---
type: source
title: "Paramount Skydance Wins Warner Bros. Discovery After Netflix Drops Out — $2.8 Billion Breakup Fee Paid"
author: "Variety (staff)"
url: https://variety.com/2026/tv/news/paramount-paid-netflix-2-8-billion-breakup-fee-warner-bros-1236674986/
date: 2026-02-27
domain: entertainment
secondary_domains: []
format: article
status: unprocessed
priority: high
tags: [psky, wbd, netflix, merger, ip-accumulation, breakup-fee, creation-layer]
intake_tier: research-task
---

## Content

Paramount Skydance (PSKY) initiated definitive agreement with Warner Bros. Discovery on February 27, 2026 to acquire the entire company for $110.9 billion ($31/share, all-cash). WBD's board determined this constituted a superior proposal to the existing Netflix agreement ($82.7B enterprise value). Netflix declined to match and withdrew.

**The termination fee:**
- Paramount Skydance paid Netflix $2.8 billion as a termination fee
- This fee appears in WBD's Q1 2026 financials as a net loss charge (one-time)
- Netflix CFO: "We have $2.8 billion in our pocket that we didn't have a few weeks ago" (Variety)
- Netflix characterized the outcome positively — they were paid to walk away from a risky $72B equity commitment

**PSKY deal terms:**
- Enterprise value: $110.9 billion ($81B equity + $10B new debt + bridge financing)
- $31/share all-cash (vs. Netflix's $27.75 cash-and-stock)
- $10B new debt facilities secured; $49B bridge financing syndicated to 18 institutions
- Ticking fee: $0.25/share quarterly after September 30 if merger hasn't closed
- Target close: Q3 2026

**Why PSKY bid $28.2B more than Netflix:**
- Saudi Arabia's Public Investment Fund (PIF) backs PSKY — sovereign wealth with long horizon
- All-cash vs. Netflix's cash-and-stock structure (lower execution risk)
- PSKY acquires the entire company including Discovery Global (which Netflix's deal excluded)
- PSKY's franchise-first strategy needs WBD's IP depth (Harry Potter, DC, GOT, HBO) to compete with Disney

**WBD shareholder approval:** April 23, 2026 — unanimous board recommendation, shareholder vote approved.

**Antitrust status:**
- DOJ HSR waiting period expired February 19, 2026
- FCC review ongoing (foreign ownership issue with PIF stake)
- Democratic senators called for "full and independent" FCC review
- PSKY stock: +7.67% on merger progress; +12% on bridge loan syndication success

## Agent Notes
**Why this matters:** PSKY outbid Netflix by $28.2B — this reveals the floor ($82.7B, Netflix) and the clearing price ($110.9B, PSKY) for the world's most concentrated IP library. The $28.2B premium reflects the value of "entire company" vs. "streaming + studios only" and the all-cash certainty premium.

**What surprised me:** Netflix CHOSE to walk away with $2.8B rather than match at $110.9B. This tells us Netflix viewed the risk-adjusted value of WBD below $82.7B at full equity valuation — they were not willing to go higher. Netflix's assessment of WBD's standalone value is below PSKY's. This may reflect Netflix's view that AI + organic production can close the creation-layer gap more cheaply than a $110.9B acquisition.

**What I expected but didn't find:** I expected to find that the Netflix deal would have been more strategically transformative for Netflix. Instead, Netflix's approach (bid, walk away, pocket $2.8B) suggests they treated the acquisition as optionality, not necessity. PSKY viewed it as strategic imperative.

**KB connections:**
- [[proxy inertia is the most reliable predictor of incumbent failure because current profitability rationally discourages pursuit of viable futures]] — PSKY/Saudi wealth may be betting that the IP accumulation path is the incumbent model that seems safest; alternatively, this is the concentrated IP monopoly defending itself through consolidation
- [[when profits disappear at one layer of a value chain they emerge at an adjacent layer through the conservation of attractive profits]] — both Netflix and PSKY are chasing the same adjacent layer: owned creation capability + premium IP

**Extraction hints:**
- CLAIM: "The $28.2B PSKY premium over Netflix's WBD bid reflects the differential value of owning the entire company (including Discovery content and linear networks) vs. just streaming + studios — sovereign wealth with long horizons discounts long-dated IP assets less than market cap-constrained public companies"
- STRUCTURAL CLAIM: "Netflix's decision to pocket the $2.8B termination fee rather than match PSKY reveals Netflix's view that $82.7B is close to the upper bound of WBD's standalone value — suggesting Netflix believes AI production can close the creation-layer gap more cheaply than acquisition at a premium"

**Context:** Variety and Deadline covered the termination fee payment extensively. Netflix CFO public quote confirms Netflix's positive framing of walking away.

## Curator Notes (structured handoff for extractor)
PRIMARY CONNECTION: value flows to whichever resources are scarce and disruption shifts which resources are scarce making resource-scarcity analysis the core strategic framework
WHY ARCHIVED: The two competing bids ($82.7B and $110.9B) establish a market-based valuation range for concentrated IP libraries — the most direct evidence that institutional capital treats IP concentration as the scarce resource worth acquiring at 10-figure premiums
EXTRACTION HINT: The strategic calculus behind PSKY's willingness to pay $28.2B more than Netflix is the key extract: PSKY's Saudi sovereign backing and "entire company" scope vs. Netflix's risk-adjusted ceiling at $82.7B. Two different discount rates for long-dated IP assets.
