Too Much TV: The Netflix/Warner Bros. Discovery Merger Is Even More Complicated Than You Think

Here's everything you need to know about the world of television for Tuesday, January 20th, 2026:

A PART OF THE NETFLIX/WBD MERGER YOU HAVEN'T HEARD BEFORE
Netflix and Warner Bros. Discovery on Tuesday said Netflix's merger offer for the Warner Bros. studio and streaming business will now be all-cash instead of cash and stock. Which both companies hope will make regulatory approval of the merger easier, as well as push back on the allegations from rejected suitor Paramount Skydance that its offer is superior because it was comprised of all cash.

Warner Bros. Discovery is also making changes to the business it is not selling to Netflix. Under the terms of the revised deal, Warner Bros. Discovery will reduce the debt that would have been passed on to its new linear TV & international business by $260 million. 

What hasn't changed is the overall structure of the deal, which is complicated even by the standards of a media merger. 

The parties to the deal include Netflix, a Netflix wholly-owned subsidiary named Nightingale Sub, Inc., Warner Bros Discovery, and a new WBD wholly-owned subsidiary called New Topco 25, Inc., (which is referred in the merger agreement as "NewCo). 

NewCo will merge with WBD, with WBD surviving as the wholly-owned subsidiary of NewCo, which will be owned by the current WBD shareholders. After that merger, WBD will undertake an internal reorganization, which will separate separation WBD’s Global Linear Networks segment and certain other assets and liabilities.  As a result of which, NewCo will hold WBD’s Streaming and Studios segments into what is described in the merger agreement as "SpinCo."

A newly formed entity (“Discovery Global”) will hold the SpinCo Business, and WBD will distribute all of the issued and outstanding stock of Discovery Global to the holders of the outstanding shares of WBD Common Stock at the effective time of the Separation and Distribution. Each share of WBD Common Stock will be converted into one share of NewCo common stock of the same class (“NewCo Common Stock”), and NewCo will be renamed “Warner Bros. Discovery, Inc." At that time, WBD stockholders will receive $27.75 for each share of WBD Common Stock, without interest, subject to any Per Share Merger Consideration Reduction.

So when it is over, Netflix (through its Nightingale subsidiary) will own NewCo, and WBD’s Global Linear Networks will exist as a standalone entity. The streaming service Discovery+ will be part of the Global Linear Networks division along with Bleacher Reports and the linear channel Turner Classic Movies will become part of NewCo.

Why structure such a complicated deal? 

Look no further than the deal that current WBD CEO David Zaslav and chief investment advisor John Malone made to obtain Warner Brothers from AT&T. The deal was structured as what is called a "Reverse Morris Trust," a transaction that has been rarely used in the media business. In most mergers, the larger company acquires a smaller company. But in a Morris Reverse Trust, the larger company spins off some assets, and that’s immediately followed by a prearranged merger with another business. 

One advantage of this approach is that as long as it's structured a certain way, it eliminates the majority of the tax burden on the seller. In this case, people with large amounts of shares, such as Zaslav or Malone. There are some restrictions. To dodge the taxes, the selling company has to retain a majority of the shares in the spin-off for a set amount of time in order to prove there was no attempt to dodge capital gains taxes. The selling company also technically runs the spin-off company, although in the case of AT&T, it simply agreed to let Zaslav essentially head the company.

The Reverse Morris Trust that made Warner Bros. Discovery possible has now expired, and Zaslav and Malone are now using the same procedure to spin off the troublesome parts of WBD. 

One early indication that was a possibility was this passage from the press release WBD sent out in October, which officially announced they were for sale:

As part of the review, the Company will also consider an alternative separation structure that would enable a merger of Warner Bros. and spin-off of Discovery Global to our shareholders.

Which sounds a lot like the description of a Reverse Morris Trust deal to me.

While this is sounds very technical (and I have just scratched the surface of the details), for reasons to complicated to get into here, WBD couldn't utilize the same complicated structure if it is acquired by Paramount Skydance, which would cost current WBD shareholders and executives hundreds of millions of dollars in deferred tax breaks. 

Speaking of Netflix, the streamer will report its fourth-quarter and full-year 2025 results after the market closes today, and will hold a conference with management for analysts.

ODDS AND SODS:
* Thanks to CNN's Brian Stelter for the mention this morning in his Reliable Sources newsletter:

Correspondent Sharyn Alfonsi essentially prevailed on Sunday: Her report aired as-is, without any changes, except for a new beginning and a new ending, which were taped to appease Weiss. Rick Ellis compared the original and new versions in detail here.

* The documentary Marty, Life Is Short will premiere Tuesday, May 12th on Netflix.

* Timothy Busfield has been edited out of the upcoming Amazon MGM Studios rom-com You Deserve Each Other has been edited out in the wake of sex abuse charges filed against the actor.

* The stand-up special Bruce Bruce: I Ain't Playin' premieres Tuesday, March 3rd on Netflix.

* Sony's TV manufacturing business is being taken over by TCL.

AN UPDATE FROM MINNESOTA
I have had a number of people reach out to ask how things are going here in Minnesota. The video footage from here is certainly grim & unsettling to watch.

We live in a suburb of St. Paul. So you don't see the street protests that you'll find in the city, in large part because there isn't the density of immigrants you'll find in the Twin Cities. But it is certainly still scary and depressing. Just about every local restaurant not owned by a white person has shut down. Some tried to stay open and lock the doors so they could screen out ICE. But in one case, two ICE cars parked outside the restaurant to scare off customers and that unfortunately worked.

It's difficult to get a sense of how many people have been detained. The arrests seem to come in two categories. People who are not white are just disappeared off the streets within minutes. And then there are the more high-profile arrests of whites that generally result in their eventual release (like the young teacher who was arrested outside the Special Ed school where she teaches).

Still, people are doing what they can do. Organizing food drives & deliveries to people too scared to go shopping. Standing at school bus stops as support, making sure that kids that need to work virtually from home have the ability to do so. Running errands for people too scared to go out and providing financial support to people who need it.

In nearby St. Paul, the public schools are closed for two days in order to prepare kids for remote learning. In large part because many immigrant children are missing school after several high-profile cases of ICE agents stopping kids and interrogating them about their parents and their citizenship status.

You may have watched news footage from Germany in the 1930s or the Warsaw Pact countries in the 1950s and 1960s and wondered what you would do if you were confronted by an oppressive government. Many of us now have the answer to that question, which is both sad and somewhat liberating. 

TWEET OF THE DAY



WHAT'S COMING TODAY AND TOMORROW

TUESDAY, JANUARY 20TH:
* Handsome Devil: The Charming Killer (Paramount+)
* Just A Dash Season Three Premiere (Netflix)
* Singles Inferno Season Premiere (Netflix)
* Star Search Series Premiere (Netflix)

WEDNESDAY, JANUARY 21ST:
* Drops Of God Season Two Premiere (Apple TV)
* Kidnapped: Elizabeth Smart (Netflix)
* Police 24/7 (The CW)
* Queer Eye (Netflix)
* Steal Series Premiere (Apple TV)
* The Beauty Series Premiere (FX)

SEE YOU WEDNESDAY MORNING!