Netflix-Warner Bros. deal: Regulatory questions emerge
Netflix and Warner Bros. logos
Reuters
netflix And Warner Bros. Discovery The deal went through quickly, but the path to regulatory approval may not be so quick.
Netflix stunned the media industry on Friday announced iconic Warner Bros. proposed $72 billion deal to acquire movie studio and streaming service HBO Max. This combination brings together two of the most popular streaming platforms in the industry. Netflix reported 300 million global subscribers as of the end of 2024, the last time it reported this metric. HBO Maximum there was 128 million customers as of September 30.
Netflix now claims 46% of mobile app monthly active users in global streaming, according to market intelligence firm data Sensor Tower. It was determined that this share will increase to 56% with HBO Max.
“This deal strengthens Netflix’s position as the premier streaming service for original content,” according to a research note from analysts at William Blair on Friday.
The size of the deal makes it ripe for scrutiny from industry insiders and U.S. lawmakers alike.
The Trump administration views the merger with “heavy skepticism,” and Sen. Elizabeth Warren has already called for an antitrust review, CNBC reported Friday.
“This deal looks like an anti-monopoly nightmare. A Netflix-Warner Bros. would 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, a Democrat from Massachusetts, said in a statement.
The merger also gives Netflix the famed Warner Bros. It would also give control of the movie studio, further consolidating the cinema landscape and raising concerns that the number or typical range of popular films could decline.
It is not uncommon for interest groups, politicians and corporate rivals to cry foul on antitrust grounds in the days and weeks following the announcement of a deal of this scale.
Ministry of Justice Since there have been other media mergers in the past, he will likely review the deal and this may take some time. DOJ investigations can take months to a year.
Netflix announced on Friday that Warner Bros. He said he expects the transaction to be completed within 12 to 18 months after Discovery transfers its cable network portfolio to Discovery Global.
Netflix trust
Ted Sarandos, Netflix’s co-chief executive officer, at the annual Allen & Co. He attended the Media and Technology Conference.
David A. Grogan | CNBC
Netflix executives said Friday they were “extremely confident” the deal would win regulatory approval.
“You know, this deal is pro-consumer, pro-innovation, pro-employee, pro-creator, pro-growth,” Netflix co-CEO Ted Sarandos said during an investor call following the acquisition announcement.
“Our plans here are to work really closely with all the appropriate governments and regulators, but [we’re] We are really confident that we will get all the necessary approvals that we need,” Sarandos added.
As part of the deal, Netflix will pay Warner Bros. in case the deal is blocked by the government. It agreed to pay Discovery a $5.8 billion breakup fee.
Netflix’s offer prevailed over rival bids Paramount Skydance And Comcast.
Analysts at Deutsche Bank and William Blair were at least minimally convinced Friday that the deal could happen.
“A merger of Warner Bros. Discovery with any of the three bidding firms would likely be successful even if the Justice Department sued to block a proposed combination,” Deutsche Bank analysts wrote in a note Friday, citing the views of a senior Justice Department official who said analysts “see no significant antitrust issue in any of the three scenarios.”
“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 could have an impact on the outcome,” Deutsche Bank analysts said. he said.
Paramount is fanning the flames.
Paramount’s lawyers filed a lawsuit against Warner Bros. this week. They sent a letter to Discovery, first reported by CNBC, alleging that the sales process was rigged at Netflix’s direction. The Wall Street Journal reported In a separate letter, Paramount said a Netflix transaction would likely “never close” due to regulatory headwinds.
Paramount was the only bidder looking to acquire WBD’s vast portfolio of pay-TV networks and is unlikely to quietly abandon the process.
not so fast
Oracle co-founder, CTO and Chief Executive Officer Larry Ellison (C), U.S. President Donald Trump, OpenAI CEO Sam Altman (R), and SoftBank CEO Masayoshi Son (2nd R) share a laugh as Ellison uses a stool to stand as he speaks during a press conference in the Roosevelt Room of the White House on January 21, 2025 in Washington, DC. Trump announced that he would invest in artificial intelligence (AI) infrastructure and on January 6 took questions on a variety of topics, including presidential pardons for criminal defendants, the war in Ukraine, cryptocurrencies and other topics.
Andrew Harnik | Getty Images
Wall Street expected President Donald Trump’s second term to lead to an unlikely deal. But economic uncertainty has slowed the process for some companies, and regulatory delays have played a larger role than expected.
“Under Donald Trump, the antitrust review process has also become a cesspool of political cronyism and corruption,” Warren said in a statement Friday. he said. “The Justice Department must enforce our nation’s antitrust laws fairly and transparently, not using the Warner Bros. deal review to invite influence peddling and bribery.”
Paramount’s merger with Skydance It remained in limbo for more than a year before finally receiving federal approval in July.
The Federal Communications Commission (which is unlikely to review the Netflix-WBD merger because it doesn’t involve a streamer) signed off on the $8 billion merger shortly after Paramount agreed to pay Trump $16 million to resolve a lawsuit over the editing of a “60 Minutes” interview with former Vice President Kamala Harris. Paramount also discontinued its diversity, equity and inclusion policies earlier in the year after the FCC said it would investigate the company over its DEI programs.
In September, the newly merged Paramount Skydance, helmed by David Ellison, set its sights on Warner Bros. He stared at Discovery. The company is currently considering whether to make a hostile offer directly to WBD shareholders and try to unseat Netflix as a potential buyer, CNBC reported Friday.
It is known that Ellison’s billionaire father, Oracle co-founder Larry Ellison, is close to Trump.
The debate over whether Netflix should clear its bid to take over Warner Bros. will likely come down to questions about streaming—first, pricing for consumers, and second, how to define Netflix’s audience.
Pricing for streaming subscriptions has generally increased in recent years. Netflix launched a cheaper, ad-supported model in 2022 after years of resistance in a bid to attract more customers. The following year, Disney He followed this with his own more affordable plan.
Netflix is used to disrupting the legacy media industry. company It ended its DVD rental business It went fully online in 2023. It has since grown to enormous proportions, capturing the zeitgeist with original series like “Squid Game,” “Wednesday,” “Stranger Things” and “Bridgerton.”
His maverick approach to media and his widening foothold in the industry could be a saving grace in the eyes of regulators.
“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… so that would include broadcast, cable, subscription and ad-supported streaming,” said Jeff Goldstein, partner and managing director of AlixPartners and co-chairman of the US Media group.
“And the really, really, really important thing is to include YouTube in that,” he said.
YouTube has begun to dominate the industry when it comes to views. Nielsen once again reported YouTube had the largest share of TV usage in October, with Netflix sixth and Warner Bros. Discovery ranked seventh. Traditional media companies with linear networks (Disney, NBCUniversal, Fox and Paramount) have filled the gaps.
Goldstein said critics of the deal will try to assert outsized dominance by defining Netflix’s reach more narrowly.
Media industry mogul John Malone told CNBC in November when asked about antitrust questions about the WBD sales process: “I believe streaming is not a category. Television viewership is a category… you know, eyeballs might be a category.”
“But if you are going to expand the category to that, you have to include YouTube, Facebook and the social networks TikTok,” he said. “I mean, that’s the real question; is streaming a category?… Is studios a category… and is that going to be scrutinized? These regulatory things are kind of hard to predict.”
— CNBC’s Julia Boorstin contributed to this report.
Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC. Versant would become CNBC’s new parent company, based on Comcast’s planned Versant spinoff.
