Netflix set to be likely winner of Warner Bros acquisition, beating out Paramount and Comcast

Netflix looks to be the likely victor in the battle to buy one of Hollywood’s last remaining major studios, Warner Bros Discovery.

Bloomberg broke the news that the streaming behemoth had entered exclusive talks to buy Warners’ streaming and studio business units.

A final decision had been expected within days after third round offers from Netflix and rivals Paramount and Comcast were submitted on Thursday US time.

According to Bloomberg, a deal between Netflix and Warner Bros will be announced if these talks don’t fall through, and the streaming company has committed to a $US5 billion fee if US government regulators don’t approve the transaction.

Earlier reports today from Reuters Netflix had become the frontrunner after it lodged the highest offer. The first round of offers were submitted in mid-November while all three companies put forward revised, higher terms on December 1.

Previous attempts from Paramount to buy Warners before it officially put up the for sale sign had valued the studio at least $US60 billion.

Warners is one of Hollywood’s five major studios with a 102-year history, and one of two remaining of its original powerhouses. No matter who emerges the victor, the sale will almost certainly diminish the industry as it’s absorbed by another business.

Netflix was seen by many in the industry as the worse-case scenario buyer for Warner Bros, given the streamer’s long-standing hostility to releasing films in cinemas. The theatrical exhibition business hasn’t recovered from Covid shutdowns and dual Hollywood union strikes as streaming accelerated its hold on audiences.

James Cameron recently said on The Town podcast, that Netflix taking over Warner Bros “would be a disaster”.

Cameron also classified reports that Netflix had committed to continuing to release Warner Bros movies in cinemas was “sucker bait”.

Paramount wanted to buy the entire business which includes Warners’ cable channels assets, which was folded into the company when Warner Bros merged with Discovery in 2022 while Netflix and Comcast, which also owns Universal, want only the studios and streaming units.

Paramount must have sensed things weren’t going its way when it sent a scathing letter via its lawyers to WBD’s chief executive David Zaslav, accusing Warners of an unfair process which appears to be favouring Netflix, CNBC reported.

The letter pulled no punches. In part, it read, “It has become increasingly clear, through media reporting and otherwise, that WBD appears to have abandoned the semblance and reality of a fair transaction process, thereby abdicating its duties to stockholders, and embarked on a myopic process with a pre-determined outcome that favours a single bidder.”

Paramount cited a German report in newspaper Handelsblatt which it said gave it “serious cause for concern”, regarding a meeting between Warners’ president of international business Gerhard Zieler and the EU commission vice president Hena Virkkunen discussing media concentration if Paramount were to win.

The letter also referred to various media reporting of “chemistry between” Warners and Netflix management, and that a transaction between the two would be a “slam dunk”. It claimed those comments “echo” sentiments Paramount had heard through the process.

In an even more extraordinary missive, Paramount said it has a “credible basis to believe that the sales process has been tainted by management conflicts, including certain members of management’s potential personal interests in post-transaction roles and compensation as a result of the economic incentives embedded in recent amendments to employment arrangements”.

The letter does not name which members of the management team Paramount is referring to, but the accusation is quite brazen. It also said that given its “grave concerns regarding the integrity of WBD’s process”, it wanted an “independent special committee of disinterested members of its board” to consider the acquisition.

It made it clear to Zaslav that it expected the letter to be shared with the whole board.

Paramount is controlled by David Ellison and his father Larry Ellison, the founder of tech company Oracle and one of the richest men in the world. The younger Ellison, through his production company Skydance, bought Paramount earlier this year.