Netflix Wins Warner Bros. Discovery Bidding War

Daniel Bach (0:03)

Netflix elbows out the competition, bidding to take over Warner Bros. studios and streaming business. Plus, the Supreme Court clears the way for Texas to use a controversial new congressional map, boosting the GOP's chances of keeping control of the house. And the stocks and crypto linked to President Trump that have some investors sitting on steep losses.

Jack Pitcher (0:25)

We've seen a couple different publicly traded assets with ties to the president and his family that are really struggling, hitting new lows kind of in contrast to how they were performing earlier this year when some investors made a lot of money on this stuff.

Daniel Bach (0:39)

It's Friday, December 5th. I'm Daniel Bach for The Wall Street Journal. And here is the AM Edition of What's News, the top headlines and business stories moving your world today. We begin in LA where Warner Bros. Discovery has entered exclusive negotiations to sell its studios and HBO Max streaming business to Netflix. We are reporting that Netflix and Warner are expected to announce a deal soon in a tie-up that could reshape the entertainment and media industry. Journal Entertainment reporter Joe Flint joins me from Los Angeles. Joe, we had reported that Paramount was the front runner. Why is Netflix now the leading contender?

Joe Flint (1:22)

Well, it's certainly quite a surprise, not only to us folks in the trenches covering it, but I think a lot of Wall Street analysts as well were dubious about how serious Netflix was, but in the last several days, it's become apparent that they were very serious and they made a dramatic cash offer, which is what Paramount had been offering. Comcast and Netflix were only bidding for the Warner movie and TV studios and library and HBO, which of course also includes the HBO Max streaming platform. Paramount was bidding for the whole company and actually Paramount thought that would give them an advantage with the board and with shareholders that they wanted the whole company and not wanting to break it apart. But the Warner people believed that there is probably more value in the Hollywood assets as a standalone than with the whole company. So that was never really a major lure for Warner Brothers.

Daniel Bach (2:21)

Now Paramount yesterday commented on this bid from Netflix. This is quite unusual, isn't it Joe?

Joe Flint (2:28)

Yes, this has been a very interesting fast-paced auction and the last few days it really began to get a little nasty. Paramount became more vocal feeling that the deck was stacked against them, that Warner Brothers was clearly favoring Netflix to the detriment of not only Paramount but they would argue Warner Discovery shareholders as well and they sent a few letters outlining why they thought their deal had the best path from a regulatory standpoint was the best offer and in another letter basically accused Warner of not engaging in a fair fashion and not working with Paramount and clearly favoring what they believed to have been an inferior offer.

Daniel Bach (3:13)

And so at this point where does this leave deal talks for Warner Brothers?

Joe Flint (3:17)

Well, we expect a deal with Netflix that could be announced very soon. We understand that Netflix is offering around $28 per share. There's a lot of stuff that will have to happen because Warner is still going to spin off the parts of the business that Netflix won't be buying and that will happen first. But then this process will go forward and we don't know if Paramount is going to try to make another run. Initially, they'd indicated that perhaps if they couldn't get it through friendly terms, they might try unfriendly terms. So we'll have to see what happens there if they do pursue some other manner to go after the company or take their ball and go home, as you will.

Daniel Bach (4:00)

Joe, we've seen a lot of mergers and acquisitions in recent years. How big is this deal for the US entertainment industry?

Joe Flint (4:06)

I think it's very significant and it's going to be very interesting to see how it plays out not only in Washington but in Hollywood. There's a lot of people concerned about consolidation in the entertainment industry. I think they would have been concerned with no matter who ended up doing this deal, but the Netflix part of it really has and I'm a little surprised, I probably shouldn't be. Netflix has become this huge force out here, but even after they're nearly 30 years old, they're still viewed in many ways as an outsider and not always embraced. The fact that they don't love the theatrical movie business, that's going to be an issue. There's going to be a lot of distrust among the writers, producers, directors and that community and Netflix will have some goodwill to build.