Netflix shares dipped Monday after Paramount announced a hostile takeover bid, fueling worries on Wall Street that the streaming giant may not be able to pull off its audacious acquisition.
Netflix stock closed down nearly 3.5% to $96.79 a share after Paramount moved to take its case directly to Warner Bros. Discovery shareholders, offering $30 a share in a deal valued at $78 billion for the whole company. Last week, Netflix said it reached an agreement with WBD to buy its film and TV studios, Burbank lot, HBO and HBO Max for $27.75 a share, a $72-billion offer. Netflix would also take on more than $10 billion in Warner Bros. debt, for a deal value of $82.7 billion.
On Monday, analyst Jeffrey Wlodarczak, CEO of Pivotal Research Group, downgraded his rating on Netflix stock from buy to hold, citing concerns that Paramount’s bid could increase the price Netflix could pay for the WBD assets. Regulatory issues may also change the terms of the deal, such as Netflix giving up HBO to a rival, Wlodarczak said. “The question is, what modifications might they have to make?” he said.
Wlodarczak also questioned Netflix’s engagement levels with customers, which is key to retaining subscribers on the platform. He said that “this very expensive deal” highlights Netflix’s concern that short-form entertainment on platforms like TikTok and YouTube are attracting younger consumers.
YouTube — once known as a place for amateur user-generated videos — has become an entertainment powerhouse, encapsulating the largest percentage of streaming on U.S. TVs, according to Nielsen. In October, YouTube represented 12.9% of U.S. TV viewing time, compared to Netflix’s 8%.
Netflix said its customer engagement “remains healthy,” noting in a shareholder letter in October that it grew its engagement in the U.S. and U.K. by 15% and 22%, from the fourth quarter of 2022 to the third quarter of 2025, citing data from Nielsen and Barb, which tracks viewership.
Equity research publisher MoffettNathanson analysts said questions have been building about Netflix’s engagement growth, adding that even though Netflix’s share of total TV time started to grow in the second half of the year, “YouTube’s share gains have overshadowed most of the other streaming platforms.”
“There’s issues with Netflix engagement, sort of flatlining,” Wlodarczak said. “You get a lot better content, it should help with your engagement. … Is this a signal they’re really starting to get worried about engagement, and they’re out doing this deal because younger people are just spending increasing amounts of time not sitting there watching hour-long shows?”
Netflix declined to comment on Wlodarczak’s report.
On Friday in a call with investors, Netflix executives emphasized that their business is healthy and growing. They pointed out how sci-fi hit show “Stranger Things” was very popular with younger audiences, as well as series like the drama “Outer Banks” and movies including “KPop Demon Hunters.”
“We had record engagement previous quarter,” said Co-Chief Executive Ted Sarandos on the Friday call. “We’re happy with our outlook for the ongoing organic growth and engagement … Our core fundamentals are strong. This gives us a very unique opportunity to accelerate an already very successful model.”
Whether the deal will go through remains an open question, as Netflix would not make the acquisition until 12 to 18 months from now, after Warner Bros. Discovery separates its company, spinning off its cable channels into a new publicly traded company.
Wedbush Securities analysts, who have an outperform rating on the stock, said in a note on Monday that they are skeptical that the deal will pass regulatory scrutiny.
“Ultimately, we think the DOJ will reject a deal without concessions on pricing and industry standards,” the analysts wrote.
On Monday, Netflix executives said they were confident the deal would go through. Co-Chief Executive Greg Peters pointed out that Netflix still represents a smaller share of U.S. TV viewing in the U.S. compared to YouTube, even if it were to combine with Warner Bros. Discover, citing Nielsen data.
“We think there’s a strong fundamental case here for why regulators should approve this deal,” he said.
Wlodarczak said he believes there are benefits to Netflix acquiring the Warner Bros. Discovery assets. The Los Gatos, Calif., streamer would gain access to characters including Batman and Harry Potter.
It also prevents rivals like Paramount from getting bigger.
“They’re starting to get large enough to build a credible threat to Netflix,” Wlodarczak said. “So by buying this thing … it’s going to be really difficult to get as large and have as much scale as Netflix.”
Times staff writer Meg James contributed to this report.
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