BusinessLine·2025-12-10 05:36Core Viewpoint - The competition between Netflix Inc. and Paramount Skydance Corp. for Warner Bros. Discovery Inc. highlights the contrasting valuations of struggling cable TV networks and the strategic importance of a strong content library in the streaming industry [1][7]. Bidding Details - Paramount has initiated a bidding war with a $30-per-share all-cash offer, valuing Warner Bros. at $108.4 billion, including debt, aiming to counter Netflix's previously announced offer of $27.75 per share [2]. - The $2.25 difference in share price between the two offers is attributed to the inclusion of struggling cable channels in Paramount's bid, which Netflix's offer excludes [3]. Financial Backing - Paramount's bid is supported by $11.8 billion from CEO David Ellison's family and $24 billion from Middle Eastern sovereign wealth funds, with additional participation from RedBird Capital Partners and Affinity Partners [4]. Potential for Increased Bids - Paramount's banker indicated that the $30-per-share offer is not the final proposal, suggesting the possibility of higher bids [5]. Netflix's Position - Netflix has the option to match Paramount's offer if deemed superior by Warner Bros., and its executives expressed confidence in the approval of their deal [6]. Importance of Content - The acquisition of Warner Bros. would significantly enhance Paramount's streaming service, which currently has about 80 million subscribers, by adding valuable titles like Game of Thrones and Batman [7]. - For Netflix, acquiring Warner Bros. would further solidify its lead in the streaming market, reaching over 300 million households globally [8]. Cable TV Industry Challenges - The cable TV business is facing significant declines, with Warner Bros. planning to spin off its pay-TV networks by 2026, reflecting broader industry trends [9]. - Warner Bros.' cable audience dropped 26% in Q3, with a revenue decline of 5% to $20.2 billion last year [12]. Valuation of Cable Channels - Analysts estimate the value of Warner Bros.' cable channels, which are set to be spun off, to be between $2 to $4 per share, potentially influencing the bidding dynamics [10][13]. Regulatory Considerations - Regulatory approval is a critical factor in determining the success of either bid, with concerns raised about antitrust issues related to Netflix's offer [13][14].