In a surprising twist in the entertainment industry, Netflix has opted out of increasing its bid to acquire Warner Bros. Discovery’s studio and streaming operations. This decision paves the way for Paramount to potentially take over the esteemed Hollywood entity.

On Thursday, Warner’s board revealed that Skydance-owned Paramount presented a more compelling offer compared to the previously agreed terms with Netflix. As a result, Netflix deemed the new financial requirements to acquire Warner as “no longer financially attractive.”

Paramount’s proposal differs from Netflix’s by seeking to acquire all of Warner’s assets, including major networks like CNN and Discovery. This could lead to CNN being under the same corporate umbrella as Paramount’s CBS, effectively merging two of Hollywood’s remaining legacy studios.

For months, Warner, home to HBO Max, DC Studios, and iconic franchises like “Harry Potter,” had supported Netflix’s bid. However, Paramount’s revised offer, valued at $31 per share along with additional enhancements, led Warner’s board to declare it a “company superior proposal” on Thursday.

Should Paramount successfully acquire Warner, it would significantly alter Hollywood’s landscape. Paramount’s CBS has undergone notable editorial transformations under Skydance’s stewardship, such as the appointment of Free Press founder Bari Weiss at CBS News. The potential expansion of such changes is anticipated if the acquisition proceeds.

The merger of Paramount and Warner would consolidate two of the industry’s five remaining legacy studios and their theatrical outlets. This would integrate Warner’s acclaimed films like “Superman,” “Barbie,” and “One Battle After Another,” along with popular TV series such as “The White Lotus” and “Succession,” into Paramount’s extensive content portfolio.

Today, Paramount’s lineup of titles include “Top Gun,” “Titanic” and “The Godfather.” And beyond CBS, it owns networks like MTV and Nickelodeon, as well as the Paramount+ streaming service.

Executives at Paramount have argued that merging will be good for consumers and the wider industry. But lawmakers and entertainment trade groups have sounded the alarm – warning that a Warner takeover would only further consolidate power in an industry already run by just a few major players. Critics say that could result in job losses, less diversity in filmmaking and potentially more headaches for consumers who are facing rising costs of streaming subscriptions as is.

Combined, that raises tremendous antitrust concerns. The U.S. Department of Justice has already initiated reviews, and other countries are expected to do so, too.

Netflix, Warner and Paramount have spent the last couple of months in a heated, public back and forth over whose deal has a better regulatory path – and offers more value for Warner shareholders. Thursday’s announcement arrived shortly after Paramount upped the ante on its offer.

Beyond increasing its proposed purchase price for Warner, the company also agreed to a regulatory termination fee of $7 billion. And Paramount pledged to move up a previously-promised “ticking fee.” The company initially said it would pay 25 cents per share for every quarter the deal drags on past the end of the year. Now it’s agreed to pay that amount if the deal doesn’t go through by the end of September, Warner said.

But Paramount is taking on billions of dollars in debt to finance its offer. And David Ellison’s father, Oracle founder Larry Ellison, is heavily backing the bid for his son’s company. Foreign sovereign wealth funds have also provided equity for the offer, drawing scrutiny.

The Ellisons also have a close relationship with President Donald Trump – bringing more politics into question. Trump previously made unprecedented suggestions about his involvement in seeing a deal through, before walking back those statements and maintaining that regulatory approval will be up to the Justice Department.

The push to acquire Warner also arrives just months after Skydance closed its own buyout of Paramount – in a contentious merger approved just weeks after the company agreed to pay the president $16 million to settle a lawsuit over editing at CBS’ “60 Minutes” program. Still, Trump has continued to publicly lash out at Paramount and “60 Minutes” since.