Netflix vs. Paramount: Strategic Contenders in Warner Bros. Discovery Acquisition Battle

Warner Bros. Discovery's 2025 strategic review created the opening for a blockbuster acquisition battle. Netflix has formally offered $83 billion for WBD's streaming and studios assets, valuing the target at 25x projected 2026 EBITDA. Paramount Skydance countered with a substantially larger proposal exceeding $108 billion, though it has set a $35-per-share ceiling on its maximum bid according to reports.

Regulatory hurdles appear steep for Netflix's bid. Morningstar estimates only a 50-50 chance of approval, citing antitrust concerns over overlapping market dominance with HBO Max and potential subscriber cannibalization. The Federal Trade Commission's stance could prove decisive, while bipartisan political opposition adds another layer of uncertainty. Paramount's larger offer represents a high-stakes gamble to achieve critical mass against Disney and Amazon in a fragmented media landscape.

Analyst perspectives remain divided on whether acquiring WBD is essential for either bidder. Some view it as a "must-have" to accelerate growth, while others consider it a "nice-to-have" luxury that risks overextension.

Netflix's aggressive move could strain its balance sheet and amplify exposure to generative AI disruptions that threaten its content cost advantages. For Paramount, the sheer scale of the proposal raises questions about integration complexity and financing sustainability. The outcome will determine whether either company gains transformative scale or becomes burdened by a costly, politically fraught takeover.

Financial Strength and Acquisition Viability

Building on previous analysis of bid competition, Netflix's $6.922 billion free cash flow in 2024 positions it as a financially capable bidder. This liquidity foundation remains unchallenged, though the absence of disclosed debt levels creates uncertainty about true leverage capacity. Meanwhile, Paramount Global's streaming business shows meaningful progress, with Q1 2025 losses narrowing to $109 million from $286 million in late 2024. Cost discipline drove a 35% reduction in tentpole movie production expenses, supporting executives' goal of domestic Paramount+ profitability by 2025. However, the $5.8 billion breakup fee tied to Netflix's proposed acquisition creates shareholder pressure for deal closure.

While Netflix relies on sustained cash generation, Paramount's turnaround hinges on translating cost efficiencies into sustainable subscriber growth. Both bidders face execution risks: Netflix's undisclosed debt could strain balance sheets if forced into a protracted bidding war, while Paramount's profitability target depends on macroeconomic stability and content performance. The $5.8 billion breakup fee further amplifies financial stakes, pushing Netflix to secure shareholder approval despite uncertain debt metrics.

Strategically, Netflix's cash flow provides a clearer path to acquisition than Paramount's trajectory, though both face hurdles. Paramount's cost cuts demonstrate operational agility but lack the liquidity depth to match Netflix's FCF. Should Paramount's bid escalate beyond $35 per share, its ability to fund the purchase may face scrutiny. Meanwhile, Netflix must navigate regulatory scrutiny and potential debt accumulation to finalize its $83 billion offer. Both companies' acquisition viability ultimately hinges on balancing aggressive bidding with financial prudence.

Strategic Positioning in the Streaming Arms Race

Netflix's $18 billion content budget for 2025 underscores its growth imperative, funding data-driven licensing deals and hybrid global-local productions designed to maximize subscriber acquisition. This strategy prioritizes high-ROI licensed content for specific markets and consolidates intellectual property for long-term value, including a multi-billion-Euro commitment to Spanish-language programming stretching through 2028. While this aggressive spending fuels subscriber expansion, it also pressures margins, particularly as competition intensifies and churn risks rise in saturated markets.

Paramount's approach contrasts sharply, emphasizing cost discipline and operational efficiency. Its direct-to-consumer revenue rose 9% year-on-year in Q1 2025 to $2.04 billion, driven by an 11% surge in Paramount+ subscribers to 79 million. The company slashed tentpole movie production costs by 35%, narrowing streaming losses to $109 million in Q1 2025 from $286 million in late 2024. Paramount's integration of Skydance Media, targeted for mid-2025 completion, aims to further streamline operations and achieve domestic profitability for Paramount+ by year-end. Yet execution risks linger, as macroeconomic uncertainties could stall subscription growth or inflate content costs.

The battle for Warner Bros. Discovery assets adds another layer of complexity. Netflix's $83 billion offer faces a hostile challenge from Paramount's $30-per-share bid, potentially escalating to $35 per share. While Bloomberg Intelligence warns a higher Paramount offer could destabilize Netflix's agreement, both deals confront significant regulatory and financial hurdles. Crucially, Netflix's pursuit of WBD content is constrained by existing regulatory barriers in key markets, while Paramount's stronger bid introduces deal-finalization uncertainty that could delay strategic asset integration.

For investors, Netflix's asset-heavy growth model demands scrutiny of its content ROI and subscriber retention trends amid rising competitive pressures. Paramount's cost-focused strategy offers clearer near-term profitability pathways but hinges on successful Skydance integration and navigating the WBD bidding war. Both companies must balance aggressive scaling with financial discipline to secure long-term portfolio control and scalable growth.

Valuation Confidence and Risk Assessment

Warner Bros. Discovery's stock has soared roughly 160% since January, fueling intense debate over its true worth. Some analysts point to a trailing price-to-earnings ratio suggesting shares are about 26% below fair value, while a discounted cash flow model only finds a 3% gap against a $29.15 target. Morningstar's $28-per-share fair value estimate incorporates a 75% probability of acquisition by 2027, a key upside catalyst for shareholders. According to Morningstar analysis, the acquisition probability tempers stock volatility.

Paramount Global's all-cash $30-per-share bid appears more favorable than Netflix's $27.75 offer, which mixes cash and stock. Paramount's approach avoids Netflix's regulatory hurdles-an SEC filing noted U.S. political and antitrust concerns could sink the deal-making the latter's chance of success less than 50%. Paramount's analyst consensus fair value sits around $20 per share, implying their proposal trades above independent company estimates.

This acquisition premium optimism coexists with significant headwinds. Long-running franchise fatigue and stalled subscriber gains in streaming expansion threaten organic growth, potentially limiting WBD's standalone upside. Shareholders face a bimodal scenario: either Paramount's cash offer executes cleanly, or Netflix navigates an uphill regulatory battle. The 75% acquisition probability baked into Morningstar's model tempers the stock's volatility, but execution risks remain real until a deal closes.