Netflix Faces Mounting Pressure as Rival Bid and Legal Challenges Threaten Warner Bros. Acquisition

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The proposed $72 billion acquisition of Warner Bros. Discovery by Netflix is encountering significant turbulence, placing the streaming giant under intense pressure. A superior counter-bid, political scrutiny, and a consumer lawsuit have converged to jeopardize the deal, contributing to a prolonged decline in Netflix's share price.

In a direct challenge to Netflix, Paramount Skydance presented a hostile takeover bid valued at $108.4 billion in cash, or $30 per share, on Monday. This offer comes after the Warner Bros. Discovery board rejected it last week in favor of Netflix's proposal. Paramount is now appealing directly to Warner shareholders.

Netflix's existing agreement stands at $27.75 per share, comprising $23.25 in cash and $4.50 in Netflix stock, valuing the total transaction at approximately $82.7 billion. The deal would grant Netflix control of Warner Bros. Studios, the HBO Max streaming service, and the premium HBO cable network.

Faced with the substantially richer Paramount proposal, the Warner board is now obligated to re-evaluate its options, casting doubt on Netflix's ability to salvage the acquisition.

Share Price Decline Exceeds 28% Since June

Netflix shares closed Monday down 3.4%, reaching their lowest point since mid-April. The stock has shed more than 28% of its value since the end of June, ranking it as the seventh-worst performer in the Nasdaq 100 index for the second half of the year.

A year-to-date gain that stood at 50% through mid-2025 has now dwindled to just under 8%. The downward trend accelerated following disappointing quarterly results released on October 21, with the uncertainty surrounding the Warner acquisition exacerbating losses.

Uday Cheruvu, a portfolio manager at Harding Loevner, commented, "A higher bid from Paramount makes it more likely that Netflix will either have to improve its offer or walk away."

Political and Legal Hurdles Emerge

Former President Donald Trump publicly questioned the antitrust viability of the Netflix-Warner deal on Sunday, stating, "That's a big market share. That could be a problem." Netflix co-CEOs Ted Sarandos and Greg Peters recently met with Trump at the White House to advocate for the transaction. At a UBS conference in New York on Monday, both executives expressed being "extremely confident" regulatory approval would be secured.

The situation is further complicated by the involvement of Trump's son-in-law, Jared Kushner, whose investment fund, Affinity Partners, is participating in the Paramount bid.

Simultaneously, an HBO Max subscriber filed a class-action lawsuit on Monday in the U.S. District Court for the Northern District of California. The suit contends the merger would substantially reduce competition in the U.S. streaming market by giving Netflix control over major Warner franchises, including Harry Potter, DC Comics, and Game of Thrones. Netflix has dismissed the lawsuit as "without merit."

Analyst Sentiment Sours, Ratings Downgraded

Several analysts downgraded Netflix immediately after the deal was announced. Rosenblatt Securities and Pivotal Research both lowered their ratings from "Buy" to "Hold."

• Rosenblatt slashed its price target from $152 to $105.
• Pivotal Research reduced its target from $160 to $105.

Rosenblatt analyst Barton Crockett noted, "We see a longer period of uncertainty and risks, while the financial return on this deal is clearly too low to justify it."

Needham analyst Laura Martin issued a particularly stark warning, suggesting that acquiring Warner Bros. Discovery would burden Netflix with an additional $83 billion in risk exposure to AI-driven industry disruption. Warner's workforce of approximately 35,000 full-time employees—2.5 times larger than Netflix's 14,000—presents a significant integration challenge for the tech-oriented streamer.

"Without Warner, Netflix is more global, agile, technology-focused, and flexible with Hollywood unions," Martin argued.

Staggering Breakup Fee and Strategic Rationale

Netflix has agreed to a breakup fee of $5.8 billion—one of the largest in M&A history—should the merger fail. The company anticipates annual cost synergies of $2 to $3 billion beginning in the third year post-closure.

A combined platform would unite Netflix's 300 million subscribers with HBO Max's 128 million customers. Data from Sensor Tower suggests this could result in a 56% market share of monthly active users in the global streaming sector.

The transaction is slated for completion within 12 to 18 months. Netflix is scheduled to release its next quarterly earnings on January 20, 2026. Current analyst consensus shows approximately two-thirds of the 59 covering analysts maintain a "Buy" rating, with 16 recommending "Hold" and three advising "Sell."