Concerns are intensifying over the proposed merger between Warner Bros. Discovery (WBD) and Netflix, as Paramount has launched a lawsuit seeking greater financial transparency regarding the deal. On October 23, 2023, Paramount CEO David Ellison announced that the company has filed the lawsuit in the Delaware Chancery Court, demanding essential disclosures related to Netflix’s $82.7 billion acquisition of WBD.
In a detailed letter to shareholders, Ellison emphasized the need for accurate information to evaluate Paramount’s competing offer of $30 per share in cash. He stated that WBD has not provided sufficient justification for its reluctance to consider Paramount’s bid, claiming, “WBD has provided increasingly novel reasons for avoiding a transaction with Paramount, but what it has never said, because it cannot, is that the Netflix transaction is financially superior to our actual offer.”
Ellison outlined specific areas where he believes WBD has failed to disclose critical information. He noted that the company has not revealed how it valued the Netflix deal or how the reduction in purchase price due to debt affects the transaction. He further criticized WBD for not explaining its “risk adjustment” for Paramount’s offer, asserting that shareholders require this information to make informed investment decisions.
The lawsuit comes on the heels of WBD’s board rejecting Paramount’s latest bid, citing concerns over the potential risks associated with the deal. The merger has drawn widespread scrutiny, not only from industry stakeholders but also from political figures. Former President Donald Trump expressed his opposition to the merger over the weekend, sharing an article that warns of Netflix’s potential dominance in the entertainment sector if it acquires WBD’s assets.
In the article, writer John Pierce cautioned that a Netflix acquisition would enable the company to become “the most dominant cultural gatekeeper the United States—and much of the world—has ever seen.” Trump previously met with Netflix co-CEO Ted Sarandos in December and indicated that the merger could pose significant challenges due to Netflix’s already substantial market share.
The reaction to the merger within the industry has been largely negative, with concerns regarding job security, the future of theatrical releases, and the representation of diverse voices in film and television. In response to these concerns, Netflix co-CEOs Greg Peters and Sarandos issued a letter last month, attempting to mitigate fears about the merger’s impact. Despite these efforts, the Writers Guild of America (WGA) continues to oppose the acquisition, citing potential violations of antitrust laws.
Political leaders have also raised alarms. Senators Elizabeth Warren, Bernie Sanders, and Richard Blumenthal have warned that the merger could lead to increased consumer costs, exacerbating financial pressures on middle-class families, especially following Netflix’s recent price increase.
As the legal battle unfolds, the future of this significant merger remains uncertain, with implications that could affect the broader media landscape. Paramount’s pursuit of greater financial transparency may not only impact its own interests but could also reshape the dynamics of competition within the streaming industry.
