The War Over Warner Bros.

The War Over Warner Bros.
 
Warner Bros. Discovery has a binding merger deal with Netflix that will cost $2.8 billion to terminate. According to the Amended Letter to Shareholders published by WBD on January 7, 2026, the total price tag of abandoning the Netflix deal in favor of Paramount Skydance (PSKY) could run as high as $4.7 billion.
 
Meanwhile, PSKY is leaning into its hard wooing (hostile bid), with a lawsuit demanding more forensic details on the financials behind the board’s rejection of PSKY’s bid. In a letter to WBD shareholders, David Ellison explained the lawsuit, writing that it was necessary “so that WBD shareholders have what they need to be able to make an informed decision.” Paramount Skydance alleges their offer is worth more than Netflix’s, at $30/share compared to Netflix’s $27.75. At face value, the price is higher. However, there is a lot more to the equation than meets the price.
 
In the interest of full due diligence and making an informed decision, will PSKY be advising WBD investors that the company's credit rating is below investment grade (from S&P Global), that it lost -$6.19 billion in 2024 and that the company’s market value ($13 billion) is a rounding error of Netflix? Netflix credit rating is A with a 22% net profit margin and a market value of $410 billion.
 
Here are the things we’ll cover in this blog. Email [email protected] with Warner Bros. in the subject line, if you'e like an updated Netflix+ Stock Report Card.
 
David (Ellison) vs. Goliath
Creditworthy vs. Junk
Profits vs. Losses
Do Customers Win or Lose?
 
And here is more information on each topic.
 
David (Ellison) vs. Goliath
As I mentioned above, Paramount Skydance is a publicly traded company with a market value of $13 billion. Netflix is worth $413 billion. So, how is Paramount Skydance financing its $94.65 billion debt/equity offer for Warner Bros. Discovery? Through leverage and borrowing. In the letter to shareholders, the Warner Bros. Discovery Board of Directors explained that the leveraged buyout proposed by PSKY would be the largest in history. “To effect the transaction, it intends to incur an extraordinary amount of incremental debt — more than $50 billion — through arrangements with multiple financing partners,” the BOD explained, writing that this is risky due to the “acquiror’s reliance on the ability and willingness of its lenders to provide funds at close.”
 
That’s not the only risk that the Warner Bros. Discovery board is worried about. They are also concerned about the creditworthiness of PSKY.
 
Creditworthy vs. Junk
Paramount Global (the parent company of Paramount Skydance) has a junk bond rating (BB+) from S&P Global. Fitch Ratings and Moody’s have the company at the lowest rung of investment grade with a negative outlook. Netflix enjoys an A- credit rating from those same agencies.
 
Given the low credit quality, are the WBD directors’ concerns about Paramount’s ability to complete the deal valid? As Warner Bros. Discovery cited, “The risks inherent in the LBO structure are exacerbated by the amount of debt PSKY must incur, its current financial position and future prospects, as well as the lengthy period to close the transaction — which PSKY itself estimates to be 12-18 months following signing.” For instance, if Fitch or Moody’s downgrades Paramount to junk, that rating action could jeopardize the deal. The negative outlook makes that a possibility.
 
Profits vs. Losses
Netflix makes money, $8.71 billion last year, while Paramount Global had losses totaling -$6.2 billion in 2024. Paramount’s losses in the most recent quarter (Sept. 2025) were -$257 million.
 
Do Customers Win or Lose?
Here are a just a few of the possibilities.
 
*Customers who pay for both services could win in either merger by having only one subscription to pay for.
*Analysts worry that the debt load of a Paramount Warner Bros. merger would stifle creativity.  
*Having Warner Bros. legacy brands at Netflix could prompt the company to charge a premium for Harry Potter and other serial brands, including the DC Universe and HBO’s prestigious content.
*Paramount Skydance argues that their merger with WBD will clear, whereas the WBD/Netflix merger might be labeled a monopoly by the U.S. Dept. of Justice.
 
Bottom Line
Both Warner Bros. Discovery and Paramount Global have lagged Netflix in terms of popularity with investors – largely to do with the companies’ high debt, weak revenue performance and net losses. Warner Bros. Discovery lost -$11.31 billion last year. However, despite net losses and being abandoned by Wall Street, WBD has managed to continue producing hits, including The Pitt, Hacks, The White Lotus and The Gilded Age.
 
The Paramount Global hostile takeover bid “comes with significant risk, but makes strategic sense,” according to Moody’s. Netflix has suffered from a perception of having slop content. Clearly, Warner Bros. Discovery and Netflix have something to offer one another and have a binding merger agreement. The question is, “What kind of fire power will David Ellison attempt to harness for his 9th attempt to force a merger with WBD and will it finally work?” (Jared Kushner pulled out of the deal on Dec. 17, 2025.)
 
 
 
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Natalie Wynne Pace is an Advocate for Sustainability Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The ABCs of Money (6th edition) and The Power of 8 Billion: It's Up to Us, and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 6th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is (2nd edition) are the most recent releases of these books. Follow her on Instagram. 
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Other Blogs of Interest
Answers Check out Natalie Pace's Substack podcast on Apple and Spotify.
Watch videoconferences and webinars on Youtube.

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Check out Natalie Pace's Substack podcast on Apple and Spotify.
Watch videoconferences and webinars on Youtube.

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Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly-traded companies, funds or projects mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect an age-appropriate, diversified wealth plan, which has been designed strategically, with the assistance of financial professionals who are familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge, patience and diversified strategy.  
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