Shares of Netflix and Paramount extended their gains by another 10% and 14%, respectively, on Friday morning following news that the former was dropping out of the bidding war for Warner Bros. Discovery.
While Netflix will miss out on the benefits of Warner Bros. IP, its film and TV studios and the additional streaming scale that would’ve come with a combination with HBO Max, it will still walk away with $2.8 billion in cash from the break-up, as well as way less debt. It also told investors it would resume share buybacks, which were initially being put on pause to fund its $83 billion deal.
“This was absolutely the right move for Netflix, in our view,” Morningstar Research analyst Matthew Dolgin said. “We estimated it was overpaying for Warner’s streaming and studios when it had no need to, given its extraordinarily strong business.”
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It’s also a great outcome for Warner Bros. shareholders, who will receive $31 per share in cash if the deal goes through and 25 cents per share for each quarter after Sept. 30 that the deal does not go through. And it’s the best possible outcome for Paramount Skydance as it gains a much-needed scale as looks to transform the two Hollywood studios into a more serious industry player.
Netflix stock is up 19% in the past five days and 8.7% in the past month, but down 23% in the past six months. Paramount stock is up 19% in the past five days and 11% in the past month, but down 13% in the past six months.
MoffettNathanson analyst Robert Fishman says that Netflix’s decision to bow out signals “confidence in the underlying strength of its core business” and the fact that the opportunity to acquire Warner Bros. was “much more offensive than defensive in nature.”
“We do think Netflix would have been able to monetize the existing Warner I.P. far better than WBD today given the relative scale advantages of its distribution platform (especially internationally) and proven success of creating buzz around and extending the reach of library content (think Suits, but on steroids). This deal could have accelerated Netflix’s growth on top of a strong existing trajectory by attracting new subscribers, reducing churn, and driving more engagement,” Fishman explained. “But now Netflix can think of other ways to allocate this capital to premium content, including top tier sports right and other licensing deals like its recent Sony Pay 1 movie deal.”
While the cancelled Warner deal and Netflix’s decision to accelerate content spend by 10% in 2026 will cause some investors to question the confidence in the streamer’s organic growth, Wolfe Research analyst Peter Supino said the company is “better off pressing its scale advantage by investing more deeply in content.”
“Investors will eagerly back the growth strategy they know & adore,” Supino added.
Fishman noted that deploying that spend toward more premium content will unlock higher-quality engagement and help it better monetize the ad tier by allowing it to implement price increases.
“We would not be surprised to see an even more aggressive price increase for its service in the coming weeks now that the bidding war is officially over,” Fishman said.
Though the bidding war is behind it, Paramount will still need to secure shareholder and regulatory approval. Seaport Research analyst David Joyce noted that while there may not be a regulatory challenge at the federal level, a Paramount-WBD deal could face hurdles from the California attorney general and in Europe.
TD Cowen analyst Paul Gallant warned of several antitrust issues, including upward pressure on pay TV prices, withholding or higher pricing on licensed WBD content to distribution rivals, increased negotiating leverage with distributors and workers. While Gallant expects state attorneys general would sue to block the deal in court, he argued that such a deal would be an uphill battle if the Department of Justice throws support behind the deal — especially if Paramount/Warner make strategic concessions to weaken a state AG case.
While acknowledging the combined entity would have “significant sports rights and children’s’ programming,” Joyce said that issues around streaming concentration will be less impactful given that Paramount+ had been subscale.
“We don’t anticipate Paramount will face any regulatory difficulties,” Dolgin said. “In the US, we believe Paramount has a good enough relationship with the presidential administration to ease concerns, and the Department of Justice has set a precedent in overlooking the merger of major studios when Disney bought Fox.”
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Despite the combined entity owning a substantial number of linear TV networks, Dolgin added that only one broadcast network — CBS — will be part of the merged entity.
“We don’t believe any overlap of cable networks should stop a deal, as cable networks are on their way to extinction, in our view, under any scenario,” he said. “Streaming platforms can and, to some extent, already have displaced the function that most cable networks once provided.”
If approved, Paramount Skydance will get a much-needed streaming subscriber boost, which will still fall well short of Netflix but would emerge as a more serious contender to Disney and Amazon. It will also be able to leverage Warner and HBO’s stronger slate of IP and generate higher cost savings from the combined linear network portfolio.
However, the combined entity would face the difficult task of growing their share while reducing debt, a balance that would come at the expense of increased content investment. Paramount executives have already committed to spend in excess of $1.5 billion on content in 2026 and are looking to ramp up to 30 theatrical releases a year post-merger.
“Paramount could continue to lose share over the long term, resulting in shrinking cash flows and a deteriorating content flywheel that further pressures its competitive position,” Supino warned.
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While Netflix and Paramount stock continued to gain from the development, WBD shares fell 1.8%. However, its up 132% in the past six months and 0.7% in the past month.
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