Ted Sarandos and Greg Peters Open Up on Why Netflix Walked Away From WBD

Netflix Co-CEO Ted Sarandos in a tuxedo." width="970" height="647" data-caption='Ted Sarandos says walking away from Warner Bros. Discovery was a disciplined strategy, not defeat. <span class="media-credit">Patrick T. Fallon / AFP via Getty Images</span>'>

After months of bidding that began in December, the contest between Netflix and Paramount Skydance for control of Warner Bros. Discovery came to a dramatic close on Feb. 26, when Netflix formally withdrew, clearing the way for David Ellison’s Paramount to acquire all of WBD for $111 billion. In interviews this week, Netflix co-CEOs Ted Sarandos and Greg Peters reflected on the loss, striking a notably unsentimental tone. Both suggested Paramount had overpaid and warned that the financial strain of the deal could reverberate across Hollywood.

Netflix had proposed an all-cash offer of $82.7 billion for WBD’s studios and HBO Max streaming platform, or $27.75 per share. Paramount had offered $30 per share for all of WBD, including its TV networks, and ultimately prevailed by raising its bid by just one dollar to $31. The speed of Netflix’s withdrawal surprised some industry observers, who believed the company could have matched or topped Paramount’s final bid.

Sarandos told Bloomberg on Sunday (March 1) that Netflix had modeled out multiple bidding scenarios, including Paramount increasing its offer, and felt comfortable walking away once the price exceeded its internal thresholds. “We definitely wanted this asset. We didn’t need it,” he said, adding, “The truth of it is, someone was going to lose it for a dollar. And the quicker you accept that, the better.”

Peters echoed that sentiment in an interview with the Financial Times on Monday. “They [Paramount] are bidding and winning these deals at prices that I can’t make sense of, that don’t seem economic,” he said. “And if [Netflix] can’t make it economically viable, I don’t know how they can. So I am quite frankly a little bit nervous for the industry.”

Sarandos also noted that Netflix co-founder and chairman Reed Hastings, while “not a big fan of M&A generally,” had supported the WBD deal.

The deal now faces regulatory review, though Sarandos said he was confident Netflix could have cleared global antitrust scrutiny had its bid succeeded. He noted that Netflix was already deeply engaging with regulatory bodies worldwide before exiting the process.

Both Sarandos and Peters expressed worries about the future of Ellison’s media empire and its impact on the broader entertainment industry. Paramount’s WBD acquisition follows its Skydance merger last summer and leaves the combined company carrying tens of billions of dollars in debt.

According to Sarandos, Netflix estimated that Ellison would need to cut $16 billion in costs from WBD within 18 months to make the economics work. Those cuts would likely affect studio production and staffing.

“It would be less production, less people working,” Sarandos said.

Peters was more blunt, warning that “a bunch of people are going to lose their jobs” under Paramount’s ownership.

A small win for Netflix is that, because it had previously signed an agreement with WBD before Paramount re-entered the picture, it will walk away with a $2.8 billion breakup fee, which will be paid by Paramount under its deal terms. Sarandos jokes that “there are easier ways to make $2.8 billion,” adding that he and Peters had spent a lot of time and energy on the deal, including meeting more than 200 WBD employees.

Peters described the payment as a “nice concession prize” that would allow Netflix “to deliver more value for our members,” pointing to potential investments in emerging formats such as video podcasts and interactive games.