In a surprising turn of events that sent shockwaves through Hollywood, Netflix has formally withdrawn its bid to acquire Warner Bros. Discovery (WBD), clearing the path for Paramount Skydance (PSKY) to become the presumptive new owner. This swift decision came after WBD’s board of directors determined that Paramount Skydance’s latest offer constituted a “superior proposal” compared to its existing merger pact with Netflix.

The initial agreement, valued at nearly $83 billion, would have seen Netflix acquire WBD's studio and streaming businesses at $27.75 per share. However, Paramount Skydance sweetened its offer, presenting an approximately $111 billion all-cash bid for the entirety of WBD, including its linear cable channels, increasing its per-share price to $31. This revised proposal also included several key elements that made it more attractive to WBD: an accelerated daily “ticking fee” of $0.25 per quarter starting after September 30, 2026; an increased regulatory breakup fee of $7 billion; a reaffirmation to cover the $2.8 billion termination fee WBD owed Netflix; the elimination of WBD’s potential $1.5 billion financing cost; an obligation for additional equity funding to support solvency; and a “Company Material Adverse Effect” definition preventing price drops due to linear network declines.

Netflix co-CEOs Ted Sarandos and Greg Peters issued a joint statement explaining their withdrawal, asserting that while their negotiated transaction would have created shareholder value, at the price required to match Paramount Skydance’s latest offer, the deal was no longer “financially attractive.” They emphasized their commitment to financial discipline, stating that the transaction was always a “nice to have” at the right price, not a “must have” at any price. Wall Street reacted positively to Netflix walking away, with shares of the streaming giant rising significantly, as investors had expressed skepticism about the initial deal's high cost and its venture into non-core businesses like theatrical distribution.

The news caught many insiders off guard. Employees at Warner Bros. reportedly felt a “gut punch,” having held out hope for a Netflix counteroffer. Meanwhile, at Paramount Skydance, executives celebrated with “tears of exhaustion and happiness,” relieved after a prolonged campaign to acquire WBD. Inside Netflix, reactions were mixed, ranging from relief over financial prudence to disappointment over missed content development opportunities from the Warner Bros. vault. Questions about the realistic coexistence of HBO and Netflix within the same company were also put to rest.

The path forward for the Paramount Skydance-WBD merger is fraught with significant regulatory and political hurdles. The Justice Department had already initiated a tough antitrust review for the Netflix-WBD deal, probing potential monopoly power. The political environment further complicated matters; Netflix co-CEO Ted Sarandos's lobbying efforts in Washington, D.C., prior to the withdrawal, spurred speculation about warnings regarding severe regulatory roadblocks. Paramount CEO David Ellison, whose father Larry Ellison is a vocal Trump supporter, reportedly leveraged his connections, promising “sweeping changes” to CNN if acquired and even lobbying European regulators against the Netflix-WBD deal. President Trump had previously called for CNN to be sold and for Netflix to fire a board member, adding to the political pressure.

Concerns over market concentration and potential harm to consumers have been voiced by various officials. Senator Elizabeth Warren (D-Mass.) denounced a Paramount Skydance-WBD merger as an “antitrust disaster” threatening higher prices and fewer choices, questioning Trump administration involvement. California Attorney General Rob Bonta also pledged a “vigorous” review, noting an open investigation. Previously, a coalition of 11 Republican state attorneys general had urged scrutiny of the Netflix-WBD deal, fearing stifled competition and higher prices for subscribers and harm to the theater business.

Under Paramount Skydance’s impending management, the future of Warner Bros. Discovery’s operations remains uncertain. With significant overlap in film and TV production, the industry braces for another round of substantial job losses. Key questions linger about the fate of WBD’s staff, culture, the storied Burbank lot, and the potential integration of streaming platforms like HBO Max and Paramount+. Furthermore, WBD’s plan to spin off its linear cable channels (including CNN, TNT, TBS, and HBO) is now unlikely, with these assets expected to be folded into Paramount’s existing linear channels group. The combined entity will also be saddled with approximately $87 billion in debt, raising concerns among observers.