The $US72 billion ($A109 billion) purchase, announced on Friday, follows a weeks-long bidding war in which Netflix offered nearly $US28 ($A42)-a-share, eclipsing Paramount Skydance's close to $US24 ($A36) bid for the whole of Warner Bros Discovery, including the cable TV assets slated for a spinoff.
Buying the owner of marquee franchises including Game of Thrones, DC Comics and Harry Potter will further tilt the balance of power in Hollywood in favour of Netflix.
It would help the streaming giant, which has so far built its dominance without major deals or a large content library, to ward off competition from Walt Disney and the Ellison family-backed Paramount.
The two companies together will "help define the next century of storytelling", said Netflix co-CEO Ted Sarandos, who had once said "the goal is to become HBO faster than HBO can become us".
The deal, however, is likely to face strong antitrust scrutiny in Europe and the US as it would give the world's biggest streaming service ownership of a rival that is home to HBO Max and boasts nearly 130 million streaming subscribers.
David Ellison-led Paramount, which kicked off the bidding war with a series of unsolicited offers and has close ties with the Trump administration, had questioned the sale process earlier this week and alleged favourable treatment to Netflix.
Even before the bids were in, some members of Congress said a Netflix–Warner Bros Discovery deal could harm consumers and Hollywood.
Cinema United, a global exhibition trade association, said on Friday the deal poses an "unprecedented threat" to movie theatres worldwide.
Looking to allay some concerns, Netflix said the deal would give subscribers more shows and films, boost its US production and long-term spending on original content and create more jobs and opportunities for creative talent.
The company argued in deal talks that a combination of its streaming service with HBO Max would benefit consumers by lowering the cost of a bundled offering.
The company has told Warner Bros Discovery it would keep releasing the studio's films in cinemas in a bid to ease fears that its deal would eliminate another studio and major source of theatrical films, according to media reports.
Warner Bros Discovery shares were up 2.4 per cent at $US25 ($A38) in premarket trading, while Netflix fell nearly three per cent and Paramount 2.2 per cent. Comcast, the third suitor, was trading little changed.
Paramount and Comcast did not immediately respond to requests for comment.
Analysts have said Netflix is driven by a desire to lock up long-term rights to hit shows and films and rely less on outside studios as it expands into gaming and looks for new avenues of growth after the success of its password-sharing crackdown.
