One of the most hotly contested business deals of recent years has come to an end, and at first glance, Netflix (NFLX 0.73%) lost. The streaming giant spent most of the past three months trying to buy the Warner Bros. studio from its parent company, Warner Bros. Discovery (WBD 1.33%).
But Netflix got outbid by a rival. On Feb. 27, Paramount Skydance (PSKY 1.36%) announced that it is acquiring the entire Warner Bros. Discovery company for $31 per share in cash. The deal is valued at $110 billion in enterprise value.
Here's the good news for Netflix shareholders: missing out on this deal might be a blessing in disguise. Let's look at a few reasons why.
Image source: Getty Images.
Investors hated this deal from the beginning
Netflix announced on Dec. 5, 2025 that it had a deal in place to buy the Warner Bros. studio for $27.75 per share with a total enterprise value of $82.7 billion. The deal was intended to help Netflix expand its production capacity by acquiring Warner Bros. studios like HBO. It would also have given Netflix ownership of Warner Bros.' extensive catalog of iconic TV and movie intellectual property (IP) like The Wizard of Oz, Harry Potter, and the DC Universe.
However, instead of seeing this acquisition as a value-adding merger, investors turned skeptical. There were worries that Netflix was paying too much and taking on too much debt to buy another media company's IP instead of creating its own, and that the deal might face regulatory scrutiny.
The streaming platform's share price plummeted by about 24% between the deal announcement date and Feb. 23. As the deal started to look less likely, with Paramount gaining momentum in making a richer offer for WBD, Netflix stock rallied. Ever since Feb. 23, NFLX is up about 30%. The company's investors seem to be breathing a sigh of relief that they're not going to get stuck with Warner Bros.
NASDAQ: NFLX
Key Data Points
Paramount debt got cut to junk
The new owner of Warner Bros. Discovery is taking on $54 billion of debt to complete the deal. And ratings agencies are noticing. On Monday, March 2, Fitch Ratings downgraded Paramount Skydance's debt rating to BB-plus, which is below investment grade ("junk bond" status).
Fitch also put Paramount on "Rating Watch Negative" because of uncertainty about the Warner Bros. Discovery acquisition, including "increased event risk and transaction complexity." The Paramount-Warner deal could turn out to be a lot more costly than expected, and there are big financial risks.
Netflix might be better off avoiding this deal, instead of overpaying for assets that don't turn out to deliver solid ROI. The streaming service's stock is up 5.2% year to date, strongly outperforming Paramount and Warner Bros. Discovery.
Even if it dodged a lot of expensive risks by not getting the Warner Bros. deal, Netflix is still facing big competition from YouTube, owned by Alphabet. According to the latest Nielsen Media Distributor Gauge report, Netflix represented 8.8% of TV viewing in January 2026, ranking third behind first-place YouTube (12.5%) and second-place Walt Disney (DIS 1.34%) (11.9%).
The streaming wars might not be over. Unless Netflix has another massive global hit franchise like KPop Demon Hunters waiting in the wings, I wouldn't rate this stock as a strong buy.
