Netflix’s winning bid to take over Warner Bros. Discovery’s studio and streaming assets is a humiliating defeat for Paramount CEO David Ellison. Ellison’s company was first in the ring to make an offer to acquire Warner Bros., advancing multiple bids to acquire all of WBD’s businesses, including their cable and television businesses.
Prior to the Paramount offers, Warner Bros. Discovery was on a track to divide its assets into two separate companies, dividing studio and streaming divisions from the linear television and cable assets. The rationale for the break up was that each of these two separate companies would be in a better position to pursue its own interests, including potential mergers with other media companies who might be more interested in one or the other of the two divisions. For example, both Netflix and Comcast/Universal were said to be interested in WBD’s studio and streaming assets only. While the internal process to divide the company was unfolding, Ellison jumped the queue with Paramount’s offer to take over the entirety of WBD as it existed. Funds for the offer were coming from Paramount’s existing financial backers, including the deep pockets of David Ellison’s father Larry Ellison, the founder of Oracle.
For the moment, it seems as if Ellison’s angle has not worked out, with WBD CEO David Zaslav sparking a bidding war to include other potential suitors. Eventually, both Netflix and Comcast came in with their own offers for the studio, and eventually Zaslav and the WBD Board of Directors saw the financial benefit of Netflix’s proposal. Evidence of a souring relationship between Paramount and WBD was clear on Thursday when Paramount’s lawyers released a 4,000-letter that made the case for a ”tainted” sales process that favored Netflix.
Paramount is now left in a vulnerable position, existing as a second-tier streaming service after the “majors”, especially after HBO Max is subsumed within Netflix. David Ellison still has a strong card to play, with both he and his father Larry Ellison having strong personal ties to President Trump and his administration. The U.S. Federal Trade Commission will almost certainly review the proposed merger, and may well object to it on the basis of it being anti-competitive and detrimental to the consumer. European regulators will also have their say. Ellison may now become a ringleader in building industry opposition towards the deal.
