Two Perspectives On Netflix Acquiring WBD Global Networks

The Paramount vs Netflix saga over the prime assets of Warner Bros Discovery (or WBD) has resulted in a rejection of Paramount's latest, amended offer. If shareholders don't disagree, this will go through the due process. It’s been a classic M&A arm-wrestle for the past few weeks. My written opinion here is to make a point that this is not just an investment decision. There’s a moral imperative that needs to be considered. And I want to start 2026 by focusing more on moral decisions, seeing as the world seems to have a crisis of sorts when it comes to this. (Note: take a look at what Trump is saying in the aftermath of the Maduro abduction. It’s pretty cringe-worthy).

Let’s step back and re-visit this epic battle in the long-running streaming wars. Netflix has been battling the Hollywood studios for domination of the direct-to-consumer (or D2C) market for some time now. Nobody wants to license content to each other. Everyone wants to own their own content and monetise the hell out of it. The ongoing bidding for the prized jewels of Warner Bros Discovery (WBD) is the latest battle and may be a decisive one for either Netflix or Paramount (more on that later).

If you’re a WBD shareholder (my commiserations to you) then you’ve been looking at two past financial years of revenue decline so far and a stock price hovering near where it was at the start of 2022. So WBD wants to split its assets into two: WBD Global Networks (their premium Hollywood studios like Warner Bros, DC Studios, HBO and the HBO Max streaming service) and WBD Streaming & Studios (their declining linear channels, news outlet CNN and the Discovery+ streaming service). You can read about it here. Let’s refer to them as WBD GN and WBD SS from now on. So, to WBD shareholders, the new buyers can pick what they want. You can take the best part of it and leave behind the lousy channels (what Netflix wants) or you can buy both of it (what Paramount wants). 

Take note that I’ve not included buying WBD SS alone as an investment option. Nobody wants it. That company would be considered by some as a Warren Buffet-categorised ‘cigar butt’ investment. It is ugly, it is shrinking, but it still has a few puffs of free cash flow left (from carriage fees). WBD shareholders should not fool themselves into thinking it is a growth stock. It is a liquidation vehicle. New investors would buy it only if it traded at a P/E ratio of 4. (Honestly, existing WBD investors really should just sell and buy something with a future.)

The Investment Perspective

From an investment perspective, the deal that Netflix is proposing seems to be a good one. Netflix gets the golden goose (movie studios, Discovery and HBO Max) and ditches the ugly ducklings (linear channels, news). Shareholders might look wise to accept Netflix’s offer. For $27.75, that’s not bad considering that the price is hovering around $28 but could weaken if the battle gets drawn out. (Plus, it was $24 just before the offer.) They aren't just getting cash; they are getting ~0.04 shares of Netflix for every WBD share they own. They’re effectively swapping a distressed asset (WBD) for the market leader (Netflix).

Usually, in a merger, 1 + 1 = 1.5. Here, the WBD board has managed to sell the ‘furniture’ (WBD GN) for more than the price of the entire house. If you are a WBD shareholder, you don't ask questions. You take the cash. You have been holding a melting ice cube (Cable TV, news channels, etc), and Netflix just walked in and paid premium prices for the water.

Finally, Netflix acquiring WBD GN will also actually weaken WBD SS because nobody will watch Discovery+. The majority of consumers prefer to watch Discovery content in HBO Max, the latter of which was supposed to have everything. As it is, HBO Max will definitely be culled and Discovery+ will be effectively emasculated. WBD SS would seem so ‘distressed’ and unsalvageable that even Howard Marks would give it a hard pass.

Let’s now consider the moral perspective.

The Moral Perspective

From this perspective, you’ll see Netflix one step closer to widening its competitive moat and becoming a genuine monopoly of the filmed entertainment industry. How is this so?

Firstly, the cinema coffin is being nailed shut for good. Netflix has historically treated theaters as a marketing tool, not a revenue stream. If they own WBD GN, (hosting the studio that released Barbie and The Dark Knight), the theatrical window could shrink or vanish entirely, devastating cinema chains that rely on future WBD tentpoles.

Secondly, Netflix will get a huge library of content AND subscribers, creating a content magnet that would allow it to hike up prices even more without suffering the effects of price elasticity. Where else would people go to get the next HBO hit drama series or DC movie franchise title? They’ll have to put up with being gouged because their kids want to watch the latest hit movie when it comes out. That’s a monopoly for you.

This is precisely what might potentially derail the deal. It’s the equivalent of Netflix winning the streaming war. Now they are buying the armory (WBD GN) to make sure no one else can fight back. Netflix will be the 'Standard Oil' of entertainment. To illustrate the FTC/DOJ scrutiny simply look at the subscriber math.

Given its time in the market (like Prime Video too), Chart A above shows how close the Hollywood studio-based streamers have advanced since they launched their D2C services. But you’ll notice the tremendous gap between Netflix and its closest competitor Prime Video.

With a successful bid, Chart B now shows that Netflix will be streets ahead of everyone now with a 41% lead over Prime Video and. Since Prime Video is a bundle for people who simply want Amazon Prime membership benefits, the real gap to look at is between Netflix and Disney+. It's a stunning 70% lead.

A better outcome will be Chart C. But I don't think the process of deciding is so clear cut. The FTC/DOJ scrutiny would have been almost insurmountable a few weeks ago but don’t forget to read the last line of my first paragraph again. WBD is also praying it won’t happen because it will be trading a headache for a winner. But more jobs are on the line and consumers will be permanently hurt if we go down this line. I definitely do not want to see Chart B come to fruition.

The Conclusion

No one really knows what will happen. As a modern enterprising investor myself (to borrow Benjamin Graham’s phrase) I try to look at how company common stock should be appropriately valued, including mergers that could affect their trajectory. But like I said, I’m thinking more about the moral imperative and this deal is screaming for it. My mind tells me that Netflix taking over WBD GN makes great investment sense. But as a consumer and cinema aficionado, it simply makes no moral sense. And that’s the bottom line for me. It means that Paramount has the upper hand. It’s up to WBD’s shareholders to see this rationale and accept their offer. 

Unfortunately, if Wall Street advisors guide you, as incentivised as they are in the ‘perverse way’ that appalled Charlie Munger, that may never happen. 

No one should be surprised then.

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Source Notes:

*Amazon's subscribers numbers are estimated at the highest of the 200 - 250 million estimates. Netflix has stopped reporting subscriber numbers so these are also estimates. Disney+ data is from Q4 reports for its FYE in September 2025. Apple TV+ subscribers are also esimated, as reported in Deadline. The remaining data is from Q3 financial reports.