Deutsche Bank analysts view a potential merger between Warner Bros. Discovery and Paramount Skydance as creating a formidable competitor to Netflix in the streaming market. Warner's board has already deemed PSKY's $31-per-share bid superior to Netflix's previous offer of $27.75 per share for Warner's Streaming & Studios businesses. The analyst raised his price target on Warner to $31 while cutting the rating to Hold.

Netflix's decision not to match the higher bid came after co-CEO Ted Sarandos visited the White House to discuss the proposed deal. According to Deutsche Bank, the bank had believed the "tenor of Mr. Sarandos' meeting(s)" might inform whether Netflix would raise its bid. The merged entity would possess "all the content and IP needed for success at scale" according to analysts.

The combined PSKY-Warner Bros. Discovery would be well-positioned globally, with Deutsche Bank predicting minimal regulatory friction. Netflix's retreat from the bidding war suggests the streaming giant recognizes the competitive threat a merged entity would pose to its market position. Warner stock fell 2.26% while Netflix gained 13.77% following the news.