Netflix shares fell on Monday after Paramount announced a hostile takeover bid, fueling concerns on Wall Street that the streaming giant may not be able to pull off its bold acquisition.
Netflix shares fell nearly 3.5% to $96.79 per share after Paramount decided to go directly to Warner Bros. shareholders. Discovery. offering $30 per share in a deal valued at $78 billion for the entire company. Last week, Netflix said it had reached an agreement with WBD to buy its film and television studios, Burbank site, HBO and HBO Max for $27.75 a share, a $72 billion offer. Netflix will also assume Warner Bros. debt. for more than $10 billion with a transaction value of $82.7 billion.
On Monday, analyst Jeffrey Wlodarczak, CEO of Pivotal Research Group, downgraded his rating on Netflix shares from “buy” to “hold,” citing concerns that Paramount's offer could increase the price Netflix could pay for WBD's assets. Regulatory issues could also change the terms of the deal, such as Netflix giving HBO to a competitor, Wlodarczak said. “The question is, what changes will they have to make?” – he said.
Wlodarczak also questioned Netflix's level of engagement with customers, which is key to keeping subscribers on the platform. He said “this very expensive deal” underscores Netflix's concerns that short-form entertainment on platforms such as TikTok and YouTube is attracting younger consumers.
YouTube, once known as a home for amateur, user-generated videos, has become an entertainment hub that brings together largest percentage of streaming on US television, according to Nielsen. In October, YouTube accounted for 12.9% of U.S. television viewing time, compared with 8% for Netflix.
Netflix said its customer engagement “remains healthy,” noting in a letter to shareholders in October that it increased its engagement in the U.S. and U.K. by 15% and 22% from the fourth quarter of 2022 to the third quarter of 2025, citing Nielsen and Barb data that tracks viewership.
Analysts at equity research firm MoffettNathanson said there were questions about Netflix's growth in engagement, adding that while Netflix's share of total TV time began to rise in the second half of the year, “YouTube's share gains have eclipsed most other streaming platforms.”
“There are problems with the interaction with Netflix, a leveling of sorts,” Wlodarczak said. “You're getting a lot better content, that should help your engagement… Is this a signal that they're really starting to worry about engagement and are giving up on this deal because young people are just spending more and more time rather than sitting and watching hour-long shows?”
Netflix declined to comment on Wlodarczak's report.
On a call with investors on Friday, Netflix executives stressed that their business is healthy and growing. They noted how the sci-fi hit show “Stranger Things“was very popular among young audiences, as were series such as the drama”Outer Banks” and movies including KPop Demon Hunters.
“We had record levels of engagement last quarter,” Co-Chairman Ted Sarandos said during Friday's conference call. “We are pleased with our outlook for continued organic growth and engagement… Our fundamentals are strong. This gives us a unique opportunity to accelerate an already highly successful model.”
Whether the deal will go through remains an open question, as Netflix won't complete the acquisition until 12 to 18 months after Warner Bros. Discovery will spin off its company. unscrewing your cable channels to a new public company.
Analysts at Wedbush Securities, who have an overweight rating on the stock, said Monday they were skeptical the deal would pass regulatory scrutiny.
“Ultimately, we believe the DOJ will reject the deal without concessions on pricing and industry standards,” the analysts wrote.
Netflix executives said Monday they were confident the deal would go through. Co-CEO Greg Peters noted that Netflix still represents a smaller share of US TV viewing in the US compared to YouTube, even when combined with Warner Bros. Discover, citing Nielsen data.
“We believe there are strong fundamental arguments here for why regulators should approve this transaction,” he said.
Wlodarczak said he believes Netflix will benefit from acquiring Warner Bros. assets. Discovery. The Los Gatos, California-based streamer will have access to characters such as Batman and Harry Potter.
It also makes it difficult for competitors like Paramount to get bigger.
“They're starting to get big enough to pose a real threat to Netflix,” Wlodarczak said. “So if you buy this thing… it will be very difficult to become as big and as big as Netflix.”
Times staff writer Meg James contributed to this report.
