How Netflix won Hollywood's biggest prize

What began as a fact-finding mission for Netflix culminated in one of the largest media deals of the last decade, potentially reshaping the global entertainment landscape, sources with direct knowledge told Reuters.

On Friday, Netflix announced it had reached a deal to acquire Warner Bros Discovery for $72 billion. Interviews with seven advisers and executives offer new insight into Netflix's strategy and Warner Bros' board deliberations.

Although Netflix had downplayed speculation about buying a major Hollywood studio as recently as October, the streaming giant entered the bidding when Warner Bros Discovery launched an auction on October 21, following its rejection of three unsolicited offers from Paramount and Skydance.

Initially driven by curiosity, Netflix executives quickly recognised the opportunity Warner Bros presented beyond its century-old content library. "Library titles are valuable to streaming services," one source said, as these films and shows can account for up to 80% of viewing.

Warner Bros' theatrical distribution, production units, and HBO Max streaming service complemented Netflix's operations, providing strategic benefits that would accelerate growth, according to a source familiar with the situation.

Netflix began seriously considering the acquisition after Warner Bros announced plans in June to split into two publicly traded companies, separating its cable networks from its studio and streaming assets.

The competition intensified this autumn, with Netflix vying against Paramount and Comcast, NBCUniversal's parent company. Warner Bros' board convened daily for eight days leading up to Thursday's decision.

Netflix executives and advisers — including Moelis & Company, Wells Fargo, and law firm Skadden, Arps, Slate, Meagher & Flom — held daily calls, even on Thanksgiving, to prepare their bid.

The board ultimately favoured Netflix's offer, which promised faster, more immediate benefits compared with Comcast's proposed merger of its entertainment division with Warner Bros Discovery.

Paramount also raised its bid to $30 per share, valuing the company at $78 billion, but the board had concerns about financing. To signal confidence ahead of regulatory scrutiny, Netflix proposed a $5.8 billion breakup fee, among the largest in M&A history.

Until the deal was confirmed late Thursday night, one Netflix executive admitted they felt they only had a 50-50 chance of success.