The news: Warner Bros. Discovery (WBD) rejected Paramount’s hostile acquisition bid Wednesday and told its shareholders the offer is “inferior” to Netflix’s bid. WBD’s board said Paramount’s offer carried "significant risks,” adding that it does not see a “material difference” in the risks Paramount will face compared with Netflix in receiving approval in the US and globally.

• WBD’s board urged its shareholders to reject Paramount’s offer, per the New York Times, as Paramount is now expected to look to persuade shareholders to tender their shares.
• WBD is asking shareholders to instead support its existing merger agreement with Netflix, claiming that it is a “superior” deal. Netflix, in turn, stated that it “welcomes” WBD’s decision in a letter.
• Paramount’s offer was a $30 per share, all-cash hostile bid worth $108 billion. David Ellison is likely to offer another, higher-price bid for WBD in response.

Behind the rejection: WBD rejected Paramount over three key concerns.

• Paramount says the Ellison family is funding most of the $40 billion equity in the deal, but WBD is uneasy because the bid is backed by a Larry Ellison–controlled revocable trust;
• Jared Kushner’s Affinity Partners, initially a key Paramount backer, stepped away from the deal;
• WBD’s board remains concerned over potential risks from sovereign funds coming from the Middle East, including Saudi Arabia’s Public Investment Fund and Qatar Investment Authority.

Netflix surges ahead: The rejection cements Netflix as the most likely buyer of WBD’s studio and streaming assets, though there is speculation of other possibilities, like an agreement between Netflix and Paramount to split WBD’s assets.

Provided Netflix receives regulatory approval, it’s unlikely WBD will budge on its firm stance—but the deal will still take at least another year to finalize.

What advertisers can expect: Consolidation will reshape ad market dynamics regardless of WBD’s fate.

• A likely Netflix acquisition will provide increased streaming inventory in Netflix’s maturing ad ecosystem, greater ad impressions across audiences, and prestige streaming placements. But CPMs are likely to increase (as are consumer costs), and advertisers will suffer from less variety of premium inventory across channels as Netflix looks to alter WBD’s film pipeline.
• A far less likely Paramount acquisition will preserve competition to give advertisers more negotiating power and ad opportunities across different channels. But Ellison ownership and foreign influence are heightening WBD’s concerns that a Paramount sale would hand the company over to owners who won’t provide a secure or steady future—heightening the sense of limbo advertisers are finding themselves in.