Ted Sarandos: Netflix ‘knew right away’ it would drop WBD deal after Paramount increased bid

It all happened quickly last Thursday.

Paramount submitted a sweetened offer for Warner Bros. Discovery, increasing its initial bid from $30 per share to $31 per share. Three days later, the WBD board deemed that offer “superior” to the deal it had already agreed to with Netflix. And hours later, Netflix announced it would not exercise the matching rights under its initial deal with WBD, officially making Paramount the future owner of WBD, pending regulatory approval.

The speed with which the future of WBD flipped from Netflix to Paramount raised some eyebrows, especially considering Netflix CEO Ted Sarandos was in Washington, D.C., when all of this went down. But in his first interview since dropping out of the bidding war for WBD, Sarandos reiterated Netflix’s discipline in how much the company was willing to pay for WBD.

“We knew right away, when we got the notice on Thursday, that they had a superior offer and the details of that deal,” Sarandos told Bloomberg’s Lucas Shaw. “We knew exactly what we were going to do.”

In other words, Sarandos knew that Netflix would drop out. In the weeks leading up to Paramount’s final bid, the Netflix CEO had alluded to his company’s history of not overpaying for assets. And in speaking with Bloomberg, Sarandos described how his company’s initial deal, agreed to in December, was its “final” offer.

“Remember, the deal we closed on December 5th was last and final. We presented it as last and final. It was,” Sarandos said.

To the contrary, Paramount continued to assert it had not yet issued its “best and final offer” to WBD, even after the Netflix deal was announced. That’s what led Netflix to take the unprecedented step of giving WBD a one-week period to negotiate with Paramount for its best offer.

Sarandos says this was the best way to end the “uncertainty” in the market.

“Go back to the seven-day window, the waiver. It’s pretty unusual. We did it because they kept creating uncertainty in the market — not just in the stock market, in the market generally. People were making decisions based on trying to figure out how the outcome of this deal was gonna be. We wanted to eliminate uncertainty as quickly as we could,” Sarandos told Bloomberg. “I said, ‘Look, take seven days, figure out if you have a real offer, and if you do, we have a matching right.’ Go figure out if you have another offer. What we want is a hard date on the shareholder vote. So, that’s what happened.”

Some, however, suggest that Netflix took Paramount’s aggressive maneuvering as an exit ramp to get out of a deal that investors didn’t agree with, which had sent Netflix stock tumbling in the months since a deal was announced. Sarandos pushed back on this premise, saying, “We’ve taken short-term hits for long-term gains in our business many times in our 20 years as a public company. And they worked out pretty well.”

Given that Paramount only increased its bid by $1 per share, it suggests that Netflix believed the margin between what it considered a good deal and a bad one was pretty slim. Prior to Paramount’s final offer, analysts suggested that Netflix would have no issues matching a marginal increase from Paramount, but might balk at an offer that raised the per-share cost by a few dollars or more.

It turns out that Netflix was ready to balk at seemingly any increase, which certainly lends some credence to the theory that the streamer simply wanted out of the deal, no matter what Sarandos says on the record.