On Thursday, after Warner's board announced that Skydance-owned Paramount's offer was superior to the agreement it had previously struck with Netflix, the streaming giant said the new price that would be required to buy Warner would make it a deal that is "no longer financially attractive."
Unlike Netflix's bid, Paramount wants all of Warner's operations, including networks like CNN and Discovery.
That would put CNN under the same roof as Paramount's CBS and combine two of Hollywood's last five remaining studios.
The owner of HBO Max, DC Studios and popular titles like "Harry Potter" had backed Netflix's proposal for months. But after Skydance-owned Paramount upped its rival bid for the entire company to $31 per share, in addition to other revisions, Warner's board said that the offer was a superior proposal.
The improved offer came after Netflix had earlier this month granted Warner Bros a seven-day waiver to seek a "best and final offer" from Paramount for the company.
Pursuant to the terms of the Netflix merger agreement, this notice initiated a four-business-day period for Netflix to propose revisions.
As a result, the quick response from the streaming service came as a surprise.
Netflix had agreed in December to pay $27.75 a share, saying the offer, along with a planned spin-off of Warner Bros' cable assets, would deliver a greater shareholder value.
In its revised bid, Paramount also raised the termination fee it would pay should the deal fail to gain regulatory approval, to $7 billion from $5.8 billion.
With about $9.03 billion in cash and cash equivalents at the end of December, Netflix had ample financial muscle to raise its offer.
Either deal will reshape the power structure of Hollywood by handing the suitor one of the industry's most-coveted studios and an extensive content library, as well as lucrative entertainment franchises such as Game of Thrones and DC Comics.
Paramount has argued it has a clearer path to US regulatory approval than Netflix and had indicated that if Warner Bros rejects the new bid, it would be ready to launch a board challenge at this year's annual meeting.
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