Warner Bros. Accepts Netflix's $83 Billion Bid, but Antitrust Threats Still Loom

If antitrust regulators allow the deal to go through, consumers stand to benefit from a less expensive Netflix–HBO Max bundle.

Netflix announced its plan to acquire Warner Bros. Discovery (WBD) for $83 billion on Friday. The merger between the entertainment giants will likely draw international antitrust scrutiny, as rival bidder Paramount Skydance ominously predicted in an 11th-hour plea to WBD to reconsider its deal with Netflix. As the deal moves forward, the public should be wary about the political weaponization of the Federal Trade Commission (FTC) and Justice Department (DOJ), given the relationship between President Donald Trump and the owners of Paramount Skydance.

Reuters reported that Netflix was considering a bid to acquire WBD in October. Netflix wasn't the only one; Paramount Skydance and Comcast were also vying for the company. Initial bids were submitted by each company on November 20. On December 1, the deadline for second bids, Paramount Skydance drew the all-mighty antitrust saber as it became clear that WBD favored Netflix's bid of $27.75 per WBD share to acquire Warner Bros. studio, HBO, and HBO Max over Paramount Skydance's bid of $30 per WBD share for the entire company.

Paramount Skydance lawyers sent a 4,000-plus-word letter on December 1 to WBD emphasizing that Netflix's acquisition of HBO Max, the fourth-largest streaming video on demand (SVOD) provider, would result in Netflix obtaining a 43 percent share of SVOD subscribers. Whenever market share numbers are tossed around, you can be sure that antitrust concerns are afoot. And that's just the sort of language Paramount Skydance lawyers invoked.

The lawyers asserted that Netflix's deal with WBD "would face grave uncertainty and significant opposition by competition law enforcement agencies in the U.S. and abroad." Jason Kilar, CEO of WarnerMedia from May 2020 to April 2022, when it merged with Discovery to form Warner Bros. Discovery, said he "could not think of a more effective way to reduce competition in Hollywood than selling WBD to Netflix."

The Paramount Skydance lawyers offered a tentative theory of consumer harm from the merger, prognosticating that Netflix's acquisition of "WBD's world-class IP library," which includes Game of Thrones, Harry Potter, and the entire DC Universe, would harm "theatrical distribution, talent and moviegoers [by reducing] the number of films for broad theatrical release." Former Federal Trade Commissioner Alvaro Bedoya affirmed this point, calling the merger "a death knell for movie theaters." At the same time, bundling Netflix and HBO Max "is expected to reduce streaming costs for consumers," reports Reuters.

The letter stated point-blank that Netflix's WBD acquisition "will entrench and extend Netflix's global dominance in a manner not allowed by domestic or foreign competition laws," and anticipated that Netflix's "gerrymandered [SVOD] market definition that includes services like YouTube, TikTok, Instagram, and Facebook" would be rejected by the DOJ, FTC, and international regulators. While competition experts doubt that the European Commission will block the merger, The Hollywood Reporter reports that the DOJ is "planning an investigation and potentially a lawsuit to try and block it, given the potential combination of Netflix and HBO Max."

Political appointees at the DOJ's antitrust division may be encouraged by Trump to scrutinize the deal, given the president's chummy relationship with Larry Ellison, Oracle co-founder and father of Paramount Skydance CEO and majority shareholder David Ellison. However, the merger would not substantially reduce competition when ad-supported video, social media, and gaming are included in the broader entertainment market. Eric Fruits, senior scholar at the International Center for Law and Economics, estimates that the combined Netflix-WBD share of the overall entertainment market could be "less than 5% of total consumer entertainment time."