Netflix just sweetened its $72B US bid for Warner Bros. Here's how the deal happened

Netflix will pay for Warner Bros. Discovery's streaming and studio division entirely in cash to edge out its rival Paramount — the latest chapter in a months-long saga that, once concluded, could significantly change the global entertainment industry.

The streaming giant announced the move on the same day as its fourth quarter earnings. The $72-billion US equity value deal, amounting to $27.75 US per share, "expedites the timeline to a WBD shareholder vote and provides greater certainty of value that will be delivered at closing," Netflix wrote in a letter to investors on Tuesday.

Netflix and Paramount have been duelling over the deal for months. While Netflix is vying for the company's studio business and streaming catalogue, Paramount wants to acquire the entire company — which would include the likes of CNN and the Discovery+ streaming channel.

Geetha Ranganathan, a senior media analyst at Bloomberg Intelligence, questioned whether the deal was a "must-have" or a "nice-to-have" for Netflix.

The deal is largely seen as critical for Paramount Skydance under the helm of new CEO David Ellison, and less so for Netflix, said Ranganathan. However, Netflix's subscriber growth has slowed, worrying investors, and it's now relying on engagement to boost its value.

To that end, Warner Bros.' deep catalogue — which includes major franchises like Harry Potter, TV hits like Friends, The Sopranos and Game of Thrones, and classic films like Citizen Kane and Casablanca — would help Netflix scale its business "dramatically," said Ranganathan.

So how did we get here, and what happens next?

Months after Warner Bros. Discovery announced that it will eventually split itself into two companies, with Warner Bros. handling the studio and film/TV library and Discovery Global handling properties like CNN and Discovery+, the company signals mid-month that it's exploring a potential sale of the business.

Paramount's initial bid to buy the entire company for nearly $24 US a share is reportedly rejected.

Around the same time, Netflix misses its third quarter earnings targets thanks to a dispute with Brazilian tax authorities. Investors remain worried about the streaming giant's capacity to sustain long-term growth.

During that earnings call, Netflix CEO Ted Sarandos — who has long insisted that the streamer is a builder, not a buyer — says the company would be open to "selective" mergers and acquisitions, but isn't interested in buying legacy media networks.

At the end of the month, reports emerge that Netflix is exploring a bid for Warner Bros., the streaming and studio division of WBD.

Netflix then tries to sweeten its bid for Warner Bros. by promising that the company will keep releasing the studio's movies in theatres, according to Bloomberg News.

Netflix, by virtue of its business model, has long maintained that people would rather watch movies at home than in theatres. But it's had to concede to theatrical windows in recent years to appease filmmakers and to qualify for the Oscars.