Netflix shares drop after Paramount launches hostile takeover bid

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Netflix stock fell on Monday after Paramount made an unexpected offer to buy the company, raising concerns among investors about whether Netflix can successfully complete its own planned acquisition.

Netflix’s stock price dropped almost 3.5%, closing at $96.79 per share, after Paramount made a competing offer directly to Warner Bros. Discovery shareholders. Paramount is offering $30 per share, valuing the entire company at $78 billion. This follows Netflix’s previous agreement to acquire Warner Bros. Discovery’s film and TV studios, including HBO and HBO Max, for $27.75 a share – a $72 billion deal. Including Warner Bros. debt of over $10 billion, the total value of that deal was $82.7 billion.

On Monday, Pivotal Research Group’s CEO, Jeffrey Wlodarczak, lowered his recommendation for Netflix stock from ‘buy’ to ‘hold’. He explained that Paramount’s potential offer could raise the cost of Netflix acquiring assets from Warner Bros. Discovery (WBD). Wlodarczak also pointed out that the deal might face regulatory hurdles, potentially forcing Netflix to make concessions, like allowing a competitor to acquire HBO. He questioned what changes might be necessary to finalize the agreement.

Wlodarczak also raised concerns about how well Netflix keeps its customers engaged, which is crucial for keeping them subscribed. He believes this costly agreement shows Netflix is worried that short videos on platforms like TikTok and YouTube are drawing in younger viewers.

YouTube has transformed from a platform for simple home videos into a major entertainment leader. Recent Nielsen data shows that YouTube now accounts for the largest share of streaming viewed on U.S. televisions – 12.9% in October, surpassing Netflix’s 8%.

Netflix reported that viewers continue to be actively engaged with its service. According to data from Nielsen and Barb, which measure viewership, engagement in the U.S. increased by 15% and in the U.K. by 22% between the fourth quarter of 2022 and the third quarter of 2023. This information was shared in a letter to shareholders.

Analysts at MoffettNathanson, a firm specializing in equity research, have noted increasing concerns about how much people are using Netflix. While Netflix viewing increased slightly in the latter half of the year, YouTube has seen much larger gains in overall TV viewing time, eclipsing most other streaming services.

Netflix is seeing a decline in user engagement – numbers are starting to level off. While they’re releasing more and better content, the hope is it will boost viewership. This deal could be a sign they’re concerned about losing younger viewers who are increasingly choosing other ways to spend their time instead of watching long-form shows.

Hollywood Inc.

Ted Sarandos, now a top executive at Netflix, wasn’t always a Hollywood insider. He started as a video store manager in Arizona and has since become one of the industry’s most powerful figures.

Netflix declined to comment on Wlodarczak’s report.

I was really interested in what Netflix shared with investors on Friday. They seemed confident things are going well, and it’s good to hear! They highlighted how shows like “Stranger Things” are still huge with younger viewers – no surprise there, honestly. They also mentioned “Outer Banks” and even a movie called “KPop Demon Hunters” doing well, which shows they’re trying to offer a really broad range of content. It’s reassuring to see they’re not just relying on one or two big hits.

During Friday’s earnings call, Co-Chief Executive Ted Sarandos announced that the previous quarter saw record levels of user engagement. He expressed confidence in continued growth, noting that the company’s core business is strong and well-positioned for further success. This solid foundation allows them to build on an already thriving business model and speed up its development.

It’s still uncertain if the deal will happen. Netflix won’t acquire the company until sometime between one and a half to two years from now, after Warner Bros. Discovery finishes separating its cable channels into a new, independent company.

Hollywood Inc.

YouTube has changed dramatically over the past twenty years. What started as a platform for home videos is now a major player in television, attracting billions of viewers worldwide and even broadcasting major concerts and sporting events.

Wedbush Securities analysts, who predict the stock will perform well, expressed doubts on Monday that the deal will be approved by regulators.

The analysts believe the Department of Justice won’t approve any agreement unless there are compromises made regarding prices and industry-wide practices.

Netflix leaders expressed confidence on Monday that the deal would be finalized. According to Nielsen data, Co-CEO Greg Peters explained that even if Netflix merged with Warner Bros. Discovery, it would still account for a smaller portion of U.S. television viewing compared to YouTube.

He believes regulators have good reasons to approve the deal, citing its strong underlying merits.

Wlodarczak thinks it would be good for Netflix to buy parts of Warner Bros. Discovery. This would give Netflix access to popular characters like Batman and Harry Potter.

It also prevents rivals like Paramount from getting bigger.

According to Wlodarczak, these companies are growing into serious competitors for Netflix. He believes that acquiring this asset will make it extremely challenging for anyone else to reach the same size and influence as Netflix.

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2025-12-09 02:02