Two Hollywood heavyweights going to war over a prized company. Billions of dollars at stake. The future of the media industry hanging in the balance.
No, it’s not Netflix’s quest to acquire Warner Bros. Discovery. It’s Sumner Redstone’s long and painful struggle with Barry Diller to control Paramount three decades ago. The outcome reordered the media industry and created a new Hollywood dynasty.
That struggle is a neat mirror image of the current contest between Paramount and Netflix for Warner Bros. Discovery, and could be critical to understanding how their story will end — and how long it might take.
“Yes, it is turning into a repeat,” Mr. Diller, now chairman of IAC, said in an email. “I don’t have any advice for the parties other than to be prepared for a long siege — ours lasted almost six months.”
Now, as then, the seller — in this case, Warner Bros. Discovery, the parent company of the Warner Bros. movie studio, HBO and CNN — stands accused of running a skewed sales process that benefits one buyer, Netflix, at the expense of shareholders. Now, as then, the losing bidder — in this case Paramount and its chief executive, David Ellison — is refusing to go away, instead launching a hostile bid to wrest the deal away from a competitor.
Mr. Diller played the role of hostile bidder in late 1993. His company, QVC, accused Paramount of handing a favorable deal to Mr. Redstone and Viacom. That move forced Paramount to negotiate a higher price with Viacom, the initial winning bidder.
Along with his bid, Mr. Diller sued Paramount, accusing the company of steering the sale in a way that hurt shareholders. A Delaware judge eventually sided with Mr. Diller, and ordered Paramount to rerun the sales process and have its shareholders vote on the competing offers.
Ultimately, Mr. Redstone prevailed once again. He ruled over an entertainment empire, passing it to his family when he died in 2020. The catch? He paid $9.7 billion, way up from the $7.5 billion initial purchase price. The wrangling took months.
Upon receiving the news, Mr. Redstone toasted his guests with champagne at the popular Manhattan restaurant “21.” “Here’s to us who won,” he said. (The biggest winners, it seems, were Paramount’s shareholders, who ended up $2 billion richer.)
Mr. Ellison, unlike Mr. Diller, hasn’t yet decided to take his claims to court. But if he does, that case would probably turn on whether Warner Bros. Discovery violated its duties to shareholders when it selected Netflix as the winning bidder instead of Paramount, said Eric Talley, a professor at Columbia Law School who specializes in corporate law and governance.
That could be difficult to sort out, Mr. Talley said. First of all, Netflix and Paramount bid for different parts of Warner Bros. Discovery, making an apples-to-apples comparison difficult. Netflix wanted the company’s streaming and studio businesses, while Paramount wanted the whole company. Because of that, both sides have some wiggle room to argue that one bid was superior.
Another major wild card is the question of which bidder — Netflix or Paramount — has a better chance of getting a deal past regulators in the Trump administration. Mr. Ellison has argued that he has a better chance of getting an acquisition across the finish line — and he might, since one of his investors is Jared Kushner, President Trump’s son-in-law, Mr. Talley said. But Netflix has made a similar claim, arguing that its deal will receive antitrust approval partly because tech giants like Google and Facebook make the overall entertainment market incredibly competitive.
If Paramount ultimately increases its bid, Warner Bros. Discovery might also argue that signing with Netflix was in the best interests of shareholders because it brought Paramount back to the table for an even higher price, Mr. Talley said.
“They could say, ‘Yeah, we played favorites among bidders here, but we did so in a way that was calculated to try to actually heat up the bidding by the other side rather than put an end to the auction,’” Mr. Talley said.
But even when the dust finally settles, don’t expect the bad blood between the two parties to evaporate completely.
When Viacom finally succeeded in acquiring Paramount three decades ago, Mr. Diller gave a characteristically terse statement to the news media signaling he was ready to move on. “They won. We lost. Next.”
Viacom’s side didn’t end it there. After the deal, executives at the company began sporting purple sweatshirts that got in one last dig.
“We won. They lost. Next.”
Benjamin Mullin reports for The Times on the major companies behind news and entertainment. Contact him securely on Signal at +1 530-961-3223 or at [email protected].
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