Netflix and Paramount are fighting over Warner Bros. Discovery. Here’s the regulatory outlook

Warner Bros. Discovery is in the middle of a Hollywood tug of war between Netflix and Paramount. And it will likely be a long and bumpy regulatory road for both buyers.

Warner’s board of directors on Wednesday urged shareholders to support its deal with Netflix to sell its studio and streaming business for $72 billion. Meanwhile, Paramount, which owns Skydance, is pursuing its hostile $77.9 billion bid for a full takeover of the company, including networks like CNN.

In either scenario, the merger is likely to trigger a review in which the U.S. Department of Justice could sue to block the transaction or seek modification. However, other countries and organizations may also object to either purchase.

Politics is also expected to come into play under US President Donald Trump, who has made unprecedented suggestions about his personal involvement in determining whether a deal will happen.

The process can take more than a year, if not longer. But regardless of who wins, new ownership of the Warner properties will drastically reshape the industry; It will impact film production, streaming platforms and the broader media landscape.

Acquisition target – Warner Bros. Discovery – A 102-year-old Hollywood giant. It is one of the “big five” studios that produce productions ranging from “Harry Potter” to “Superman”. Its cable operations include top networks like CNN and Discovery. Warner also owns DC Studios and HBO Max.

Paramount, which completed its $8 billion merger with Skydance just months ago, is also one of Hollywood’s remaining legacy studios; with a cast of blockbusters including “Top Gun” and “The Godfather.” Beyond traditional film and TV production, CBS also owns networks like MTV and Nickelodeon, as well as the Paramount streaming service.

Streaming is the bread and butter for Netflix, accounting for 20% of the on-demand subscription market in the US, according to data from streaming guide JustWatch. That compares with 13% for HBO Max and 7% for Paramount. But Netflix has also launched its own production arm, launching popular titles like “Squid Game” and “Stranger Things.”

Netflix is ​​the largest of the three companies, with a market value of approximately $430 billion as of mid-December. Warner Bros. Discovery is worth about $70 billion, while Paramount Skydance is worth close to $14 billion.

Regulatory hurdles between Netflix and Paramount

Paramount has already noted Netflix’s streaming dominance, arguing that bringing the platform under the same umbrella as HBO Max would crush the competition and give it “overwhelming” market share. However, Netflix argued that the merger would give consumers more choice and could offer customers more plans and titles to choose from Warner’s catalogue.

Antitrust experts expect Paramount and Netflix to try to convince regulators that they are up against not only more traditional rival subscriptions but also larger video libraries on the Internet.

YouTube tops the list, and Netflix is ​​already laying the groundwork to showcase Google’s streaming platform’s superiority in terms of viewing hours; It accounted for about 13% of viewership this fall, compared to Netflix’s 8%, according to media analytics firm Nielsen.

Northwestern University Pritzker School of Law professor Jim Speta expects both companies to say the merger is “necessary for them to be able to compete against YouTube.”

“The more you broaden the market we consider, the less anti-competitive the merger looks,” Speta said.

Others, meanwhile, will argue that both mergers are bad for consumers. While content libraries could expand, a case could be made for a combined company to use its power to control prices or add more subscription hoops that consumers can jump through to watch certain titles.

Among the concerns is that “the range of content available on streaming services may decrease,” said Scott Wagner, head of the antitrust practice at law firm Bilzin Sumberg. He specifically noted older movies that may see shorter streaming windows across platforms.

Implications for studio production and news

If successful, Paramount’s takeover would combine two of Hollywood’s “big five” studios. Although Netflix has agreed to honor Warner’s contractual obligations regarding theatrical releases in the proposed acquisition, critics are skeptical due to the company’s reliance on online streaming.

Some trade groups have warned that the consequences of both deals could include job losses. Restructuring-related layoffs are common after a merger and will not likely be subject to antitrust scrutiny; but Speta notes that competition concerns may still arise if a company “grows large enough to have purchasing power” and is deemed to control wages more broadly.

There’s also news to consider, especially for Paramount, and the broader cable landscape.

Lawyers like Wagner expect the possibility of Warner-owned CNN and Paramount’s CBS to be under the same umbrella to come up in regulatory review. But he doesn’t believe this will carry the same weight as the streaming and content library questions or be a tipping point that would lead to the end of the merger overall.

Similar to broadening the definition of the streaming market, proponents of the Paramount merger will likely point to broader media offerings beyond traditional TV news, including sharing information on social media platforms, Warner said.

But a potential CBS-CNN merger also has political ramifications. Under new Skydance ownership, Paramount has taken steps to appeal to more conservative audiences in its news operations, particularly with the appointment of Free Press founder Bari Weiss as editor-in-chief of CBS News. If the company’s bid to take over Warner is successful, many expect similar changes at CNN, which has long drawn Trump’s ire.

Trump has been vocal about whether the Warner acquisition will happen, even saying he will be “personally involved in that decision.”

Speta says such a suggestion should raise alarm. While changes in administration have caused the scope of antitrust enforcement to change over the years, “it’s completely unprecedented for presidents to choose whether mergers will happen or not,” he said.

Earlier this month, Trump said Netflix’s deal “could be a problem” due to the size of its overall market share. The Republican president also has a close relationship with Oracle founder billionaire Larry Ellison (father of Paramount CEO David Ellison), whose family’s trust largely supported the company’s bid to acquire Warner. An investment firm run by Trump’s son-in-law Jared Kushner was also among the first to contribute to Paramount’s bid but later backed out.

Netflix, meanwhile, has its own political connections. Trump previously called the streaming giant’s co-CEO Ted Sarandos a “fantastic guy” and said the two met in the Oval Office before the proposed Warner merger was announced. And Trump continued to openly attack Paramount for editorial decisions on CBS’s “60 Minutes.”

Even without Trump’s intervention, companies could still hurt themselves as the process progresses, according to Paul Nary, an assistant professor of management at the Wharton School of Business at the University of Pennsylvania. He is Warner Bros. He notes that Discovery has massively underperformed for shareholders since its inception just three years ago and could “potentially be left worse off” if management gets distracted by messing around with a long, protracted deal.

“There is potential for winners’ curse here,” he said. “Media and entertainment is one of the areas where you see all these mega-mergers, high stakes (and) big egos competing over glamorous assets. And a lot of these deals fail.”