Netflix Inc. (NFLX) just made the biggest bet in its history, and now it's hoping regulators will greenlight the deal before a rival can throw sand in the gears. The streaming giant announced a definitive agreement to acquire Warner Bros. Discovery (WBD) for $82.7 billion, bringing home HBO, Warner Bros. studios, and franchises like Harry Potter and the DC Universe. But Paramount Skydance (PSKY) isn't going quietly, raising questions about whether the auction was rigged from the start.
The Deal Breakdown
Netflix's agreement values Warner Bros. Discovery at $27.75 per share, representing roughly $72 billion in equity value. The transaction covers Warner Bros.' legendary film and television studios, along with HBO and HBO Max streaming operations—basically, the crown jewels of prestige content production.
Warner Bros. Discovery shareholders will pocket $23.25 in cash and $4.50 worth of Netflix stock per share at closing. The stock portion includes a collar tied to Netflix's 15-day volume-weighted average price measured three trading days before the deal closes, which protects both sides from wild swings in Netflix's share price.
How We Got Here
This deal emerged from what can only be described as a Hollywood cage match. Netflix secured exclusive negotiating rights after a chaotic final bidding round that included Paramount Skydance among other suitors. Trade publications disagreed on the exact winning bid—Deadline reported $28 per share while The Wrap claimed Netflix hit a $30-per-share target during negotiations.
What everyone agrees on: this was about acquiring Warner Bros.' storied production capabilities and HBO's premium content engine, plus marquee franchises that have generated billions at the box office and in merchandising.
The Paramount Problem
Here's where things get interesting. Paramount Skydance isn't accepting defeat gracefully. According to CNBC, the company fired off a letter to Warner Bros. Discovery CEO David Zaslav alleging the auction process was biased and potentially predetermined in Netflix's favor.
The letter proposed forming an independent special committee to oversee the process—essentially accusing Warner Bros. Discovery's management of having their thumb on the scale. Paramount Skydance raised concerns about potential conflicts of interest tied to management incentives and warned that even the appearance of favoritism could damage shareholder value and create legal risks for any deal.
Whether this is legitimate concern or sour grapes from a losing bidder remains to be seen, but it could give regulators something extra to chew on during their review.
What Happens Next
Both boards unanimously approved the agreement, but that's just the opening act. The deal still needs regulatory approval from antitrust authorities who will scrutinize whether combining Netflix's streaming dominance with Warner Bros.' content production creates too much market power.
There's also the matter of Warner Bros. Discovery shareholder approval and standard closing conditions. The transaction is expected to close after Warner Bros. Discovery completes its planned spinoff of the Global Networks business into a new publicly traded company called Discovery Global, now scheduled for the third quarter of 2026.
The Business Case
Netflix says it plans to keep Warner Bros.' current theatrical film release strategy intact—good news for movie theaters worried about losing tentpole releases. The company projects annual cost savings between $2 billion and $3 billion by year three, achieved through eliminating duplicate corporate functions and consolidating distribution infrastructure.
Management expects the deal to boost GAAP earnings per share by year two, suggesting they see real synergies beyond just cutting costs. Combining Netflix's global streaming reach with Warner Bros.' production machine and HBO's premium brand could reshape how entertainment gets made and distributed.
Price Action: Netflix shares dropped 4.37% to $98.71 in premarket trading Thursday, while Warner Bros. Discovery climbed 2.12% to $25.06.