The honchos at Warner Bros Discovery are likely to reject the gargantuan $108 billion bid from Paramount. Even at that level, Paramount only recently got a billionaire to pledge his own money for the deal, and apparently, even he wasn’t enough. On Tuesday, it was reported that the Warner Bros board prefers a different agreement with Netflix. This maneuver keeps the drama alive in what’s undoubtedly one of Hollywood history’s epic battles.
A Giant Battle of the Offers
Paramount has been aggressively trying to buy up Warner Bros. They even managed to get the personal guarantee of $40 billion from a very rich guy named Larry Ellison. Paramount agreed to pay $30 a share for the company, in cash. They assert that their transaction is superior because it is more money and involves the entire company, not only cable TV channels like CNN.
But Warner Bros has already struck a new arrangement with Netflix. The Netflix deal is worth around $82 billion in stock, less money than Paramount’s proposed offer, but Warner Bros believes it’s a safer bet. They think the Netflix deal can be closed more easily and with less uncertainty. Walking away from Netflix now would require Warner Bros to pay a massive “breakup fee” of almost $3 billion. The Warner Bros board has advised its shareholders to stand with Netflix.
Their concern is that Paramount’s maneuvering is too complex and may not come to pass anyway. They also believe that teaming with Netflix makes more sense for the future of streaming movies and shows. A modest sure thing is better than a risky big deal to them.
Government Rules and Big Risks
The biggest obstacle for any of those deals is the government. When two big firms merge, officials are concerned that it could harm competition and drive prices up for regular people. Paramount says that its offer would be easier for the government to approve. They seem to be of the mindset that because they are a traditional movie studio, consolidating with Warner Bros wouldn’t equal a monopoly like the one Netflix would have.
On the other hand, if Netflix and Warner Bros struck a deal they’d become a monstrous streaming giant. Politicians on both sides of the aisle have already taken notice. Even President Donald Trump has said that he intends to investigate the deal. We’re all concerned about what happens when we live in a world where a few giant companies own all the movies and TV shows we watch.
The experts are also leaning on the math. Netflix wants only the movie studio and the streaming pieces, a la HBO. They’re not interested in the old cable TV channels. Paramount wants everything. This divergence is one of the biggest reasons the two offers are so different. To the leaders at Warner Bros, choosing their dance partner is not only about taking home the biggest check but also knowing who will be the best owner in the long run.
What This Means For the Future
If Warner Bros responds with a hard “no” to Paramount later this week, it will be an enormous blow to the Ellison family. For months, they have been working to woo over shareholders. They were trying to show they meant business by including a personal guarantee. But if the board holds fast, Paramount may have to walk away or else come back with an even larger measure of sweetheartening.
Netflix winning this battle would be a boon of galactic proportions. It would provide some of the most iconic movies and shows ever created, from Harry Potter to Batman. It would also keep them a step ahead of other streaming platforms, such as Disney+. It proves that in a world of traditional TV and movies, it is the new streaming giants that are calling all the shots.
Ultimately, the company’s shareholders will have the last word. They must choose between the quick cash from Paramount and the stock and future growth of Netflix. With the January clock now ticking away, it’s perhaps getting close. Who will ultimately own one of the world’s most famous movie studios is a question everyone in Hollywood is watching.
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