Why did Netflix back away from its deal to acquire Warner Bros?

Netflix stunned the entertainment world this week when it declined to raise its bid for Warner Bros. Discovery, paving the way for Paramount Skydance to win ownership of the Hollywood studio.

At the time, Netflix co-CEOs Ted Sarandos and Greg Peters said they were undergoing financial discipline. Now reports in Bloomberg provide more details about why Netflix executives are backing out of the bidding war they appeared to have won back in December.

For one thing, shareholders in the streaming giant seemed highly skeptical that buying a Hollywood studio was the right move — Netflix’s stock price has fallen 30% since the acquisition was announced, while the subsequent announcement of its decline sent Netflix shares up nearly 14%.

Netflix, on the other hand, reportedly dropped its commitment to the deal after Paramount made an increased bid and appeared ready to go several more rounds in the bidding war.

By the time Sarandos met with Trump administration officials on Thursday, he may have already decided to concede. In fact, since President Donald Trump had previously warned him not to overpay, Sarandos reportedly told him: “I took your advice.”

Meanwhile, employees at Warner Bros. are now concerned about layoffs at major studios and conservative political pressures on CNN.