Warner Bros. Discovery has officially rejected Paramount’s hostile takeover bid, advising its shareholders to do the same.

The Ellisons came promising boatloads of cash. They told Warner Bros. Discovery chief David Zaslav they would give him a pay package worth hundreds of millions of dollars.

The decision throws another wrench into Paramount’s frenzied, monthslong effort to buy Warner Bros. Discovery — a make-or-break attempt, analysts said, to compete with streaming giants like Netflix, D...