⚠ Paramount and WBD Become One SupplierModerate threat

Netflix (NFLX) — threat to the moat

By losing Warner Bros. to Paramount, Netflix helped create a larger studio that it both licenses from and competes with.

Netflix tried to buy Warner Bros. and lost it to Paramount Skydance, which paid Netflix a $2.8 billion termination fee on WBD's behalf1. The result is that two of the studios Netflix licenses from and competes with are combining.

The Warner Bros. contest ($bn)72.0Netflix equity value offered2.8Termination fee received110Paramount deal as reportedNetflix 8-Ks December 2025 and February 2026; stockanalysis news
Netflix took the fee; Paramount took the studio.

The combined group would include the Warner Bros. studios, HBO and HBO Max alongside Paramount. Paramount has been reported reaching a settlement with states on its $110 billion deal for WBD2. It would have more reason to keep its best shows on its own services and more leverage when licensing the rest.

Netflix's exposure is real: it licenses about 20 Paramount shows3, and licensed content is still the larger part of its amortization4.

Netflix's own offer shows what it thought the prize was worth. It offered $27.75 a share, $23.25 in cash and $4.50 in Netflix stock, before moving to all cash56, and expected at least $2 billion to $3 billion of annual cost savings by the third year7. Those savings now accrue to Paramount instead.

What matters is whether Netflix's licensing costs rise faster than its revenue. Licensed amortization grew 13.3% in 2025 against revenue growth of 15.9%8; if it overtakes revenue growth after the merger closes, the lost deal will have cost more than the fee repaid.

References
  1. Reportedand lost it to Paramount Skydance, which paid Netflix a $2.8 billion termination fee on WBD's behalf.
    Netflix Form 8-K of 27 February 2026, Item 1.02 - termination of the Warner Bros. agreement and receipt of the $2.8 billion termination fee. — February 2026 · publ. 27 February 2026 · source ↗
  2. ReportedParamount has been reported reaching a settlement with states on its $110 billion deal for WBD.
    Netflix (NFLX) market data - $71.15 a share at the close on 25 September 2026, market cap $296.24B, 52-week range $65.08-$124.86, 51 analysts with a $92.93 target; analyst downgrades on YouTube's share of viewing; Paramount's settlement with states on its $110B WBD deal. — September 2026 · publ. 25 September 2026 · source ↗
  3. ReportedNetflix's exposure is real: it licenses about 20 Paramount shows, and licensed content is still the larger part of its amortization.
    Netflix fourth-quarter 2025 shareholder letter, Form 8-K exhibit 99.1 - 325 million paid memberships, 2026 guidance, advertising revenue, named competitors, content licensing and the pause in buybacks. — Q4 2025 · publ. 20 January 2026 · source ↗
  4. ReportedNetflix's exposure is real: it licenses about 20 Paramount shows, and licensed content is still the larger part of its amortization.
    Netflix Form 10-K for fiscal 2025 - content assets, amortization and content obligations notes. — FY2025 · publ. 23 January 2026 · source ↗
  5. ReportedIt offered $27.75 a share, $23.25 in cash and $4.50 in Netflix stock, before moving to all cash, and expected at least $2 billion to $3 billion of annual cost savings by the third year.
    Netflix press release 'Netflix to acquire Warner Bros.', Form 8-K exhibit 99.1 - price per share, equity and enterprise value, and cost savings. — December 2025 · publ. 5 December 2025 · source ↗
  6. ReportedIt offered $27.75 a share, $23.25 in cash and $4.50 in Netflix stock, before moving to all cash, and expected at least $2 billion to $3 billion of annual cost savings by the third year.
    Netflix press release of 20 January 2026, Form 8-K exhibit 99.1 - the amended all-cash Warner Bros. agreement. — January 2026 · publ. 20 January 2026 · source ↗
  7. ReportedIt offered $27.75 a share, $23.25 in cash and $4.50 in Netflix stock, before moving to all cash, and expected at least $2 billion to $3 billion of annual cost savings by the third year.
    Netflix press release 'Netflix to acquire Warner Bros.', Form 8-K exhibit 99.1 - price per share, equity and enterprise value, and cost savings. — December 2025 · publ. 5 December 2025 · source ↗
  8. Moat Explorer calcLicensed amortization grew 13.3% in 2025 against revenue growth of 15.9%; if it overtakes revenue growth after the merger closes, the lost deal will have cost more than the fee repaid.
    Moat Explorer calculation from Netflix's reported financial statements, shareholder letters and market data ($ millions unless stated). Content amortization / revenue: 14,026.1 / 31,615.6 = 44.4% (2022); 14,197.4 / 33,723.3 = 42.1% (2023); 15,301.5 / 39,001.0 = 39.2% (2024); 16,422.2 / 45,183.0 = 36.3% (2025); Q2 2026 4,311.3 / 12,559.9 = 34.3%. Revenue growth 2022-2025: 45,183.0 / 31,615.6 - 1 = 43%; 2025 45,183.0 / 39,001.0 - 1 = 15.9%. Operating income 13,326.6 / 5,632.8 = 2.4 times. Gross margin (45,183.0 - 23,275.3) / 45,183.0 = 48.5% (2025); (33,723.3 - 19,715.4) / 33,723.3 = 41.5% (2023). Q3 2025 operating margin excluding the Brazil charge (3,248 + 619) / 11,510 = 33.6%. Additions to content assets Q2 2026 4,927.5 / 3,835.8 - 1 = 28%. Cash content spend = additions less change in content liabilities: 16,839.0 - 179.3 = 16,659.7 (2022), 12,554.7 + 585.6 = 13,140.3 (2023), 16,223.6 + 779.1 = 17,002.8 (2024), 17,096.6 + 610.8 = 17,707.5 (2025); ratio to amortization 16,659.7 / 14,026.1 = 1.19, 13,140.3 / 14,197.4 = 0.93, 17,002.8 / 15,301.5 = 1.11, 17,707.5 / 16,422.2 = 1.08. Licensed share of amortization 8,713.6 / 16,422.2 = 53%; licensed growth 8,713.6 / 7,689.0 - 1 = 13.3%; produced growth 7,708.6 / 7,612.5 - 1 = 1.3%. Produced share of content assets 20,639.8 / 32,778.4 = 63%; content assets / amortization 32,778.4 / 16,422.2 = 2.0 years. Tax incentives / produced amortization 1,000 / 7,708.6 = 13%; tax incentives / operating income 1,000 / 13,326.6 = 7.5%. Employees outside UCAN 16,000 - 10,900 = 5,100. Capex / revenue 688.2 / 45,183.0 = 1.5%; capex growth 688.2 / 439.5 - 1 = 57%. Free cash flow = operating cash flow less capex: 10,149.3 - 688.2 = 9,461.1 (2025); 7,361.4 - 439.5 = 6,921.8 (2024); 7,274.3 - 348.6 = 6,925.7 (2023); FCF / revenue 9,461.1 / 45,183.0 = 20.9%; FCF / net income 9,461.1 / 10,981.2 = 86%; capex / FCF 348.6 / 6,925.7 = 5.0%, 439.5 / 6,921.8 = 6.4%, 688.2 / 9,461.1 = 7.3%. Buybacks / FCF 9,127.2 / 9,461.1 = 96%; buybacks 2024 + 2025 6,263.7 + 9,127.2 = 15,390.9; diluted shares 4,261 / 4,349 - 1 = -2.0%; remaining authorization 27.1 / 296.24 = 9%. Year-end P/E = market value / net income: 213.10 / 5.408 = 39.4 (2023), 381.00 / 8.712 = 43.7 (2024), 397.29 / 10.981 = 36.2 (2025), trailing 296.24 / 13.650 = 21.7. Net debt / equity end 2025 (14,462.8 - 9,033.7 - 28.7) / 26,615.5 = 0.20; interest / operating income 776.5 / 13,326.6 = 5.8%; termination fee / 2025 net income 2,800 / 10,981.2 = 25%; ROE 10,981.2 / ((26,615.5 + 24,743.6) / 2) = 43%; net income growth 10,981.2 / 8,711.6 - 1 = 26%. Pre-tax income 2025 10,981.2 + 1,741.4 = 12,722.6, one point of tax rate = 127; six points = 763. UCAN ARM 17.20 / 15.86 - 1 = 8.4%; UCAN net additions 80,128 - 74,296 = 5,832 (2023), 89,625 - 80,128 = 9,497 (2024); paid memberships growth 301,626 / 260,276 - 1 = 16%; top plan price 37 / 32 - 1 = 15.6%. Obligations: due in 12 months / revenue 11,528.0 / 45,183.0 = 25.5%; obligations / debt 25.1 / 14.3 = 1.75; off balance sheet 18.4 / 24.0 = 76% (end 2025), 19.6 / 25.1 = 78% (June 2026). Advertising: 1.5 / 45.2 = 3.3% of 2025 revenue; 3.0 / 51.2 = 5.9% of the 2026 guidance midpoint (51.0 + 51.4) / 2 = 51.2. Nielsen gap 13.8 - 8.0 = 5.8 points. Regions: 2025 shares UCAN 19,957.2 / 45,183.0 = 44.2%, EMEA 14,514.6 / 45,183.0 = 32.1%, LATAM 5,357.5 / 45,183.0 = 11.9%, APAC 5,353.7 / 45,183.0 = 11.8%; Q2 2026 UCAN 5,432 / 12,560 = 43.2%. UCAN growth 14,873.8 / 14,084.6 - 1 = 5.6% (2023), 17,359.4 / 14,873.8 - 1 = 16.7% (2024), 19,957.2 / 17,359.4 - 1 = 15.0% (2025). EMEA memberships 101,133 / 76,729 - 1 = 31.8%; APAC memberships 57,541 / 38,023 - 1 = 51.3%; APAC revenue 5,353.7 / 3,570.2 - 1 = 50%. UCAN share of 2022 streaming revenue 14,084.6 / 31,469.9 = 44.8%. Memberships 2022-2024: UCAN 89,625 / 74,296 - 1 = 20.6%, LATAM 53,327 / 41,699 - 1 = 27.9%. ARM gap UCAN less APAC 15.86 - 8.50 = 7.36 (2022), 17.20 - 7.29 = 9.91 (2024). H1 2026 revenue 24,809.7 / 51,200 = 48.5% of the guidance midpoint. Diluted shares 4,343,863 / 4,494,966 - 1 = -3.4%. Average buyback price Q2 2026 4.7bn / 52.93M shares = about $89; 2025 9,127.2 / 86.54M shares = about $105; 71.15 / 105 - 1 = -32%. Analyst target 92.93 / 71.15 - 1 = 31%. US revenue 18.5 / 13.8 - 1 = 34%. Hedging swing 124 - (-91) = 215. Revenue 2023-2025 45,183.0 / 33,723.3 - 1 = 34%; employees 16,000 / 13,000 - 1 = 23%. Q2 net income 3,401 / 3,125 - 1 = 8.8%. DVD revenue = total revenue less streaming revenue: 33,723.3 - 33,640.5 = 82.8 (2023); 31,615.6 - 31,469.9 = 145.7 (2022) - cash flow, capital returns, valuation and obligations. — 2015-2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Netflix's Forms 10-K and 10-Q, shareholder letters, Nielsen's May 2026 Gauge and market data; operands shown in the source line.
Sources
Generated September 26, 2026