Is the Netflix–Warner Bros Discovery deal headed for market and regulatory challenges? Here’s the outlook

The Netflix and Warner Bros. Discovery deal went through faster than expected, but the regulatory side of the deal may not go as smoothly, according to a source. CNBC report.

Netflix stunned the media on Friday by announcing it had emerged as the winner of a three-way battle to acquire Warner Bros. Discovery by paying $72 billion for the acquisition of the iconic movie studio and streaming service HBO Max. The combination of two giant companies in the film and streaming industry is seen as one of the largest mergers bringing together two of the most popular streaming platforms in the industry.

Netflix has 300 million subscribers worldwide by the end of 2024, while HBO Max has 128 million customers as of September 30.

“This deal strengthens Netflix’s position as the premier streaming service for original content,” according to a research note from analysts at William Blair.

The sheer size of the Netflix-Warner Bros. Discovery deal has it primed for scrutiny from industry leaders and U.S. lawmakers alike.

Will the Department of Justice review the Netflix-Warner Bros deal?

The Department of Justice is expected to review the Netflix-Warner Bros deal, as it has done with other mergers in the past. This could come at a time when US lawmakers are already demanding an antitrust review, and the combination of both could mean the $72 billion acquisition could take a long time to complete.

Sen. Elizabeth Warren, a Democrat from Massachusetts, has already called for an antitrust review.

“This deal looks like an anti-monopoly nightmare. Netflix-Warner Bros. will create a massive media giant that controls nearly half of the streaming market, threatening to force Americans into higher subscription prices and fewer choices about what and how to watch, while putting American workers at risk,” Warren said in a statement Friday.

according to CNBC According to the report, analysts at Deutsche Bank and William Blair were somewhat convinced that the deal would go through.

“A merger with Warner Bros. Discovery by any of the three bidders would likely be successful, even if the DOJ sued to block a proposed combination,” Deutsche Bank analysts said in a note.

“However … we do not know all the detailed facts that will be collected and analyzed by the Department of Justice, nor do we know who the judge hearing the case will be, and both of these factors may have an impact on the outcome,” they added.

Questions approach Netflix

The debate over whether Netflix’s bid to acquire Warner Bros. Discovery will be given the green light will come down to two questions. CNBC report.

The first of these is about pricing to consumers, and the second is about the definition of Netflix’s audience.

Netflix hasn’t always been at the top of its game when it comes to pricing, and it charges significantly more for its streaming services compared to peers like Disney.

“My expectation on the regulatory side is that Netflix will advocate and argue with its advisors for a very broad definition of what their markets are…that will include streaming, cable, subscription and ad-supported streaming,” said Jeff Goldstein, partner and managing director at AlixPartners. CNBC.

On the other hand, YouTube maintained its top spot in terms of viewing. According to Nielsen’s October report, YouTube had the largest share in TV usage, while Netflix ranked sixth.

Debates will likely lean on that factor to try to demonstrate great dominance, Goldstein said.