Warner Bros Discovery has told its shareholders to reject Paramount Skydance’s $108.4bn (£80.75bn) takeover bid.

Paramount had said its offer was “superior” to a $72bn deal that Warner Bros struck with Netflix for its film and streaming businesses.

But in a dramatic plot twist in the story of who will take control of one of Hollywood’s oldest and most famous movie studios, Warner Brother’s board “unanimously” recommended rejecting the offer and agreed the deal with Netflix was in the firm’s best interests.

The media giant put itself up for sale in October after receiving “multiple” expressions of interest from potential buyers, including approaches from Paramount Skydance.

On 5 December, Warner Bros Discovery said it had agreed to sell its film and streaming businesses to Netflix.

In a lengthy legal filing, Warner Bros Discovery’s board said the offer from Paramount poses numerous and significant risks, and strongly rejects the idea that the Ellison family – one of America’s richest – is financially supporting the bid.

Paramount is backed by the billionaire Ellison family, which has close ties to the president.

In a reflection of where power now lies in the entertainment industry, the Warner Bros board says the offer from streaming giant Netflix is well financed and offers better long term value to shareholders.

Netflix welcomed the recommendation from Warner Bros. Ted Sarandos, Netflix’s co-chief executive, called the company’s merger agreement “superior” and “in the best interest of stockholders”.

In a letter to Warner Bros shareholders, Netflix reiterated its stance that its bid for Warner Bros involves a clearer funding structure and less regulatory risk.

Paramount could still come back with another offer, meaning the take-over saga gripping Hollywood isn’t over yet.

The are considerable differences between the Netflix and Paramount offers.

Netflix wants to buy Warner Bros. movie studio and its HBO streaming service, which would also give it access to Warner Bros’ rich library of content and secure access to those movies and shows for its subscribers.

But it doesn’t want the media giant’s pay-TV channels. If Warner Bros. goes with the Netflix deal it would leave Warner Bros to sell off its television networks, such as CNN and TNT, into a separate company before the takeover is completed.

Paramount, on the other hand, wants to buy Warner Bros in its entirety, which would mean acquiring competitors to its own TV channels such as CBS, MTV and Showtime.

Regulators might raise questions about an erosion of consumer choice, as the entertainment industry continues to consolidate ownership.

The week after Netflix announced its deal to acquire Warner Bros, Paramount Skydance launched a new offer for the whole company, including its television networks.

A takeover of Warner Bros is expected to face scrutiny from competition regulators in the US and Europe.

A new owner of Warner Bros would gain a significant edge in the highly competitive streaming market. It would get a huge library of films and TV shows, including Harry Potter, the MonsterVerse, Friends and the HBO Max streaming service.

Mike Proulx from research firm Forrester said the battle for control of Warner Bros will take months more to be resolved.

“What’s unfolding now feels like a real-life, far more consequential episode of HBO’s Succession,” he said. “And if you think you know how this plot ends, think again.”

Some in the film industry have criticised the plan to merge all or part of Warner Bros with a rival. The Writers Guild of America’s East and West branches called for the merger to be blocked, arguing that it would result in lower wages and job cuts.

The volume of content for viewers would also be reduced, it said.