MW Did Paramount end up burning down its own house with its pursuit of Warner Bros. Discovery?

By Lukas I. Alpert

By opening up a sales process that drove WBD into Netflix's arms, Paramount could find itself left in the dust by what would be a far larger streaming rival

Paramount Skydance CEO David Ellison vowed to move quickly to transform Paramount, but his aggressive pursuit of Warner Bros. Discovery may end up leaving his company behind.

When David Ellison took the reins of Paramount Skydance just four months ago, he promised to rapidly transform the storied movie studio and television business into a tech-forward dynamo well positioned for growth.

Within weeks, Ellison sought to jump-start that process by aggressively pursuing an acquisition of a larger rival, Warner Bros. Discovery (WBD). Yet that ended up triggering a bidding war that pushed the owner of HBO and one of the largest studios in Hollywood into the arms of Netflix $(NFLX)$, which announced Friday that it is acquiring WBD's streaming and studio businesses for $82.7 billion.

If the Netflix-WBD deal goes through - there are several regulatory challenges to overcome - it would make Netflix, already the top streaming company, even larger and likely leave everyone else, Paramount Skydance $(PSKY)$ included, far behind.

And investors are getting anxious about the consequences, as Paramount's stock sank 9.8% to $13.37 on Friday, a four-month closing low, and has tumbled 16.6% in the past week.

The logic of the deal for Paramount had been clear: By adding Warner Bros. Discovery's 128 million global streaming subscribers to the over 79 million it had to its Paramount+ service, it would have been able to leapfrog to second place among the major streaming companies, trailing only Netflix.

But with Netflix poised to add WBD's streaming customers to the over 300 million it already has worldwide, it would give Netflix a formidable and likely insurmountable lead that would see it have more than twice as many subscribers as its nearest rival, Amazon.com's (AMZN) Prime Video.

With Paramount and NBCUniversal parent Comcast $(CMCSA)$, which also bid for WBD, losing out, some analysts think it could result in serious competitive disadvantages for those companies going forward.

"Netflix's stranglehold on the streaming market will become even tighter, as there is now a lack of scaled M&A options that will be able to challenge their leadership position," John Conca, a media analyst with research firm Third Bridge, wrote in a note to clients. "With Comcast and Paramount missing out, it raises serious concerns about their abilities to remain viable, given the scale disadvantages when it comes to acquiring must-have content."

Representatives for Paramount and Comcast didn't immediately respond to messages seeking comment.

The deal is far from done, however. Netflix said it expects it will take 12 to 18 months to close the acquisition, and regulators in Washington and Europe are expected to closely scrutinize the transaction.

That could leave room for Paramount to stage another offensive, whether attempting to go directly to shareholders with a higher offer or launching a hostile takeover effort, analysts have speculated - although it would be a costly endeavor.

Ellison said in a letter to Warner Bros. Discovery's board earlier this week that he felt that the bidding process had been handled "unfairly," with the scales being tipped in Netflix's favor, and warned that only Paramount's offer could get through the regulatory process.

Of the three potential suitors, Paramount had been the only one to offer to buy Warner Bros. Discovery in its entirety, including its cable-TV business. Netflix and Comcast had only bid for WBD's studio and streaming arms.

Paramount was also considered to have a leg up given the closeness of its owners - Ellison and his father, Oracle $(ORCL)$ co-founder Larry Ellison, who is one of the richest people in the world - to the Trump administration, which would need to sign off on expected regulatory hurdles.

In the end, WBD agreed to sell its streaming and studio businesses, plus HBO, to Netflix following a spinoff of its cable channels, which include CNN, TNT, the Food Network and the Discovery Channel.

Netflix also will gain control of Warner Bros.' deep content library - from films like "Casablanca" and the "Mad Max" franchise, to television staples like "Friends" and "The Sopranos."

Other analysts said they believed that Paramount's aggressive acquisition effort was appropriate and even necessary once WBD announced plans in June to spinoff its cable channels, effectively starting a potential sales process.

"From Paramount's perspective, this was a move they had to attempt, and at least this way, they chose the timing and were in control of the process," said Jeff Goldstein, managing director of technology, media and telecommunications at consulting firm AlixPartners. "Even if they decide this is it, there are other moves they can make to bolster their position."

-Lukas I. Alpert

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December 06, 2025 08:30 ET (13:30 GMT)

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