Why Netflix Walked Away From a Potential Warner Bros. Acquisition

Netflix shocked the entertainment industry this week by declining to raise its bid for Warner Bros. Discovery, effectively clearing the way for Paramount Skydance to take control of the iconic Hollywood studio.

At the time, Netflix co-CEOs Ted Sarandos and Greg Peters said the company was remaining financially disciplined. New Bloomberg reporting offers a clearer picture of why Netflix executives decided to step away from a bidding battle they had appeared to win back in December.

One major factor was investor scepticism. Shareholders at the streaming company reportedly had serious doubts about whether the deal made financial sense. Since announcing the acquisition, Netflix’s stock price had fallen by 30%, while news that the company was backing out of the contest helped send the stock up by nearly 14%. Netflix also received a $2.8 billion breakup fee from Paramount.

Another issue was that Netflix’s confidence in the deal appears to have weakened after Paramount returned with a higher offer and signalled it was prepared to proceed through several additional rounds of bidding.

By the time Sarandos met with officials from the Trump administration on Thursday, he may already have decided to back off. In fact, after President Donald Trump had earlier warned him not to overpay, Sarandos reportedly told him, “I took your advice.”

Meanwhile, Warner Bros. staff are increasingly concerned about the possibility of large-scale studio layoffs and about growing conservative political pressure on CNN.