Netflix Wins Warner Bros. Discovery: IP, Antitrust, & Rivals 12/05/25

0:00Bring in show music, please. This is Squawk Pod and I'm CNBC producer Cameron Costa. On today's episode, Netflix wins the bidding war for Warner Brothers' Discovery, at least for now. How this huge deal will play and pay out with CNBC's own reporting thanks to Andrew Ross Sorkin. My sources this morning are now saying that Paramount had bid$30. And thanks to David Faber. It's an enormous premium that Netflix is willing to pay here, 85 % of it in cash. We're doing the transaction math for shareholders. Do they value the enviable margins? Is it back to content as king? The power of intellectual property with a very plugged-in Hollywood journalist, Matt Bellany.

0:51I don't think Netflix is buying Warners for the stock value. They've got that. What they need is to grow subscribers and to grow the overall audience. Plus Hollywood's reaction. The industry is not excited about this. I mean, my DMs and texts blew up last night with some pretty dour messages. And one of the biggest questions hanging over it all, how Netflix and Warner Bros. Discovery might win over regulators. It's not just in the context of streaming itself, but to look at it in the context of time spent online, eyeballs and the like. It's Friday, December 5th, 2025. It's like an episode of succession.

1:34Squawk Pod begins right now. Stand Becky by in three, two, one, cue it please. Good morning, everybody. Welcome to Squawk Box right here on CNBC. I'm Becky Quick along with Joe Kernan and Andrew Ross Sorkin. Making some headlines though right now. Here's the big news. Warner Brothers Discovery has reportedly entered now exclusive deal talks for sale of its movie studio and HBO Max streaming platform to Netflix. Reports say that a deal could come soon. CNBC was told another round of bids from the companies interested in Warner Brothers assets was due yesterday. Netflix, Paramount, Skydance and CNBC parent company Comcast have been vying for all or in some cases parts of the business.

2:18Now, Paramount recently questioned the company on how it was conducting its sales process. NBC reported yesterday that Netflix was in the lead for Warner Brothers, and it's believed to have an 85 % offer in cash. Appears to be higher. Unclear whether Paramount, Joe, put in a breakup fee that apparently is higher on the other end. And really the whole question, I don't know if it's the whole question, A big part of the question is what does this regulatory environment really look like? You know, which deal would get approved and not just which deal would get fought. In most cases, both deals are going to get fought, not just here in the United States, but likely in Europe and by states.

3:02Almost across the board, there's going to be. Paramount keeps pointing out that Netflix got major problems in Europe. But there's going to be problems for Paramount, for all of them. And the question is, who can get through that gauntlet? And what does that look like on the other side for shareholders? Aslov supposedly prefers Netflix, but I bet it's more money because Paramount is sticking to the notion that we can do this so we don't have to pay as much. Right. No, that's part of the thing. If they get it, the$5 billion. But it's also not the whole company. It's hard to compare the deals, right, because you're talking about part of the company versus the full company.

3:36In the Netflix case, it appears that it's a higher bid just for the streaming services. So then you get it's that plus plus. Whereas in the case of Paramount, it appears that they have a lower bid for the entirety of the whole thing. It may only be off by a dollar or two, but that's the game here. It's how do you then decide from a regulatory perspective what's going to happen here. But I do think you may be right. Like maybe David thinks about Netflix as a better. If you read some of the descriptions and you talk to some of the people around it, they talk about Netflix as a steward of these assets in a different way than they think of Paramount, for example.

4:13Paramount knew that they had the administration on their side. It wouldn't matter what breakup fee they were offering because they know that they could almost have a wink and a nod to be able to get it done. But as Andrew points out, it's not just the it's not just the Trump administration. You've got to get past. Right. Right. We've got some news. Well, I know you go to literally right now. The shares are halted. Warner Brothers Discovery shares are halted. So I don't know. I don't know. It could. I think you're here. It's out. I think we've been waiting for it. Press release is out. Press release is out.

4:47And let's explain to the public what's happening here. Not the biggest secret in the world that Netflix is the winner. Netflix is the winner. And the deal's done, apparently, at this point. And the details will be forthcoming. And we'll see whether regulatory muster becomes a problem. I know that at least Warner Brothers is halted at this point. I figure Netflix probably is at this point. Let's see. It will be after, obviously, the separation of some of the cable assets. You have two deals going on here. So you have Netflix is going to be buying the streaming business and the theater business.

5:29$27.75 a share. It says cash and stock for. $27.75. And most importantly, on the regulatory side of this deal, if you're looking, the breakup fee is$5.8 billion. More than. So, you know, people have been discussing how regulators would think about this transaction. Right. Equity value,$72 billion. Total enterprise value,$82.7 billion at this point. That's with the debt piece of it. That's with the debt. Right. It is one of the most storied, Warner Brothers, one of the most storied studios and entities in Hollywood, obviously. And it culminates, I guess, with Zaslav able to deliver, I guess you would say, to shareholders at this point of Warner Bros.

6:19A heck of a lot better than$12 or$11 a share. Given where it had fallen to. Given where it had fallen to. The big question on the regulatory side is going to be, you know, the argument effectively here is that if you look at the Paramount transaction, that would have effectively taken out Astudia, right? In this case, you're not taking out a studio. That's a big part of the argument. The other argument that Netflix is effectively going to have to make, and Time Warner is going to have to make, or I should say Warner Brothers is going to have to make, effectively, is to argue that it's not just looking at the marketplace in the context of streaming itself, but to look at it in the context of time spent online, eyeballs and the like.

7:00You're going to have to effectively include YouTube, viewing, and Amazon Prime and so many others, so that you're not just looking at the paid streaming business. What are you looking at there? I'm looking at the cash component is$23.25. $23.25,$4.50 in the shares of Netflix. That comes up to$27.75. There's collars on the shares. This is going to be a complex. It's going to be a complex deal. And by the way, this is going to be in the regulatory mix for a long time. It could close in a year and a half. That's what I think they would hope that it's able to close. Does Zaslav run Warner Brothers, the studio?

7:44I'm trying to look through this to find out. What I also don't know is, and look, this is where the next piece of this comes. Does Paramount try to go hostile? Is there some other element of this that could happen? I don't know. What do you think regulators do? You know, Jason Kylar, who runs or ran, I should say, Hulu for a very long time, came out last night. I don't know if you saw the quote. He said, if I was tasked with doing this, I cannot think of a more effective way to reduce competition in Hollywood than selling WBD to Netflix. So there's going to be a lot of consternation in Hollywood.

8:15By the way, there would have been consternation whether it was sold to Paramount or to Netflix. But clearly there's going to be lots of disagreement about, you know, who should be the owner effectively of this asset. But it does appear that Netflix is now going to be the owner, at least going to attempt to be the owner, and that Warner Brothers Discovery's board has decided to take that bet and to take that bid. Guys, it's probably worth taking a look at shares of Netflix just longer term on this because it's a market cap of about$438 billion. You know it's the media company that has been the darling of the street.

8:49It's off its 52-week high, which was$134.12. 103.22 is where it closed yesterday. But you're still talking about, if you look over the last five years or even the history of the stock, that was an all-time high when it was sitting at those levels. It has done very well, particularly relative to some of the other media companies. And you wonder what wrapping this in. We should point out that they get$2 also approximately from the spinoff of the linear business. So if you want to actually add in it, it might actually come to$29 to$30 in terms of what you do. Yeah, no, and this is what David had said, David Zaslav had said from the beginning he wanted$30 a share.

9:31And this is effectively arguably a$30 a deal share. If you believe that the spinoff ultimately captures that. Captures the$2. The$2. Let's get Faber on the phone because he's calling in right now. Hey, David. Yeah, hey, Andrew. Tell us what you know. Well, you guys obviously have the terms, I guess, at the point. And listen, I mean, the price itself, you have to just step back for a second and consider. Because$27.75,$23.50 of it in cash, and then the rest in stock that's going to be collared is quite a number. And remember, it's for the studio and streaming business. So in addition, because they've reversed the split, there will be a Remain Co.

10:15that will trade publicly called Global Networks, made up of all the linear cable networks of Warner Brothers Discovery. That will also have a value. Maybe it's$2.50. Maybe it's as much as$4. Put it all together, and you do end up with a value of at least, let's call it, over$30 a share. And don't forget, guys, for a stock that was trading at about$11 or$12 before all this started. So it's an enormous premium that Netflix is willing to pay here. Much of it, as we said yesterday, has reported 85 % of it in cash. And as you were just talking, though, and has come up numerous times in my reporting, of course, as well, is the question of antitrust and whether, in fact, this is going to be something that can get past the regulators and, of course, Donald Trump as well, given you are putting together the number one and number four streaming companies in the world.

11:09And that will continue to be a key question. There is a$5.8 billion reverse break fee, meaning that if Netflix is unable to get to the finish line,$5.8 billion will go to Warner Brothers Discovery. But many shareholders will argue that's not enough to compensate for what could be a very long process that could still end in them not owning the company. We just don't know. We'll have to wait and see. But a stunning outcome, Netflix clearly showing that it was very much determined to own this business. And again, guys, I'll defer to you as well and your thoughts. But, you know, Netflix pursuing this so aggressively, you wonder what of its shareholders will question whether, in fact, what it was seeing that made it want to go down this road, given its multiple to earnings, has been the envy of the media business for many years.

11:59Is it putting that multiple at risk? So, David, a couple of things. You know, as I was talking to folks around this transaction yesterday, you know, we've heard and there's been reporting that Ted Sarandos had been down to see the president in the White House, that they felt, I don't know, some assurance that they could actually move ahead with this deal. In part, by the way, my understanding is because CNN and the linear channels are not part of this and that potentially that might allow, you know, this administration might look more favorably on this deal because it's not thinking about some of those linear businesses.

12:39I don't know if you think that's true and whether you think that the real impetus for this is that actually so much of the library programming that Warner Brothers has lives or has been sold to Netflix and they wouldn't have access to that in the future. And the idea that they could actually take down material costs, given that they would obviously now own HBO. I think that's all true. I mean, I think your reporting on Sarandos and the president is important because, again, that goes to that key question. And as we know, the president ends up being a key decision maker in so many of these kinds of things.

13:14There had been a perception, of course, that Paramount had a much easier path. And I said this many times. First of all, given they were paying a number for the entire company. And secondly, but not less important, that they had a very strong relationship, was believed, Larry Ellison, with the president, and therefore would have an easier go on the antitrust front. When it comes to what Netflix gets here, you're absolutely right. The library is certainly one of the key things. They no longer measure this company in terms of subscriber growth, right? It's simply time spent. How much time is our audience with us?

13:46And with the ad business as well, an important component of their growth plan, that library is going to be key and franchises they're going to be able to bring over, and not to mention the HBO shows and things like Game of Thrones and everything else. I continue, though, you know, but you've got to remember, Andrew, if they're no longer buying that programming, so to speak, they're keeping it for themselves, it's sort of a wash. And there will be a question as to whether or not that's really going to contribute to any real growth for the company. There may have been a significant threat if Paramount in particular had bought the company that they would no longer have access to certain programming that obviously is very important.

14:25And as you guys will know, they don't own a lot of their own IP, which is something David Zaslav will tell you so many times, and that's a key consideration one would have to think for them as well. Why didn't Netflix just buy this instead of Discovery a couple of years ago, basically getting everything but Discovery? Yeah, I don't know. Why didn't Paramount buy it, Joe, like when they, instead of, you know, David Ellison and Larry Ellison, why didn't they just step up and try to buy this thing when it was eight bucks? And who's going to pick over the spin-out assets? Yeah, that's a good question.

15:00One thing I think this does kind of speak to, though, is that constant fluctuation. and what the market values. Do they value the enviable margins that David was pointing out that Netflix has before? Or is it back to content as king? And there's only so many of these content places to go around. It's probably noteworthy that Paramount Skydance shares, at least until just a moment ago, were off by even more than Netflix, the idea that they might miss out on this asset. So they're down by two and a third percent. That's not a concern about overpaying that's reflected there. That's a concern about there's only so many of these assets to go around.

15:34And you have to have that content and you have to get bigger. So I think it's that constant battle that we've seen play out over the last several years in the market over what investors are going to value at any given point. You know, Becky, as well, I mean, you're right. And I wonder whether this will usher another round of consolidation, because to your point, Paramount was looking at the possibility of$6 billion in synergies from putting these businesses together. Those are huge, obviously, cost synergies and giving it the scale at its streaming company, Paramount Plus, to really compete globally.

16:09And so, you know, you have to wonder. They've done better than many had anticipated, at least the last quarter in terms of where they came in on EBITDA versus, of course, the promise that was far above that some time back. But that said, you know, the opportunity here is or the miss is a significant one for Paramount. They competed very aggressively here. As you know, they started all this off and made five bids. Remember, three, of course, before the auction began, and then two more. I think they were contemplating, I have to find out from reporting, going as high as the high 20s, maybe even to 30 bucks a share.

16:44Much of it's financed with Larry Ellison's fortune. And yet the choice here, apparently, from Warner Brothers was to go with Netflix, despite, again, what we will come back to numerous times being at risk in terms of what the regulatory front will look like for the company. Okay. David, I want to thank you for calling in with all of the latest. Cheese will be next. Next on Squawk Pod, the streaming match of the day, month, decade, even lifetime? More on Netflix is next. But the deal isn't done yet. Will Paramount Skydance owner David Ellison give up so soon? Media watcher Matt Bellamy, founder of Puck, joins us.

17:25This is a once-in-a-lifetime opportunity to own a Hollywood movie studio, and if the Ellison's entire game plan is to own Warner Brothers and Paramount and maybe a piece of TikTok and that's the plan, maybe it's worth paying that kind of fee to come in over the top. Plus, comments from Netflix's co-CEO Ted Sarandos.

17:53This is Squawk Pod. I'm Becky. Thank you. You're watching Squawk Box right here on CNBC. I'm Becky Quick along with Joe Kernan and Andrew Ross Sorkin. Our top story this morning, Netflix announcing that it has reached a deal to buy Warner Brothers film and streaming assets. The cash and stock deal is valued at$27.75 per Warner Brothers share, although there are some other things that could go along with that too that could boost that price. Warner Brothers will spin out its TV networks, including TNT and CNN, into that remain co-called Global Networks. That acquisition is expected to close after the separation takes place, which is now expected in the third quarter of next year.

18:33Joe? Very good. All right. Let's bring in, talk more about that, Matt Bellany, founding partner at Puck. And I was talking about this earlier, Matt. Thanks for joining us on Quick Notice. We got a lot of questions, obviously, but here's the quote that I had when what the letter Paramount sent basically sent it to Zaslav saying, look, you have abandoned the semblance in reality of a fair transaction process. Now it's done. And I mean, does that mean are they coming back? They basically laid the groundwork there to claim that this was an unfair process. So maybe they'll sue. Maybe they'll go directly to the shareholders, say that this is not the best deal.

19:17We could have offered you something better. We were cleaner. We were going to take out the entire company. Now you've got to go through with this entire split. Much more uncertain than what they were offering, they would argue. But they have not said what they're going to do yet. That's the big mystery today. Right. Because I don't want to say it's arrogance, but it's almost like they wanted everyone to just believe that they got the administration on their side. So they almost were it was almost like a sense of entitlement that, look, you need to talk to us at 24, even if other people at 30, because they're not.

19:55We can tell you, you know, wink and a nod. We can tell you it's not going to happen for you with our, you know, with our connections with the administration. I mean, that was certainly the messaging that was going out. I mean, they basically said that we don't believe the others can close. And they may be right about that. I mean, this is going to be a very difficult regulatory process. You're excited. I can see it. For the next year and a half, you're like, ka-ching, you can't wait to watch this play out. Right. We are kind of too. It's unbelievable. It will be, especially when you inject the whole Trump of it all.

20:32I mean, I would not be surprised if the president weighed in today on this transaction. I mean, other Republicans have already been making noises about it. We saw Mike Lee, the antitrust committee member. He has already been saying he's going to look closely at this transaction. So there is messaging going on within the Republican Party about this transaction. and we'll see now if they act upon it. Do you know how much the president would like Barry Weiss to be overseeing CNN? I mean, I would almost like to see that, to be perfectly honest. Yeah, I mean, they certainly had a preference here. And, you know, we'll see what Trump's willing to do.

21:17He may just say, you know what, I tried. We're walking away from this. Or the D.A.J. may come after this. so matt is there any chance in a million years somehow paramount comes back and does something that we aren't thinking about right now well i mean they they first of all they can go to the shareholders or we don't know what the termination fee is but they could go just say we're gonna pay whatever it is and offer way more money i mean we know we do 5.8 billion dollars is the termination. Oh, we do. It's 5.8 billion. There's a reverse break, reverse breakup fee of 5.8. I don't know if it's specifically in the terms.

21:57Talk about that in the context of somebody else coming in or really just the regulators blocking it. But right now, 5.8 is is the figure that's been put out there. That's pretty big. But, you know, this is a once in a lifetime opportunity to own a Hollywood movie studio. And if the Ellison's entire game plan is to own Warner Brothers and Paramount and maybe a piece of TikTok. And that's the plan. Maybe it's worth paying that kind of fee to come in over the top. What about Comcast? You know, it's interesting. Comcast, I have not heard that much about what their offer was. There was a whole scenario, sort of a conspiracy that people were talking about how the real plan was for Netflix to buy Warner and then sell HBO to Comcast.

22:49And I have been told by sources that that is not the plan. So I don't know what Comcast, what the role was here. By the way, on Comcast, I keep thinking potentially that now you might see them trying to make a move maybe with a Paramount. I don't know what you do about the CBS, NBC of it all, but or maybe go as we talked with Greenfield, go to Sony, go to somebody else. But it seems like if you're not going to if you're not going to try to fight this, you know, in City Hall, effectively, if you're not going to try to fight the Netflix deal, you might put up one or two other deals against it at the same time.

23:25And then they all sail through at the same time. Maybe, although I think it would be tough to have CBS and NBC together there. And plus, I don't know that the Ellisons want partners on this. I mean, they seem to want to kind of go it alone and they have the wherewithal to do it. I think if Comcast had a partner, it would be some kind of a big money partner. But maybe they'd go in with someone like Sony or something. I mean, you could see all kinds of scenarios here, sort of a free fall. It's like an episode of Succession. Media's not a zero-sum game, but we know what happened to Sherry Redstone.

23:59We know that Zaslav was looking at seven and a half dollars a share at one point, and now he's getting 30. Comcast was a 65 dollar stock. It's now at 27. I don't know what happened. Did it all flow into Netflix? And if so, if so, why do they want any of this stuff when all it's done is just drag down the valuation of everyone that's touched any of these legacy assets? Yeah, I mean, I don't think Netflix is buying Warners for the stock value. They've got that. They're the growth stock. What they need is to grow subscribers and to grow the overall audience. And they see the intellectual property and the library that Warners offers as pretty important.

24:49They know. I mean, at this point, given everything, Zaslav is popping champagne corks and so are shareholders. Are they not at Warner Brothers, even though Warner Brothers Discovery, even though it's been a tough couple of years? Yeah, I mean, I don't know if popping champagne is the thing. Zaslav, for sure. I mean, he's going to get paid. He's going to get whatever he wants. But, you know, this is the fourth transaction that this company has gone through in the past decade. And every time they do it, they cut jobs. People lose. You know, it's been very disruptive. That doesn't even include Jerry.

25:28I mean, go back even further and it's like, what? And that was what I said earlier. Too bad Netflix just, I mean, Discover is like a middleman. Too bad Netflix just didn't do this. Oh, a long time ago. With AT &T, if they were going to do it. But it would have cost more probably back then. Yeah. Hopefully in 20 years we're not talking about this like we do AOL time. And then sometime we've got to talk about, I mean, not just us, But, I mean, we've got Versant's got all these things, and now we've got all the stub of Warner Brothers. What happens to all—I think these are all really valuable little things.

26:03Who rolls all of those things up? Are they valuable? Well, Versant says they're not really interested in adding more TV networks. I don't know if that's true, but that's what they're saying. They say they're happy with it. We're not talking about what's going to happen to these Warner TV networks, but this is going to be, if they go through this split, a separate company, And they're going to have to have a strategy and want to buy stuff and manage it. We'll see. Matt, what is the Hollywood creative community think about this and how they think about the permutations of these deals? I remember we talked a couple months ago about how you thought actually Hollywood was quite excited about what Paramount was doing because they were spending a lot of money on programming.