By Brett Decker

About the author: Brett M. Decker is a New York Times best-selling author and the Endowed Chair of Leadership at Northwood University. He is a former editor and editorial page writer for The Wall Street Journal.

After a prolonged bidding war and intense regulatory scrutiny, Netflix abandoned its efforts to acquire Warner Bros. Discovery last month. Some members of Congress, including a few of those most vocally opposed to a Netflix-WBD deal, still aren't happy.

More than a dozen Democratic lawmakers are demanding insight into how the Justice Department and the Federal Communications Commission are reviewing the winning bid from Paramount Skydance. Paramount, which is owned by a Trump ally, beat out Netflix on Feb. 26 with a $111 billion offer for all of WBD's assets.

Lawmakers are right to call for careful scrutiny of the merger, and their concerns about some of Paramount's foreign investors, including the Saudis and Chinese, are valid. But they should recognize that Netflix's bid was far more problematic.

Netflix's $83 billion proposal presented serious concerns of vertical integration. Combining the world's most dominant streaming platform with one of Hollywood's largest studios would have given one firm influence over movie licensing, distribution, and advertising markets. Films produced by Warner Bros. would likely go directly to streaming rather than theatrical release. Independent cinemas would suffer.

That's why high-profile directors -- such as James Cameron, who told lawmakers that Netflix was "directly at odds" with the movie business -- lobbied hard against the streamer.

Industry opposition like that can slow a deal, complicate Justice Department review, and widen merger spreads. Whether or not the opposition and concerns would ultimately have derailed Netflix's bid, they introduced time risk -- and in large transactions, time is money. Every additional month under review increases financing costs, market exposure, and the chance that shifting market conditions alter the deal's economics.

Paramount is a more logical steward of the traditional theatrical model, Cameron argued. It produces movies intended for big cinematic releases, such as Top Gun: Maverick and the Transformers series. It also has less than half the streaming market share as Netflix.

For WBD stakeholders, being patient paid off. On Feb. 24, Paramount upped its offer to a $31-per-share bid, which represented a more reliable premium with less of the stock volatility that could have accompanied Netflix's part-cash, part-equity offer. For merger-arbitrage investors, Paramount's all-cash bid with a ticking fee and a defined regulatory backstop materially reduced spread risk compared to a stock-heavy transaction subject to extended Justice Department review.

Yet, Paramount's stock has taken a beating since winning the bidding war. Its share price has fallen roughly 30% and neared its lowest level since 2009 last week.

Investors are worried that the deal, if approved, will only worsen Paramount's massive, junk-rated debt load. And despite President Donald Trump previously said he would "be involved" in a WBD merger -- presumably to benefit Paramount -- Justice Department investigators said last week that they have no plans to expedite the deal's approval.

Paramount's stock plunge may reverse quickly, however, as merger-arbitrage investors step in, drawn by the defined spread and improving visibility into the deal's path to completion. As uncertainty fades, the market is likely to begin pricing in the premium embedded in Paramount's all-cash bid.

Meanwhile, Ted Sarandos, Netflix's co-CEO, is telling those inside and outside the company that WBD was always a case of "nice to have," not "must have." For investors, walking away from the bidding war was a display of capital discipline. Avoiding a prolonged regulatory battle preserves balance sheet flexibility and shields the company from the risk of overpaying in a competitive auction. Netflix's stock is up about 9% since it backed out of the bidding war.

Paramount was much more determined to combine forces with WBD, and its aggressive posture paid off. But in megadeals, the company that "must have" the asset often assumes greater financial and regulatory risk. Investors would do well to remember that in contested transactions, restraint can generate as much long-term value as expansion.

Members of Congress, meanwhile, should recognize a better thing when they see one.

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March 23, 2026 16:12 ET (20:12 GMT)

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