Julius Young — Founder & Editor-in-Chief, Vantage
Netflix declined to match Paramount's bid, collected a $2.8 billion breakup fee, and kept its balance sheet. Now Paramount is bleeding ticking fees. Ted Sarandos might be the smartest person in the room.
On February 26, Warner Bros. Discovery informed Netflix that Paramount's revised bid constituted a superior proposal. Netflix had four business days to match it. Ted Sarandos waived the right to negotiate and let Paramount have the deal. The $2.8 billion breakup fee hit Netflix's books in Q1 as interest and other income — one Needham analyst described it as funding two months of content spending at no cost. Netflix's current content spending is approximately $20 billion annually, its ad-supported tier revenue is projected to reach $3 billion this year, and its subscriber base stands at 325 million globally. None of those numbers required acquiring Warner Bros. Discovery. Now look at Paramount: the deal is paused, the ticking fee starts September 30 at $7 million per day, and the $7 billion regulatory termination fee is a live liability. There is a version of this story where Netflix bid for WBD and won — taking on tens of billions in debt while facing the same regulatory scrutiny Paramount now navigates. Instead it has $2.8 billion and a content slate. Related: Paramount-WBD Merger Paused