The whopping sum Netflix will have to pay if Warner Bros. deal falls through. Check what's the clause

Netflix-Paramount battle reshapes Hollywood media

Netflix’s $72 billion acquisition of Warner Bros. Discovery comes with one of the largest breakup fees in corporate history — a $5.8 billion penalty the streaming giant would have to pay if the deal collapses or fails to win regulatory approval.

At 8% of the deal’s equity value, the fee far exceeds the average for large M&A transactions, typically around 2.4% of total deal value in 2024, according to Houlihan Lokey. The multibillion-dollar pledge underscores both Netflix’s confidence and how intense the bidding war has become for the iconic Hollywood studio.

The Netflix–Warner Bros. deal has sparked a fierce contest for control of the studio. On Monday, Paramount launched an all-cash tender offer valued at $108.4 billion — a 139% premium over Warner Bros. Discovery’s September stock price — in a direct challenge to Netflix’s $83 billion bid.

Unlike Netflix, Paramount’s proposal includes Warner Bros.’ cable networks such as CNN, TNT, TBS and Discovery, alongside its own assets including Paramount Pictures, CBS, MTV and Comedy Central. Paramount argues its offer provides greater regulatory certainty and fewer antitrust hurdles, while maintaining theatrical releases — a critical concern for Hollywood’s creative community.

Paramount’s CEO David Ellison, son of billionaire Larry Ellison, has personally backed the bid, with support from sovereign wealth funds from Saudi Arabia, Qatar and Abu Dhabi, as well as Affinity Partners, founded by Jared Kushner. “WBD shareholders deserve an opportunity to consider our superior all-cash offer,” Ellison told CNBC.

Netflix faces a $5.8 billion breakup fee if the acquisition does not close, signalling the company’s determination to see the deal through. Warner Bros., meanwhile, is on the hook for a $2.8 billion reverse breakup fee if its shareholders reject the Netflix transaction, or if it accepts a rival bid.

Paramount, too, has sweetened its proposal with a breakup fee of $5 billion, more than double the initial offer, highlighting the high stakes involved. These sums place the Netflix–Warner Bros. deal among the most expensive contingencies in M&A history.

For comparison, some of the biggest breakup fees historically include:

Netflix’s exposure, both in absolute terms and as a percentage of the deal, rivals these historic transactions, reflecting how aggressively the streaming giant is pursuing its Hollywood ambitions.

Analysts caution that while Netflix currently leads the bidding war, the deal remains far from final. Ross Benes of eMarketer said, “Netflix is in the driver’s seat but there will be twists and turns before the finish line… The battle could become prolonged.”

Hollywood is watching closely: the combined assets could reshape the entertainment landscape, with Netflix gaining control of HBO Max, Warner Bros. films, and major sports rights. Yet Paramount’s all-cash offer, focus on theatrical releases, and expanded media portfolio make the fight anything but over.

Warner Bros. Discovery’s shares jumped over seven percent on Monday, while Netflix shares fell more than three percent, reflecting investor nerves over the bidding drama.