Paramount, Netflix, Comcast Prep Bids for Warner Brothers Says WSJ

Warner Bros Discovery shares rose, after the Wall Street Journal reported that Paramount, Comcast and Netflix are preparing bids for the company, citing people familiar with the matter. Laura Martin, Senior Analyst at Needham & Company joins Paul Sweeney and Scarlet Fu to discuss who she thinks should win the bid for Warner Brothers and on the future of the media space.

Netflix's reported preparation to bid for Warner Bros. is strategically sound but lacks economic logic. A potential $70-$80 billion price tag (18-20x 2026 Ebitda of $4 billion) is steep. Though Netflix would gain from Warner's gaming unit and film franchises, it likely doesn't want theatrical distribution and content licensing -- revenue streams that would fade post M&A

Netflix has expanded the quality and quantity of original programming, but licensed content -- which make up about half of its TV catalog, according to Parrot Analytics data -- remains central to the company's strategy as it helps to deepen engagement and lower churn. Warner Bros. Discovery contributed roughly 7% from January 2023 to September 2024, with HBO shows including "Six Feet Under," "Ballers" and "Insecure." Though licensed titles are a reliable driver of viewing, we don't expect a material impact if WBD pulls content in the event of a merger with Paramount Skydance or another buyer.

Netflix’s historically consistent focus on build vs. buy makes speculation about a WBD M&A unlikely.

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