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Paramount Skydance now seems the favourite to snap up the production giant.
"Hello everyone and welcome back to another GRTV News, today we're going to be talking about the big development that happened overnight. We knew that something was going to happen because when this much money is being thrown around, nothing ever really sticks and stays as it is. But yeah, overnight Netflix put out a press release where they confirmed that they will not be increasing their bid for Warner Brothers, which means, as it stands, the financially more impressive bid is coming from Paramount Skydance. Now this isn't a direct confirmation that the Warner Brothers Discovery Board are going to select Paramount's bid over Netflix's, it's just that there's not going to be a bid anymore. We're not going to see Netflix come out in a couple of days and say, you know what, we'll offer up $115 billion and then Paramount will come back, we'll do $117 billion or something like that."
"That's not going to happen. The two bids are locked in and we're probably not going to see either mess around with raising the money more now. This is what we're dealing with.
So it looks like in the next coming days and weeks, we're going to finally get a firm decision about what's happening with Warner Brothers, who's going to eventually complete the acquisition, who's going to own this legendary production company. But anyway, let's dive in."
"So yes, Netflix will not raise its $80 plus billion Warner Brothers acquisition bid to match Paramount Skydance's superior offer. The latest superior bid has swayed the minds of the WBD leadership and Netflix doesn't intend to get locked into a bidding war.
So yeah, well, we did mention that things could get spicy in the entertainment business this week and spicy is certainly what things have become. Following the recent improved bid by Paramount Skydance in their effort to challenge Netflix's acquisition of Warner Brothers for as much as $83 billion, it has now been confirmed that the Warner Brothers Discovery executives have been swayed by the improved offer thought to be valued at around $111 billion and are hoping the rival production firms will become locked in a bidding war."
"However, this won't be the case. Netflix has issued a press release stating it will not be improving its bid, meaning the WBD leaders and board have a big decision to make. Do they take the financially larger bid from Paramount Skydance that is riskier due to it being tied up in large part by loans and debts, or do they take Netflix's much smaller bid that is less risky as the streaming giant can fork over more of its own funds? I'll come to that again in a minute. It should also be said that Netflix only really wanted Warner Brothers IPs and production facilities and HBO Max, whereas Paramount Skydance wants most of the company, including its legacy networks. Speaking about this decision to stick and not twist, Netflix co-CEOs Ted Sarandos and Greg Peters have stated, and this is a direct quote from the press release, the transaction we negotiated would have created shareholder value with a clear path to regulatory approval. However, we've always been disciplined and at the price required to match Paramount Skydance's latest offer, the deal is no longer financially attractive, so we are declining to match the Paramount Skydance bid. Warner Brothers is a world-class organisation. We want to thank David Zaslav, Gunnar Weidenfels, Bruce Campbell, Brad Senger and the WBD board for running a fair and rigorous process. We believe we would have been a strong stewards of Warner Brothers' iconic brands and that our deal would have strengthened the entertainment industry and preserved and created more production jobs in the US. But this transaction was always a nice to have at the right price, not a must have at any price. Netflix's business is healthy, strong and growing organically, powered by our slate of best-in-class streaming service. This year, we'll invest approximately $20 billion in quality films and series and will expand our entertainment offering. Consistent with our capital allocation policy, we'll also resume our share repurchase programme."
"We will continue to do what we've done for more than 20 years as a public company, delight our members, profitably grow our business and drive long-term shareholder value. Are you surprised by this development? Do you think this massive acquisition situation will ultimately end over the coming days and weeks?
So, again, in that statement, Netflix always does this. Every year they lay out billions of dollars and they say, this is what we're going to commit to producing the content for the year ahead. And again, we're expecting $20 billion to be forked out over 2026 alone."
"And that's when I mentioned earlier that Netflix's bid is financially more stable. It's because Netflix has the capital to be able to do things like this. Netflix's business model is impressive as it comes at the moment. It's dwarfing majority of competitors and everyone's coming to it. It's why it keeps doing and exploring these new things and going into all these different sporting events and whatnot, because it looks at the way that it's fundamentally set up is much more well-structured and it promotes growth in a way that the traditional theatrical model cannot match. Netflix has been a key and strong player in the streaming space now for well over a decade. Paramount doesn't have that. It can't compete yet."
"And that's the thing is that Netflix technically doesn't need Warner Brothers.
If it can have it and it can add it to its collection and it can use the different IPs and it can use the production facilities and it can incorporate HBO Max, it would like it, of course, but it doesn't need it. If Paramount doesn't get Warner Brothers and instead goes to Netflix, Paramount could be in severe trouble because all of a sudden it's getting absolutely dwarfed by one of its greatest competitors. The problem is that Paramount doesn't have $111 billion to throw at Warner Brothers. A lot of the funding that's coming from this deal that Paramount is putting forward is coming from debts and it's coming from loans taken against the companies, meaning if the deal doesn't plan out and doesn't ultimately go the way that Paramount wanted to go over time, in 10 years time, we could be looking at a company, we could be looking at a Paramount that is in severe dire straits. Netflix, again, has more financial security. It's still a very, very expensive deal for Netflix, but there are significantly lower chances of it going wrong for Netflix and they can recoup from it because there is that projected growth. If Paramount brings in the Warner Brothers stuff, it doesn't necessarily mean that in 2028 or whatever, when everything's finally cleared, that they're going to have a box office slate that brings in $35 billion or something like that and all of a sudden it's like, whoa, Paramount is killing it."
"The theatrical industry is so uneven at the moment that this could be a horrendous deal for Paramount and again, none of it's certain. It's not like they have $111 billion sitting in the vaults underneath Paramount Productions. They don't. So if this goes badly, the bank is going to start eating Paramount from the inside out. So I think this is an incredibly risky endeavor from Paramount because, again, by buying Warner Brothers, what you're really buying is the production facilities that are already there, the property, and you're buying the IP and from my perspective, Netflix can utilize IP better at the moment because of the way they're fundamentally structured and the way that they can offer it to their fans. Paramount has to make people want to go back to cinemas or join their streaming service, which is directly competing with the established titan that is Netflix and the established titan that is Disney+."
"And even, you know, Prime Video, which has way more capital at its disposal because it's a part of the Amazon family. So I think this is an incredibly risky decision. It's also a fantastic gambit from the Netflix board because it's still win-win for them. If Warner Brothers Discovery decides to go with Netflix's lower offer, again, they can handle it. It's costly, but they'll be able to handle it. They'll get all that IP, all that production facility, and Netflix will grow significantly. If it doesn't go their way and Warner Brothers Discovery ultimately goes to Paramount's bid, they get about, I think, about three, four billion dollars from the termination fee. Just, you know, revenue that goes into their account. That's probably, you know, that kind of money, it'll probably pay off the entire production budget of Stranger Things over the last decade."
"Again, it puts their competitor in really financially insecure waters because if it doesn't go to plan in 10 years time, we could be looking at another press release where Netflix is swooping in to try and buy Warner Brothers and Paramount Skydance for X amount of money. Who knows? So I think this is a really fascinating situation that's happening here."
"I think the initial deadline that was put in place was about March 20th or something around there.
That was when, you know, a decision was supposed to be made, but that was assuming that there was going to be a bit of a bidding war, that Netflix is going to raise their offer. Netflix haven't said that, so that timeline might be brought forward a bit, because all that needs to happen now is that Warner Brothers Discovery board needs to decide which one they're going to go with, because there's no other players that are coming in for this because it's such a risky and such an expensive deal. So we'll see what happens, but things are happening incredibly quickly, so stay tuned because they will continue to happen incredibly quickly. But that's all the time that I have, so I'll be back now for my next year TV news on Monday. Maybe if something massive happens we'll be talking about this again, who knows, over the weekend. But yeah, thank you for joining me, hope you enjoyed Friday, hope you enjoyed the weekend. I'll see you all on the other side."
