Accounting in Real Life: The Warner Bros. Discovery Bidding War - and Why Paramount Is Pushing So Hard
- Nikki Winston, CPA
- Jan 13
- 10 min read
Updated: 3 days ago
Things have changed since the original posting date. I've updated this blog post with the latest and greatest information on the Warner Bros. Discovery, Netflix, and Paramount bidding war:
Netflix upped the ante and is now offering roughly $72 billion, all cash, for Warner Bros. Discovery’s film and streaming assets instead of the initial cash and stock offer. That includes DC Comics, the Harry Potter franchise, and HBO content like Succession and The White Lotus - a couple of my favorites. If approved by regulators, consider the Warner Bros. Discovery Netflix deal done.
One would look at the headlines and wonder why Warner Bros. Discovery is leaving $36 billion on the table by accepting $72 billion from Netflix and not $108 billion that Paramount was offering, but it’s more to it than the money ($36 BILLION though?! 😮💨).
The other key difference between the Netflix and Paramount offers is that Paramount wanted CNN and the legacy cable networks in addition to the film and streaming assets. That difference matters because those assets come with different economics and long-term impacts.
Next comes the post-merger integration phase. On paper, the companies become one. Operationally, they often remain two for a while (two sets of books, two Accounting teams, separate processes) as the M&A dust settles. This is where synergies surface, and friction does too.
Let's pop more popcorn - literally and figuratively.
Pop your popcorn, because this boxing match with Warner Bros. Discovery and Paramount is just getting started.
Before we talk about lawsuits, proxy fights, and competing bids between Netflix and Paramount for Warner Bros. Discovery, it helps to understand how Warner Bros. Discovery arrived at this moment in the first place. This story did not start with Netflix or Paramount - it actually started years ago, inside one of the most ambitious media mergers of the last decade.
The backstory: Warner Bros., AT&T, and the road to Warner Bros. Discovery
Go back to 2017 through 2019. That was the era of the AT&T–Time Warner merger, a deal designed to combine distribution with premium content. Warner Bros., HBO, and Turner networks became part of a telecom giant that believed ownership across the value chain would unlock long-term value. I experienced that period from the inside.
I had the opportunity to serve as the post-merger integration consultant during that time. For nearly a year and a half, my life followed a steady rhythm: travel to Manhattan during the week and back home to Atlanta on the weekends. I lived near Columbus Circle and worked alongside domestic and international finance teams as systems, reporting structures, and processes were rebuilt following the AT&T–WarnerMedia deal.
Post-merger integration is where the deal assumptions stop living in models and start showing up in the work. You are seeing the things that need to get done, how it gets done, assessing if that's the best way to do it, performing the tasks, documenting the tasks, tightening the processes, and transferring that knowledge to the teams who will own the work going forward in Atlanta. Every assumption made at the deal table eventually shows up as a meeting, a deliverable, or an M&A journal entry that has to be booked correctly by the GL team.
Inwas proud of the work I did and the impact I delivered. My team and agency gave me glowing reviews too. After all that work, in May 2021, AT&T announced it would separate WarnerMedia and combine it with Discovery. That transaction officially closed in April 2022, creating Warner Bros. Discovery. AT&T moved on. Warner Bros. Discovery inherited both the assets and the capital structure from the deal. Stay with me on this.
Why Warner Bros. Discovery is considering acquisition offers today
Since the spin-off, Warner Bros. Discovery has focused on stabilizing operations, managing debt, and generating consistent free cash flow. That context explains why strategic alternatives are even on the table.
This is a company shaped by prior deal decisions, and that history shows up clearly on the balance sheet Warner Bros. Discovery is carrying today. Understanding that makes the current acquisition interest easier to interpret. This moment reflects long-term capital structure realities rather than sudden opportunism.
#CareerConvos™️ note: I landed work like this because I was willing to bet on myself and position my experience clearly, especially on LinkedIn. I break that down inside my LinkedIn Profile Optimization Guide, which focuses on building a profile that attracts hiring manager conversations rather than “send me your resume” responses.
The setup: Where Warner Bros. Discovery and Paramount collide
Fast forward to now.
Warner Bros. Discovery explored strategic alternatives involving its studio and television assets. Netflix emerged with a bid that placed meaningful value on the studio business. Reported figures put Netflix’s offer at approximately $82.7 billion in enterprise value, translating to roughly $27.75 per share, depending on structure and assumptions.
The remaining piece of the business, the global television networks segment, became the point of debate.
Paramount, partnering with Skydance Media and led by David Ellison, countered with a higher all-cash offer reportedly around $108 billion, or approximately $30 per share.
At the center of the disagreement is valuation, and that valuation shapes the economics of the entire transaction.
Warner Bros. Discovery’s board has assigned a modest per-share value, estimated around $3–$4 per share, to its global television networks business. Paramount argues that this same business carries minimal value. That valuation gap is why David Ellison has demanded additional disclosures around how Warner Bros. Discovery valued this segment and how those assumptions were messaged in connection with Netflix’s offer.
Where the Warner Bros. Discovery and Paramount disagreement actually lives
Valuation debates can feel abstract until you translate them into balance-sheet consequences. Assigning value to the global television networks determines how much risk shifts to the acquiring entity after the deal closes. A higher headline price only matters if the post-transaction structure holds. That is where accounting becomes the filter.
Why leverage changes everything in the Warner Bros. Discovery and Paramount deal
This Warner Bros. Discovery and Paramount thing is playing out like a memoriable scene from a reality show. Paramount’s proposal would require assuming a substantial amount of debt relative to its size. On a pro forma basis, the transaction approaches seven times leverage, meaning debt would be roughly seven times earnings or cash flow.
At that level, free cash flow becomes the governing constraint. Interest expense becomes a central operating consideration. Advertising performance, content investment, and execution risk all carry immediate financial consequences.
Netflix operates from a materially different balance-sheet position, with significantly more scale and access to capital. Those differences influence how boards evaluate financing risk, regulatory posture, and long-term survivability.
How Warner Bros. Discovery shareholders are likely thinking
Shareholders weigh immediate value alongside long-term durability. A higher offer promises a larger upfront return. A structurally sound transaction preserves value over time. That tradeoff explains why disclosure, governance pressure, and board discipline matter so much in moments like this. Shareholders understand that deal success depends on more than price alone.
A personal reflection from inside post-merger reality
When I supported post-merger integration work during the AT&T–Warner transaction, I was not learning how to consult. I already knew how to do the work. What made that experience different was the environment and the responsibility that came with it.
I walked into rooms where senior accountants and accounting managers knew they had a last day on the calendar. At the same time, my role required me to learn their jobs, perform the work, document it, optimize the processes, and transfer that knowledge to the team in Atlanta at the CNN Center who would be taking over. That required building trust with them early.
As an introvert, I had to be intentional about conversations. I picked up the phone and called people I had never spoken to before. I walked into offices in the Columbus Circle building to get the information I needed so the work could move. I reassured people that I was not the reason their roles were ending, even though my presence represented change.
One of the most important parts of that work was reinforcing excellence. Even with an end date on the calendar, how you perform from now until that last day still matters.
That season also changed my life in practical ways. I walked everywhere. I stopped feeling like I needed a car. I experienced New York fully, including food trucks, Rockefeller Center at Christmas, and the everyday rhythm of the city. During that time, we were even evacuated due to a bomb scare tied to the mailroom, something I'd only see as breaking news on CNN. To actually live it and see the building I was rushed out of at 8:30 in the morning as the center of every news station and social media platform was crazy.
That experience shaped how I look at accounting, really all of controllership today.
Accounting decisions move people, teams, and organizations. Being inside that reality stays with you. Accountants have access to a ton of information that we can use to tell a crisp business story that leadership will leverage for informed decision making.
This situation reflects years of capital structure decisions, post-merger integration outcomes, and balance-sheet realities converging in real time. Warner Bros. Discovery’s options today are shaped by the deals that came before it, and accounting frames how those options are evaluated.
That is what accounting looks like in real life.
FAQs: The Warner Bros. Discovery, Netflix, and Paramount Deal
Why did AT&T spin off WarnerMedia?
AT&T reassessed its media strategy and chose to separate WarnerMedia, leading to the creation of Warner Bros. Discovery.
Why is Paramount willing to pay more for Warner Bros. Discovery than Netflix?
Paramount appears willing to pay a higher price for Warners Bros. Discovery because it is pursuing control of Warner Bros. Discovery’s assets under an all-cash structure and is signaling deal certainty to shareholders. By offering approximately $30 per share compared to Netflix’s roughly $27.75 per share, Paramount is emphasizing immediate value and attempting to differentiate its proposal on closing certainty and regulatory posture.
At the same time, Warner Bros. Discovery’s board is weighing whether that higher price introduces greater balance-sheet risk once the deal closes, particularly given the amount of debt Paramount would need to assume.
Why does Paramount claim its deal would be easier to approve than Netflix’s?
Paramount has suggested that its transaction with Warner Bros. Discovery may face fewer regulatory challenges because it does not already dominate the streaming market to the same degree as Netflix. This argument is designed to position Paramount’s offer as more likely to close without prolonged regulatory scrutiny.
That framing is strategic. Regulatory risk affects deal timelines, financing costs, and shareholder confidence. However, regulatory approval is not guaranteed for any transaction of this size, and boards still have to evaluate the financial durability of the combined company after approval.
Why is David Ellison involved in the Warner Bros. Discovery and Paramount deal?
Warner Bros. Discovery and Paramount (and Netflix) are in the bidding war, and David Ellison is the CEO of Skydance Media, which has agreed to combine with Paramount Global pending regulatory approval. As the expected future leader of Paramount, Ellison is driving the strategic direction of the company and advocating for acquisitions he believes strengthen Paramount’s long-term position. His involvement reflects leadership alignment and future control rather than day-to-day operational management at Warner Bros. Discovery.
What is leverage in accounting terms, and why does it matter so much in this deal?
In accounting and finance, leverage refers to how much debt a company carries relative to its earnings or cash flow. In the case of Warner Bros. Discovery and Paramount, when analysts describe this transaction as approaching seven times leverage, they mean that the combined company’s debt would be roughly seven times its annual earnings or free cash flow.
High leverage limits flexibility. Interest expense becomes a permanent use of cash. Free cash flow must first cover debt service before it can support content investment, growth initiatives, or operational improvements. In media businesses, where revenue can fluctuate, leverage materially increases risk, which is why boards treat it as a central decision factor.
Why would Warner Bros. Discovery reject Paramount’s higher all-cash offer?
Warner Bros. Discovery and Paramount merging in an all-cash offer over $100 billion dollars sounds like a no-brainer. However, boards evaluate offers based on risk-adjusted value, not price alone. Although Paramount’s offer is higher on a per-share basis, it introduces significantly more leverage relative to Paramount’s size. That leverage affects the combined company’s ability to operate, invest, and respond to downturns. Warner Bros. Discovery’s board appears to be weighing whether a slightly lower price paired with a stronger balance-sheet outcome ultimately better serves shareholders over
time.
Why is the valuation of Warner Bros. Discovery’s TV networks causing a lawsuit?
The dispute with Warner Bros. Discovery and Paramount centers on Warner Bros. Discovery’s global television networks business, which includes its legacy linear cable networks. The board has assigned this segment a modest per-share value, estimated around $3 to $4 per share. Paramount has argued that this business carries minimal value and that shareholders need more transparency around how Warner Bros. Discovery reached its valuation.
Because that valuation affects how competing offers are compared, Paramount has demanded additional disclosures and escalated the matter to court.
Does the court decide which company acquires Warner Bros. Discovery?
No. Courts do not choose winning bidders. The court’s role is to assess whether Warner Bros. Discovery has met its disclosure and fiduciary obligations to shareholders. Litigation can delay a transaction, require additional disclosures, and influence shareholder perception, but the ultimate decision rests with the board and shareholders.
What accounting standard applies to a deal like this?
A transaction of this nature falls under ASC 805, Business Combinations. Under ASC 805, the acquiring company records the acquired assets and liabilities at fair value on the acquisition date. Any excess of the purchase price over the fair value of identifiable net assets is recorded as goodwill.
In highly leveraged transactions, goodwill becomes especially sensitive to future performance, because weaker-than-expected cash flows can trigger impairment reviews. That accounting reality is one of the reasons leverage and free cash flow matter so much in this deal.
Why does free cash flow matter more than earnings in acquisition decisions?
Free cash flow reflects the cash available after operating expenses and capital investments. In leveraged acquisitions, free cash flow determines whether the company can service debt, invest in the business, and maintain financial stability. Earnings can be influenced by accounting estimates. Cash cannot. Boards prioritize free cash flow because it directly affects survivability after the transaction closes.
Comments