While Netflix Inc. and Paramount Skydance Corp. vie for President Donald Trump’s blessings in their competing bids for Warner Bros. Discovery Inc., investors have an irony to consider.
The valuation of faltering cable TV networks like CNN, TNT and Discovery — among the TV industry’s least-coveted properties today — is much of what separates Paramount’s hostile takeover bid from Netflix’s friendly offer.Play Video
Paramount kicked the bidding war into high gear Monday, going directly to stockholders with a $30-a-share all-cash bid that values all of Warner Bros. at $108.4 billion, including debt. It’s aiming to derail Netflix’s agreement announced last week to buy Warner Bros.’ studios, streaming and HBO businesses for $27.75 a share in cash and stock.
The $2.25-a-share difference between the offers lies in those struggling cable channels, which Warner Bros. announced in June that it would spin off. Netflix’s offer doesn’t include the cable business while Paramount’s does. Paramount has suggested a value of $1 a share to Warner stockholders for those assets, while analysts say they may be worth closer to $4.
The lower you value the cable assets, the greater advantage Paramount’s bid has. If shareholders believe the cable operations are more highly valued, then Netflix’s bid, which assumes they will be spun off, means investors get an overall bigger sum of money.
Paramount Chief Executive Officer David Ellison and his team met Tuesday with investors at the UBS media conference in New York, trying to convince them their offer is better than Netflix’s, according to people familiar with their efforts.
For its offer, Paramount is pulling together $11.8 billion from the Ellison family and $24 billion from Middle East sovereign wealth funds. RedBird Capital Partners and Affinity Partners, the company led by President Trump’s son-in-law Jared Kushner, are also participating.
The bidding could go still higher. In a text message contained in regulatory filings, one of Paramount’s bankers told his Warner Bros. counterpart that the company’s $30-a-share offer isn’t their “best and final” proposal.
What’s more, Netflix has an option to match Paramount if Warner Bros. determines its offer is superior, according to filings. Netflix’s co-chief executive officers, Ted Sarandos and Greg Peters, told investors at the conference on Monday that they’re “extremely confident” their deal will be approved.
Warner Bros. has said it will respond to Paramount’s hostile bid within 10 business days.
The battle royale for Warner Bros. underscores just how critical a deep archive of top films and TV shows has become in streaming — the only growing part of the movie and TV industry today. Warner Bros. titles like Game of Thrones, Batman and Lord of the Rings, along with HBO Max, would significantly enlarge Paramount’s streaming business, which has about 80 million subscribers.
For Netflix, those same films and TV shows would feed a streaming service that already reaches more than 300 million households globally and cement the company’s lead over competitors like Walt Disney Co. and Amazon.com Inc.
How bad is the cable TV business today? So bad that two of the biggest US media companies are pulling away. Warner Bros. is spinning off its pay-TV networks to investors in a new company called Discovery Global by the third quarter of 2026. Comcast Corp., parent of USA, SyFy, CNBC and other outlets, is doing likewise, creating a new business called Versant Media Group.
The value of the Warner Bros. cable channels slated to be spun off may be sufficient to bridge the gap between the Paramount and Netflix bids, according to analysts including Matthew Dolgin of Morningstar Research.
The cable channels fall “almost certainly in the $2 to $4 range,” he said. Bloomberg Intelligence analyst Geetha Ranganathan estimates the cable channels are worth $4 for every Warner Bros. share, making the Netflix bid higher.
But those Warner Bros. channels are shrinking fast as consumers shift to online viewing from broadcast and cable.
The company’s cable TV audience dropped 26% in the third quarter, and the decline is forecast to continue as the company grapples with the loss of National Basketball Association games to Amazon.com Inc. Last year, revenue at Warner Bros.’ networks declined 5% to $20.2 billion.
Jon Klein, a former executive at both CNN and CBS and CEO of Hang Media, said Paramount’s new offer suggests its “main interest” is the same as Netflix’s, “the movie and TV IP and HBO Max.”
On a conference call with analysts Monday, Paramount’s Chief Operating Officer Andrew Gordon said it “was interesting to us that neither Warner Bros. nor Netflix gave any indication as to the value of the spun-off stub.”
Citing Wall Street estimates, he put the value of Warner’s cable spinoff at $1 a share.
There are other factors that could push the war in Paramount’s favor, according to Morningstar’s Dolgin. He pointed to President Trump, who raised antitrust concerns around Netflix’s deal on Sunday. The participation of Trump’s son-in-law with Paramount also augurs well for Ellison’s camp.
“If I were a Warner shareholder, that extra 25 cents or 75 cents, that is not the most critical thing that I would look at in determining which offer I thought was superior,” Dolgin said. “I think the odds of regulatory approval are probably the most important factor I would consider.”
