The bidding war isn't between equals. Paramount, a smaller and weaker legacy media company, sees the acquisition as a necessity for future relevance. For the much stronger Netflix, it's an opportunistic play to cement its market leadership.

Netflix once aimed to create an HBO-level original library. This acquisition is a tacit admission of failure. The streaming giant couldn't build its own deep, enduring library because its economic model prioritizes short-term user acquisition over creating long-running, culturally resonant shows.

Reed Hastings advises entrepreneurs against rushing to an IPO because it exposes crucial business metrics. He believes Netflix's 2002 IPO revealed the market's profitability to Blockbuster, directly prompting them to launch a competing service two years later.

While the dot-com bubble chased nascent internet delivery, Netflix's contrarian thesis was that the internet wasn't ready. They used DVDs-by-mail as a transitional distribution network to build a massive customer base and brand, creating a moat while waiting for streaming technology to mature.

Netflix isn't buying Warner Bros. out of desire, but necessity. Facing plateauing engagement and competition from free platforms like YouTube, acquiring a massive IP library is a mandatory move to boost retention and hours watched, even if it's financially risky.

Unlike the infamous AOL-Time Warner merger where an overvalued tech stock bought a solid media asset, Netflix, a genuinely valuable company, is considering buying a legacy media library at a potentially inflated price. This signals a strategic shift from bubble-currency acquisitions to potentially overpriced consolidation by established tech players.

Reed Hastings' bet wasn't that DVDs would definitely succeed, but that if they did, it would create a market disruption. Legacy players like Blockbuster couldn't serve the niche early adopter market, providing the opening Netflix needed to establish itself.

The deal is less about consolidating media power and more about arming Netflix with a vast IP library to compete for attention against free, user-generated content platforms like TikTok and YouTube, which pose a greater existential threat.

Despite poor performance, CEO David Zaslav skillfully navigated a bidding war between Netflix and Paramount. By positioning Warner Bros. as a must-have asset in the streaming wars, he drove the acquisition price from $8 to $30 per share, securing a billionaire outcome for himself regardless of the winner.