Netflix's Co-CEO Explains Why He Quit the Warner Bros. Fight: 'They Were Irrational'

 

# Netflix's Co-CEO Explains Why He Quit the Warner Bros. Fight: 'They Were Irrational'

**Published: March 2, 2026**

You know that feeling when you're in an auction, the bidding gets way higher than you expected, and you just have to walk away?

That's exactly what happened with Netflix and Warner Bros. Discovery. But according to Netflix co-CEO Ted Sarandos, it wasn't just about the money. It was about dealing with a rival he calls "irrational."

In his first interview since losing the bidding war, Sarandos didn't hold back. He described Paramount's offers as "unusual, irrational, whatever words you want to use in that" . And he offered a fascinating glimpse into the political dynamics that ultimately gave the Ellison family—with their deep ties to President Trump—a decisive advantage.

Let me walk you through exactly why Netflix walked away, what Sarandos said about the process, and why this might actually be the best thing that could have happened to the streaming giant.

## The Short Version: What You Need to Know

**What happened:** Netflix had an $82.7 billion deal to buy Warner Bros. Discovery's studio and streaming assets . Paramount Skydance, backed by the Ellison family, launched a hostile bid for the entire company. When Paramount raised its offer to $31 per share, Warner's board declared it "superior." Netflix had four business days to match. They declined within hours .

**The financial math:** Paramount's winning bid valued Warner at about **$110 billion including debt** . That's roughly 13 times Warner's EBITDA—well above what Paramount itself is worth on the same basis .

**Why Netflix walked:** Sarandos and co-CEO Greg Peters called the deal a "nice to have" at the right price, not a "must have" at any price . Sarandos later described Paramount's tactics as "irrational" and suggested they relied on political pressure because it's "cheaper to make noise" .

**The political angle:** The Ellison family has deep ties to President Trump. David Ellison, Paramount's CEO, and his father Larry (Oracle's billionaire founder) positioned themselves as allies of the administration. Sarandos noted that once it became clear Netflix wasn't in the "CNN business," Trump's interest in blocking their deal faded .

**The stock reaction:** Netflix shares surged **more than 10%** the day they walked away . Investors clearly approved.

## The Numbers That Matter: Why $82.7 Billion Became $110 Billion

Let's start with the raw math, because it explains a lot about why Netflix said no.

**Table 1: The Bidding War by the Numbers**

| **Metric** | **Netflix Offer** | **Paramount Offer** |

| :--- | :--- | :--- |

| Per share price | $27.75 | $31.00 |

| Total equity value | ~$82.7 billion | ~$110 billion (including debt) |

| What it bought | Studio + streaming assets only | Entire company (including CNN, cable networks) |

| Breakup fee (if deal fails) | Would receive $2.8 billion from Warner | Agreed to pay Warner's $2.8B fee to Netflix + $7B regulatory termination fee |

| EBITDA multiple | ~9-10x | ~13x |

*Sources: *

When Warner's board declared Paramount's $31 offer "superior" on February 26, Netflix had four business days to respond . They took less than two hours .

Sarandos later explained the thinking: "We had a very tight range that we'd be willing to pay and made that offer back when we closed this deal. We hadn't moved much from that, except for moving to cash, which served to move the deal faster. I'm happy where we got in and happy where we got out. We knew right away, when we got the notice on Thursday that they had a superior offer and the details of that deal. We knew exactly what we were going to do" .

## 'Irrational' Bidding: Sarandos Speaks His Mind

In his Bloomberg interview, Sarandos was asked about dealing with an "unusual" buyer. His response was telling.

**"Unusual, yeah, unusual, irrational, whatever words you want to use in that,"** he said .

He explained that Paramount tried to apply political pressure early in the process, suggesting it would spook Warner shareholders. But Sarandos saw through it.

**"It's a lot cheaper to make noise than it is to actually raise your bid,"** he said. "So they tried that path first. Once it was clear that we weren't in the CNN business, it was a lot less interesting. He didn't care that much more about our deal" .

That "he" is almost certainly President Trump, who has long targeted CNN. By agreeing to spin off CNN in its deal, Netflix essentially removed itself from Trump's crosshairs. But for Paramount—which was buying the whole company, CNN included—the political dynamics were entirely different.

**The result:** Sarandos suggested that Paramount's eventual winning bid wasn't just financially aggressive. It was driven by factors beyond pure economics. "It'll be fascinating to see the next steps," he said. "I have been on the record a lot in the last two weeks talking about what I think the future looks like. I'm confident in our future that we're not impacted by all that. In fact, maybe it's to our advantage. But I hope I'm wrong for the sake of the industry" .

## The Political Chess Game: Trump, the Ellisons, and CNN

You can't understand this deal without understanding the politics.

**The Ellison family** has cultivated close ties to President Trump. Larry Ellison, the Oracle billionaire, is a Trump ally. His son David runs Paramount Skydance. When Trump addressed Congress for his State of the Union speech on February 24, David Ellison was in the audience .

**The Trump factor:** Trump has repeatedly attacked CNN, calling its leadership "corrupt or incompetent" and saying the network should be sold. Under Netflix's deal, CNN would have been spun off as a separate public company. Under Paramount's deal, CNN stays inside the combined giant—now under the same roof as CBS, which has already seen editorial shifts under Skydance ownership .

**Bari Weiss's role:** Free Press founder Bari Weiss was installed as editor-in-chief of CBS News after Skydance's takeover, a move seen as appealing to more conservative viewers. Critics warn similar changes could come to CNN if the deal closes .

**Democratic backlash:** Senator Elizabeth Warren didn't mince words. She called the potential merger an "antitrust disaster" and warned that "a handful of Trump-aligned billionaires are trying to seize control of what you watch and charge you whatever price they want" .

Mike Proulx at Forrester Research summed it up: "Politics are playing an outsized role in this deal, and they've been on Paramount's side from the get-go" .

## Why Investors Cheered Netflix's Retreat

Here's the most telling signal of all: Netflix stock jumped **more than 10%** the moment they walked away .

The stock had fallen about 18% since the Warner deal was announced in December . Investors never loved the idea. They worried about the massive debt, the integration challenges, and the distraction from Netflix's core business.

**Analyst reactions** were overwhelmingly positive:

- **HSBC analysts** called it "a positive turn of events in our view, as we believe NFLX's withdrawal from the race will leave it free to refocus on its business, while its closest competitors grapple with long and distracting regulatory approval and merger integration processes, and with PSKY saddled with sizable deal debts" .

- **Ben Barringer** at Quilter Cheviot said the move was a "tick in the box" for discipline. "What you want from a management team is an ability to look at acquisitions, value them, pay what they think is a fair price, but to not overpay" .

## The $2.8 Billion Consolation Prize

Netflix doesn't walk away empty-handed. Paramount agreed to pay the **$2.8 billion breakup fee** Warner would have owed Netflix . That's real money—about what Netflix spends on content in a month and a half.

Plus, Netflix now avoids years of regulatory battles, integration headaches, and the massive debt load that Paramount is taking on. The company plans to invest **$20 billion in content this year** and resume its share repurchase program .

## The Paramount Challenge: Did They Overpay?

Now the pressure shifts to Paramount. Their deal values Warner at about **13 times EBITDA**—well above what Paramount itself is worth on the same basis .

Dan Coatsworth at AJ Bell put it bluntly: "Paramount was the streaming market laggard, and it needs Warner Bros' content and capabilities to play catch-up. It will need more than Harry Potter for the deal to work its magic and enable Paramount to fight off Netflix, Disney and Amazon in the streaming wars" .

Ross Benes at Emarketer was even more skeptical: "WBD's largest asset is declining, and the company is still under debt from its last failed merger. But this deal is more about Ellison taking over Hollywood and ego than it is about good business sense" .

## What Netflix Does Next

With the Warner saga behind them, Netflix is getting back to basics.

**The $20 billion content plan:** That's roughly what Netflix spends annually on films and series—enough to keep the pipeline full and subscribers happy .

**Share buybacks:** Netflix plans to resume repurchasing its own stock, a signal that management believes shares are undervalued .

**Organic growth:** Sarandos and Peters emphasized that "Netflix's business is healthy, strong and growing organically, powered by our slate and best-in-class streaming service" .

## Frequently Asked Questions

**Q: Why did Netflix walk away from the Warner deal?**

A: Netflix's co-CEOs said the price required to match Paramount's $31-per-share offer was "no longer financially attractive." They called the deal a "nice to have" at the right price, not a "must have" at any price .

**Q: What did Ted Sarandos say about Paramount?**

A: In a Bloomberg interview, Sarandos called Paramount's tactics "unusual, irrational" and suggested they relied on political pressure because it's "cheaper to make noise" .

**Q: How did investors react?**

A: Netflix stock surged more than 10% the day they walked away, indicating strong approval of the decision .

**Q: Does Netflix get anything for walking away?**

A: Yes. Paramount agreed to pay the $2.8 billion breakup fee Warner would have owed Netflix .

**Q: What role did politics play?**

A: A significant one. The Ellison family has deep ties to President Trump, and Sarandos noted that once it became clear Netflix wasn't in the "CNN business," Trump's interest faded . Critics warn that CNN could face editorial shifts under new ownership .

**Q: What's next for Netflix?**

A: Netflix plans to invest about $20 billion in content this year and resume share repurchases. They're returning to organic growth .

**Q: Did Paramount overpay?**

A: Some analysts think so. The deal values Warner at about 13 times EBITDA—well above what Paramount itself is worth. Critics call it more about "ego" than business sense .

## The Bottom Line

Here's what I keep coming back to.

Netflix wanted Warner Bros. They spent months negotiating, lined up financing, and had a deal in place. But when the price got too high—and when the political dynamics shifted decisively in favor of a rival with deeper pockets and better connections—they walked away.

**Ted Sarandos's message** was clear: discipline matters more than ego. "We believe we would have been strong stewards of Warner Bros.' iconic brands," he said. "But this transaction was always a 'nice to have' at the right price, not a 'must have' at any price" .

**The stock market agreed.** A 10% surge is a pretty emphatic vote of confidence.

**The irony** is that Netflix may have won by losing. They pocket $2.8 billion, avoid years of regulatory headaches, and get to watch their biggest competitors struggle with massive debt and integration challenges.

Sometimes the best deal is the one you don't make. Netflix just proved that.

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*Got thoughts on the Warner bidding war? Think Netflix made the right call? Drop a comment and let me know.*