WBD-Netflix Deal Hinges on European Regulators—and Sports Rights

The future of Warner Bros. Discovery – encompassing its film studio, HBO Max, and cable networks like CNN, TBS, TNT, Discovery, and HGTV – is now significantly tied to the decisions of European regulators regarding potential deals with Netflix and Paramount Skydance. This situation is particularly noteworthy given that the core assets at stake – valuable American sports rights – have limited direct connection to the European market.

A Complex Deal Landscape

Warner Bros. Discovery currently holds the rights to numerous live U.S. sports events, including March Madness, Major League Baseball, the National Hockey League, NASCAR, the French Open, All Elite Wrestling, and the College Football Playoffs. Under the current agreement, these rights would not transfer to Netflix. Instead, Netflix has offered $27.75 per share for the WBD movie studio and streaming business, while the cable networks, along with sports rights, would be spun off into a separate publicly traded entity called Discovery Global, also including Bleacher Report, House of Highlights, and other digital assets.

Did You Know? Netflix generates approximately $14.5 billion in revenue from the EMEA region (Europe, the Middle East, and Africa), representing about 32% of its total sales.

However, a competing bid has emerged. Paramount Skydance has launched a hostile takeover attempt, offering $30 per share for the entirety of WBD. If successful, the cable networks and associated sports rights would fall under the Paramount umbrella. Paramount extended the deadline for its tender offer to February 20th, allowing WBD shareholders more time to consider the proposal.

Shareholder Response and Board Opposition

As of a recent statement, less than 7% of WBD shareholders have tendered their shares to Paramount. Warner Bros. Discovery maintains that over 93% of shareholders are rejecting Paramount’s offer, favoring the merger agreement with Netflix. WBD expresses confidence in securing regulatory approval for the Netflix deal, anticipating significant value for shareholders.

The Unexpected Importance of Europe

While much of the initial attention focused on the potential reaction of President Donald Trump – Netflix co-CEO Ted Sarandos met with him to gauge his sentiment – the role of European regulators has become increasingly critical. Both the U.S. Department of Justice and the European Commission must approve any deal.

Expert Insight: The involvement of European regulators introduces a significant layer of complexity, as they have demonstrated a willingness to block mergers between U.S.-based companies, particularly in the tech sector, when concerns about market dominance arise.

WBD believes there is a “95% certainty” that Europe will approve the Netflix deal, potentially with conditions such as commitments to produce local content and maintain theatrical releases. Paramount, however, reportedly believes the Netflix deal has little chance of gaining European approval and is pursuing its own regulatory strategy.

Precedent and Potential Roadblocks

European regulators have previously blocked deals, such as Adobe’s acquisition of Figma in 2023, and forced Meta to sell Giphy in 2022. However, the European Commission did approve Amazon’s acquisition of MGM, a comparable situation. Paramount’s confidence stems from Europe’s history of strict antitrust enforcement against major tech companies like Meta, Microsoft, Google, Apple, and Amazon.

The EU’s Audiovisual Media Services Directive already requires video-on-demand services to ensure at least 30% of their programming in EU countries qualifies as European works.

What Could Happen Next

If European regulators block the Netflix deal, Paramount Skydance’s offer could become more attractive. Paramount could then proceed with its acquisition of WBD. Alternatively, if both deals face regulatory hurdles, the current structure of WBD could remain intact. Netflix recently simplified its offer to an all-cash deal, potentially expediting the shareholder meeting for approval, possibly as early as March.

Frequently Asked Questions

What sports rights are involved in this potential deal?

Warner Bros. Discovery owns the rights to March Madness, Major League Baseball, the National Hockey League, NASCAR, the French Open, All Elite Wrestling, and the College Football Playoffs, among others.

What is Discovery Global?

Discovery Global is the proposed name for the new, publicly traded entity that would be created if the Netflix deal goes through. It would consist of WBD’s cable networks and sports rights, along with Bleacher Report, House of Highlights, and other digital assets.

What role does Paramount Skydance play in this situation?

Paramount Skydance has made a hostile takeover bid for Warner Bros. Discovery, offering $30 per share for the entire company, an offer the WBD board has rejected.

How will the outcome of these negotiations shape the future of sports broadcasting and streaming?