun-off cable assets deserves scrutiny. Warner Bros Discovery would essentially create a separate publicly traded entity comprising news, sports, and general entertainment channels with declining subscriber bases and shrinking advertising markets. Who exactly wants to own that business?
The spin-off structure benefits Netflix by allowing it to avoid legacy media baggage whilst cherry-picking the valuable IP. But it leaves fundamental questions about whether these cable properties possess sufficient standalone value to attract investors. CNN might survive as an independent news organisation, but TBS and similar channels face an existential challenge in an on-demand entertainment world.
What the 23 February deadline actually means
Zaslav's language around Paramount's deadline suggests theatre more than genuine negotiation. The statement that Warner Bros is "engaging with Paramount Skydance to determine whether they can deliver an actionable, binding proposal" reads like a company going through the motions to satisfy shareholder litigation concerns whilst already knowing its preferred outcome.
Paramount has one week to solve problems that have dogged multiple previous proposals. Absent a radical restructuring of its financing or unexpected consortium of backers, the 23 February deadline will pass without a competitive offer. Netflix will proceed to acquire the studio and streaming business, completing a remarkable reversal in which the disruptor becomes the consolidator. The cable channels will spin off into an uncertain future, and Hollywood will have one fewer major studio than it does today.
For streaming subscribers, the implications won't materialise immediately. But Warner Bros Discovery's content library landing permanently within Netflix's ecosystem rather than licensed on rotating terms will eventually reshape what appears where. The company that once simply delivered other studios' content to your screen is becoming the studio itself.
