Netflix. Winning by folding.
Netflix walked away from the biggest deal in media history, and two hours later it was 85 billion dollars richer. The most profitable thing it ever did was something it didn't do.
THE GIST ON NETFLIX: "Winning by Losing"
What happened?
Netflix agreed to buy Warner Bros. Discovery: HBO, DC Comics, Harry Potter and CNN, for 83 billion dollars. Then Paramount came in with 111 billion. Netflix had four days to match it and walked away within two hours.
What did walking away earn?
Paramount had to pay Netflix a 2.8 billion dollar break fee, about 25 percent of Netflix's annual profit.
Investors had hated the deal, and Netflix's share price dropped by about 30 percent during negotiations. The moment it walked away, the market rewarded it with 85 billion dollars of value in four days, more than the deal itself was worth.
What is the lesson?
Netflix has 320 million subscribers and spends 20 billion dollars on content this year alone. It didn't need Warner Bros. It just wanted it.
We're taught growth means buying: more brands, more IP, more market share. But the market paid Netflix more for walking away than for winning. As in poker, the skill isn't knowing when to bet big. It's knowing when to fold.
Is walking away ever the smarter business move?
Your take. One tap, then see how everyone else voted.
Quick answers
How much was Netflix's deal worth?
83 billion dollars for Warner Bros. Discovery.
What happened when Paramount bid higher?
Paramount offered 111 billion, and Netflix walked away within two hours.
What was the break fee?
2.8 billion dollars, about 25 percent of Netflix's annual profit.
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