Netflix chief: I feel uneasy about the result and our final position

Paramount Secures Warner Bros Discovery in Landmark Acquisition

The intense contest to acquire Warner Bros Discovery has concluded, marking one of the most significant transactions in the entertainment industry. The company behind the Harry Potter films and acclaimed HBO series such as The Sopranos and Succession was purchased at auction on Thursday for $111 billion (£82 billion).

David Ellison, head of Paramount, emerged victorious after a prolonged struggle with Netflix. Netflix, the streaming giant, unexpectedly withdrew, missing what may have been its sole opportunity to acquire a studio that rivals Disney as Hollywood’s most prestigious.

While the bidding war has ended, further developments may still unfold. Ellison’s team maintained throughout the process that their bid would face fewer regulatory hurdles than Netflix’s, though Netflix remains unconvinced.

“This deal must be approved in over 50 different jurisdictions, each with its own viewpoint,” explained Greg Peters, Netflix’s co-CEO, in his first interview with The Telegraph following the auction’s conclusion.

Despite Netflix’s dominance and profitability in Hollywood, the odds were never entirely in its favor.

Ellison’s bid was backed not only by his father Larry’s considerable resources but also by financial support from three Gulf nations: Qatar, Saudi Arabia, and the United Arab Emirates, each contributing billions to the Warner acquisition.

The involvement of foreign governments in Western media is a relatively recent phenomenon, and Peters remains uncertain about its acceptance. In Warner’s case, it means three authoritarian states will have stakes in CNN, though without voting rights.

Regulators and lawmakers, including the U.S. Committee on Foreign Investment (CFIUS) and UK authorities, are expected to scrutinize the implications of this ownership structure.

Peters commented, “I expect CFIUS, as well as the UK’s Competition and Markets Authority and Ofcom, will examine the Gulf states’ involvement and funding sources, and consider what that means for the transaction.”

This scenario is familiar to The Telegraph, which faced a similar attempted takeover in 2023 by the UAE in partnership with RedBird Capital, a major Paramount shareholder. Despite assurances that Gulf investment would not influence operations, the plan was ultimately blocked after campaigns in the press and Parliament. The Telegraph remains in a state of uncertainty as the UAE and RedBird seek to divest.

Political and Regulatory Challenges Ahead

The Warner acquisition is on a different scale entirely. Paramount reportedly has the backing of Donald Trump and even considered bringing his son-in-law, Jared Kushner, on board as an investor. However, shifting political dynamics in the Gulf and in Washington—especially with the upcoming midterm elections—could impact the deal’s future.

Peters remarked, “A transaction of this size warrants regulatory review, which is appropriate. Changing perspectives could affect how this unfolds, so we’ll have to wait and see.”

During the bidding, Netflix was portrayed as a culturally progressive force, a narrative aimed at conservative lawmakers in the U.S.—a characterization the company rejects. Still, the White House is likely aware that Netflix has signed deals with high-profile figures such as the Obamas and Harry and Meghan.

Peters noted, “We collaborate with a broad spectrum of people, including those who sometimes draw criticism from progressive circles. For example, Dave Chappelle—we faced significant backlash over some of his content. Our mission is to support diverse voices and artistic freedom.”

Trump closely monitored the auction, even calling for the removal of Netflix board member Susan Rice, a former Obama and Biden administration official, just days before the deal closed. Peters dismissed this as typical social media rhetoric.

Netflix’s Approach and the Future of Streaming

For Netflix, the Warner bidding war was an unusual foray into large-scale mergers and acquisitions. The company has primarily grown by developing its own content, rather than through major purchases. By the time Hollywood realized the value of its content deals with Netflix, the streaming service had already established an unassailable position.

Now, Netflix describes Warner as a desirable but non-essential acquisition.

Peters explained, “We were excited about the possibilities, especially how the HBO brand could enhance our offerings. We believed we could be excellent stewards of those assets.”

Ultimately, Netflix’s decision to withdraw came after Paramount’s $111 billion offer received Warner’s board approval. “We recognized that outbidding them would exceed our valuation, so stepping back was the clear choice,” Peters said.

For Ellison and Paramount, acquiring Warner is crucial to building a streaming platform capable of challenging Netflix. Paramount has invested heavily in sports rights and popular shows like South Park to catch up. However, Peters questions whether Paramount’s audience is large enough to justify the acquisition’s price tag.

“Our strategy relied on connecting Warner Brothers’ content with a vast audience. I’m not sure Paramount has that reach, and I wonder how their model will succeed,” he added.

Industry Uncertainty and the Role of AI

Ellison now has the opportunity to reshape the entertainment landscape, leaving Hollywood anxious. After enduring the pandemic, labor strikes, and wildfires, the industry is already facing challenges. If Ellison clears regulatory hurdles, he may pursue significant cost reductions, especially as AI technology becomes increasingly capable of handling production tasks. Warner also employs thousands in the UK’s production sector.

Peters admitted, “I have some concerns about the outcome and where things stand. I anticipate more job losses as a result, which is regrettable.”

He emphasized that Netflix is not seeking to use AI to reduce costs. “That’s not a conversation we’re having with our creative partners. When it comes to storytelling, we believe it’s a uniquely human skill—one that’s rare and valuable.”

Ellison, speaking to analysts, insisted that AI would serve as a tool to assist artists, not replace them.

Peters also dismissed speculation that Netflix’s strategy was to drive up costs for Ellison and entangle him in regulatory challenges. “There was no elaborate scheme behind our actions,” he insisted.

“Ultimately, there are even larger competitors out there, like YouTube, that probably deserve more of our attention.”

Looking Ahead: Netflix’s Strategic Direction

Peters is exploring ways for Netflix to collaborate with major traditional broadcasters. France’s TF1 is already joining the platform, and he hopes the BBC will follow, which could allow Netflix to offer news content without the regulatory and political complications.

Netflix faces the task of rebuilding investor confidence after the Warner saga. Shareholders were less enthusiastic about the acquisition than Peters and his co-CEO Ted Sarandos. Between November, when Netflix first expressed interest, and the conclusion of the auction, the company’s stock price dropped by a third. Although shares have started to recover, they remain below pre-auction levels.

“It’s understandable that some investors doubted our ability to execute such a deal,” Peters acknowledged. “We haven’t done anything like this before, but we’re used to breaking new ground. By the end, I was confident we could have succeeded.”

However, Peters indicated that Netflix is unlikely to pursue a similar acquisition in the near future. “I don’t foresee us doing something like this again anytime soon.”