Netflix spent nearly three decades growing primarily through its own products and content. That is why it came as a surprise when, in December 2025, Ted Sarandos signed an agreement to acquire Warner Bros. studios and HBO Max.
The deal ended very differently.
After three months of competition with Paramount, a Senate hearing and several increases in the offer price, Netflix decided to walk away. It made the decision in less than two hours and ultimately collected a $2.8 billion breakup fee.
The Warner Acquisition
Netflix wanted the film and television studio along with HBO Max. The cable networks, including CNN, were to be separated into a new company called Discovery Global.
When Paramount began pushing with a competing offer, Netflix revised its proposal and moved to an all-cash bid of $27.75 per share, valuing the enterprise at $82.7 billion.
Sarandos defended the transaction because Warner owned businesses that Netflix had never built itself.
These included theatrical distribution and television production for other studios and platforms.
He also pointed out that eight out of ten U.S. HBO Max subscribers already paid for Netflix. His argument was that combining the two services could offer better pricing and reduce cancellations.
Netflix also entered the negotiations from a position of strength. During 2025, revenue grew 16%, operating profit rose 30% and the platform surpassed 325 million subscribers.
Paramount Raises the Stakes
Paramount Skydance, led by David Ellison, wanted all of Warner.
It launched a hostile offer of $30 per share and left open the possibility of increasing it to $31.
Sarandos responded by questioning his rival’s numbers. He calculated that Paramount would need to reduce around $16 billion to bring down the debt associated with the transaction and also noted that the deal would place CNN and CBS News under the same corporate group.
Netflix also sought support within Hollywood and asked unions to publicly back its proposal because of the potential impact on employment.
In mid-February, it decided to give Warner room to negotiate. Netflix granted a seven-day waiver allowing talks with Paramount as the shareholder vote scheduled for March 20 approached.
Facing the Senate
Sarandos also had to defend the transaction in Washington.
Before the antitrust subcommittee, he argued that Netflix accounts for around 9% of total television viewing time in the United States and that, even with Warner included, the combined share would be close to 10%.
He also insisted that YouTube competes directly with Netflix and accounts for a significant share of streaming viewing time.
According to Sarandos, the company’s productions had generated more than 155,000 jobs in the United States. Netflix was also investing $1 billion in a new production complex at Fort Monmouth, New Jersey.
The hearing included several tense moments.
Mike Lee questioned whether YouTube could truly be considered a competitor for the same content. Cory Booker mentioned financial transactions involving Donald Trump connected to Netflix and Warner after the deal was announced. Josh Hawley pressed Sarandos on residual payments, while other Republican senators asked about children’s content and political positions inside the company.
Sarandos also made one concrete commitment: Warner films would retain a 45-day theatrical window.
The Price No Longer Made Sense
The decisive moment came at the end of February.
Paramount increased its offer to $31 per share, and Warner gave Netflix four business days to decide whether it wanted to improve its proposal.
Netflix responded in less than two hours.
It would not go higher.
At the same time, Donald Trump had publicly called on Netflix to remove Susan Rice, a former official in three Democratic administrations, from its board and had warned of possible consequences if that did not happen.
Inside Netflix, however, the explanation for withdrawing was economic.
Chief Financial Officer Spence Neumann said Warner was an attractive acquisition at the right price, but not something Netflix needed at any cost.
The market supported the decision. Netflix shares rose about 10% after the announcement.
Paramount also ended up assuming the $2.8 billion payment Warner owed Netflix for terminating the agreement.
After Warner
Paramount moved forward and, in April, Warner shareholders approved a transaction valued at $111 billion, still subject to regulatory approval.
Netflix then returned its focus to organic growth.
For 2026, it plans to invest around $20 billion in content, 10% more than the previous year. The company expects revenue between $50.7 billion and $51.7 billion and an operating margin of 31.5%.
That does not mean Sarandos has ruled out future acquisitions.
His position is that Netflix should continue growing internally while taking advantage of acquisitions when the right opportunity appears.
As an example, he mentioned InterPositive, Ben Affleck’s artificial intelligence tools startup for filmmaking, for which Netflix could ultimately pay as much as $600 million.
The Warner experience left behind a fairly simple rule: Netflix is willing to buy big, but not at any price.
