After months of a heated bidding war, Netflix dropped out of the race to acquire Warner Bros Discovery (WBD) on Thursday (February 26). It declined to match the revised bid offered by Paramount Skydance for the same that was deemed “superior”.“The transaction we negotiated would have created shareholder value with a clear path to regulatory approval,” Netflix said in a statement. “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.”Netflix added that they would have been “strong stewards of Warner Bros’ iconic brands”, and that their 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.”For months, Netflix and Paramount have vied for complete ownership of WBD’s film and television studios, as well as its vast content library. Netflix’s initial offer had valued the Warner Bros business at $82.7 billion, while Paramount’s valuation of the combined business stood at $108 billion. Thus, any resulting media deal was long guaranteed to become one of the biggest ever in history, surpassing WBD’s own disastrous 2022 $43 billion merger, which set this process in motion. Here is what to know.The ‘For Sale’ signLast June, Warner Bros Discovery decided to split into two businesses, resulting in a new Warner Bros, comprising its TV business, the HBO film studio, and the HBO Max streaming service; and a global networks operation, identified in some publications as Discovery Global, which includes the Discovery channels, CNN, and Cartoon Network.WBD CEO David Zaslav justified this decision, saying the split would give its brands the “sharper focus and strategic flexibility they need to compete most effectively in today’s evolving media landscape”. The 2022 merger, which resulted in Discovery’s acquisition of WarnerMedia from AT&T for $43 billion, had promised a content powerhouse combining HBO’s prestige programming with Discovery’s unscripted empire.Story continues below this adWhat resulted instead was a mammoth of a company saddled with around $50 billion in debt, amidst cable TV’s struggle for relevance in the streaming era. The new company’s approach was to salvage its resources, with Zaslav spearheading aggressive cost-cutting measures, even cancelling finished films like Batgirl, and writing off content for tax reasons without releasing it.Also read | No matter who wins the Warner Bros battle, the ultimate loser is the audienceThe new company found itself trying to sell off its assets while its prestige businesses — CNN, Discovery, TNT — were bleeding it dry. At the same time, streaming giants Netflix, Amazon, and Apple have increased their investments in their businesses. So, the decision to split will remove uncertainty for investors in WBD’s declining stock, as they ascertain just how much of the company’s debt and declining revenue was tied to cable, against the value of the revenue-generating film and TV business.In October 2025, WBD announced that it was open to a partial or complete sale, triggering weeks of deliberations with several interested entities, including Netflix and Paramount. Story continues below this adThe bidding warOn December 5, Netflix announced in a letter to WBD shareholders that it had entered an agreement with WBD to acquire the Warner Bros business — not its cable TV business — at a valuation of $82.7 billion. This would unfold after WBD’s split into two companies around Q3 2026. While WBD’s deal with Netflix prohibited it from soliciting other offers, Paramount could raise its bid to WBD, forcing Netflix to counter. In such a case, WBD would have to pay Netflix $2.8 billion if it accepted an improved Paramount bid. In its letter to its shareholders, WBD described the Netflix merger as a “binding agreement with enforceable commitments” made by a public company with a market cap exceeding $400 billion. This agreement necessitated no equity financing or robust debt commitments.Paramount decided to mount a challenge to this offer, and on December 8, announced it was mounting a hostile takeover bid to acquire the entire WBD business, comprising both Warner Bros and Discovery Global.Paramount first sent in an unsolicited all-cash $30 per share offer on December 8 to WBD’s shareholders, which its CEO, David Ellison, said was worth about $18 billion more in cash than Netflix’s competing cash-and-stock bid from Netflix, priced at $27.75 per share. WBD rebuffed this, writing to its shareholders on December 17 that Paramount’s original offer omitted details about its weak financial position and was based on a convoluted debt-equity financing structure.Story continues below this ad David Ellison poses during the ‘Top Gun Maverick’ UK premiere at a central London cinema, on May 19, 2022. Photo: AP/Alberto Pezzali/FileCrucially for WBD, Paramount’s offer lacked a “full backstop” or a complete guarantee by Larry Ellison, the billionaire co-founder of Oracle and father of Paramount CEO David Ellison — and a major ally of President Donald Trump. The senior Ellison had backed Paramount’s financing agreement through a revocable trust, whose assets and liabilities were not publicly disclosed and could potentially be modified by him at any time. WBD characterised this as a risk to its shareholders.On December 22, Paramount announced that Larry Ellison had agreed to personally backstop $40.4 billion in equity financing for the proposed deal. This too was rebuffed by the WBD board, which unanimously voted against the amended agreement in January, and said that Paramount’s revised bid amounted to a risky, leveraged buyout that investors should reject.At this stage, Paramount initiated a proxy fight and nominated its own candidates to WBD’s board of directors ahead of the crucial annual meeting. Paramount also filed a lawsuit in Delaware seeking additional details about WBD’s deal with Netflix, since WBD had not described Netflix’s offer as financially superior to Paramount’s.In the latest development, Paramount this week increased its offer for a WBD takeover to $31 per share in cash, up from its previous $30 per share offer. It also agreed to pay $7 billion if the deal collapsed at the stage of regulatory approval, and promised to cover $2.8 billion WBD had promised Netflix if their original merger plan went awry.Story continues below this adWhat this means for consumersIn either outcome, consumers would have to contend with a consolidated marketplace of entertainment providers. With every major studio launching its standalone streaming service, smaller players like Tubi and Plex would likely be phased out (or acquired).The issue then is with a few, bloated competitors in the marketplace offering the same services at higher prices. In the present case, think of a single enterprise offering products like CBS, Showtime, CNN, HBO, HBO Max, and the film libraries from both Paramount and HBO Studios. Given WBD’s debt, Paramount would likely shrink the content catalogues, as it engages in cost-cutting to keep the new giant afloat. Antitrust law seeks to prevent just that by encouraging competition — more providers, lower, competitive prices, and better quality products.Also read | Paramount CEO David Ellison promises ‘no monopoly’ amid bid for Warner BrosThe Ellisons’ proximity to Trump, as well as the president’s own support for Paramount’s bid, is also a concern. In the past, Trump has expressed criticism of CNN coverage of his administration, and called the people running it “corrupt or incompetent” and said they should not be entrusted to run the network. There is the obvious concern of its editorial independence, as well as of other cable channels under Paramount that have been critical of the regime.Story continues below this adEarlier this week, Trump had also warned Netflix that it would “pay the consequences” if it did not “immediately” remove Susan Rice (who served in both the Barack Obama and Joe Biden administrations) from its board of directors. Recently, Rice’s comments on a podcast that Democrats shouldn’t “forgive and forget” companies that showed loyalty to Trump had drawn the ire of conservatives. Trump’s remark of “consequences” was widely perceived to be referring to the Warner deal.There are also the creative concerns: Warner Bros’ film business has had an exceptional run over the past year, releasing massive successes like Ryan Coogler’s Sinners and Paul Thomas Anderson’s One Battle After Another. These films are award-circuit darlings and feature a type of director-driven cinema that is believed to have been given the backseat by major film studios.In a column for The Guardian, Jesse Hassenger argues that Paramount’s creative decisions thus far have indicated anything but an inclination to creative storytelling. David Ellison has made clear the studio will pursue “patriotic, flag-waving” films and stick to franchises — think DC films and Harry Potter sequels. Paramount also recently revived the Rush Hour franchise as a favour to Trump acolyte, Brett Ratner, a man accused of sexual misconduct. While the Netflix conundrum centred on its stated intent to restrict theatrical releases to 15 days for awards eligibility, Hassenger posits that the Netflix deal may have — at least creatively, given its support of serious filmmaking — been the lesser of the two evils.