Netflix-Warner Bros. deal: Regulatory questions emerge

the Netflix and Warner Bros. Discovery The deal was reached quickly — but its path to regulatory approval may not be so quick.

Netflix surprised the media industry on Friday when… Announce that it Proposed deal worth $72 billion To acquire the famous film studio Warner Bros. And the streaming service HBO Max. This combination combines two of the most popular streaming platforms in the industry. Netflix reported 300 million global subscribers as of late 2024, the last time it reported that metric. HBO Max king 128 million customers as of September 30.

Netflix currently accounts for 46% of global streaming mobile app monthly active users, according to data from the market intelligence firm Sensor tower. It found that in combination with HBO Max, that share would rise to 56%.

“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 both industry insiders and US lawmakers.

Trump administration views merger with ‘extreme skepticism’ CNBC reported on FridaySenator Elizabeth Warren has already called for an antitrust review.

“This deal looks like an antitrust nightmare,” Warren, a Democrat from Massachusetts, said in a statement. “A Netflix-Warner Bros. alliance would create a massive media giant controlling nearly half of the streaming market — threatening to force Americans into higher subscription prices and fewer choices about what and how they watch, while putting American workers at risk.”

The merger would also give Netflix control of the Warner Bros. film studio. Famous, which further enhances the cinematic space and raises concerns that The number or typical windows of popular releases may be reduced.

It is not uncommon in the days and weeks following the announcement of a deal of this size for interest groups, politicians and companies to criticize competitors on antitrust grounds.

the Ministry of Justice The company will likely review the deal, given there have been other media mergers in the past, and it may take some time. Department of Justice reviews can take from months to more than a year.

Netflix said on Friday that it expects to close the deal within 12 to 18 months, after Warner Bros. It is taking its portfolio out of cable networks At Discovery Global.

Netflix show Beat competing offers from Paramount Skydance and Comcast.

Analysts at Deutsche Bank and William Blair were at least convinced on Friday that the deal could go through.

“The merger of Warner Bros. Discovery and any of the three suitors is likely to succeed, even if the DOJ sues to block the proposed merger,” Deutsche Bank analysts wrote in a note on Friday, citing the insights of a Justice Department veteran who the analysts said “does not see any significant antitrust problems in any of the three scenarios.”

“However…we do not know all the detailed facts that the Department of Justice will collect and analyze, nor do we know which judge will hear the case, and both factors could have an impact on the outcome,” Deutsche Bank analysts noted.

For its part, Paramount fanned the flames.

Paramount’s lawyers sent a letter to Warner Bros. Discovery this week first Reported by CNBCwhich claimed that the sale had been rigged in Netflix’s direction. The Wall Street Journal reported In a separate letter, Paramount said the Netflix deal would likely never close due to regulatory headwinds.

Paramount was the only bidder looking to buy WBD’s massive portfolio of pay-TV networks – and it is He is unlikely to walk away from the process quietly.

Paramount merges with Skydance It remained in limbo for more than a year Before it finally received federal approval in July.

The Federal Communications Commission (which is unlikely to review the Netflix-WBD partnership since it does not involve a broadcaster) Signed an $8 billion merger deal Shortly after Paramount agreed to pay Trump $16 million to settle a lawsuit over the editing of a “60 Minutes” interview with former Vice President Kamala Harris. Paramount was too I finish Its diversity, equity and inclusion policies were dropped earlier this year after the FCC said it would investigate the company over its DEI programs.

In September, newly merged Paramount Skydance, run by David Ellison, set its sights on Warner Bros. Discovery. The company is now considering whether to make a hostile offer directly to WBD shareholders and attempt to dislodge Netflix as a potential buyer. CNBC reported on Friday.

Ellison’s billionaire father, Oracle co-founder Larry Ellison, is known to be close to Trump.

The argument will likely boil down to whether Netflix’s proposed acquisition of Warner Bros. will be cleared. In questions about streaming – first, about pricing for consumers, and second, about how to define Netflix’s audience.

Streaming subscription prices have risen across the board in recent years. In 2022, Netflix created a Cheaper ad-supported model After years of resistance trying to attract more customers. The following year, Disney Followed by its own affordable plan.

Netflix is ​​being used to turn the legacy media industry upside down. Company It ended its DVD rental business In 2023 and everything went live. Since then, the series has gone viral and captured the zeitgeist with original series such as “Squid Game,” “Wednesday,” “Stranger Things” and “Bridgerton.”

Its rebellious approach to the media and expanding its foothold in the industry may prove to be its saving grace in the eyes of regulators.

“My expectation on the regulatory side is that Netflix will push and argue with its advisors for a very expansive definition of its market…to include streaming, cable, subscription and ad-supported streaming,” said Jeff Goldstein, partner and managing director at AlixPartners and co-chairman of US Media Group.

“And it’s really important that that includes YouTube,” he said.

YouTube has come to dominate industry when it comes to viewership. Nielsen again I mentioned In October, YouTube had the largest share of TV usage, with Netflix in sixth place and Warner Bros. Discovery is in seventh place. Traditional media companies with linear networks — Disney, NBCUniversal, Fox, and Paramount — filled the spots in between.

Critics of the deal will define Netflix’s reach more narrowly to try to project outsized dominance, Goldstein said.

“I think streaming is not a class. Watching television is a class… You know, eyeballs might be a class,” media industry mogul John Malone told CNBC in November when asked about antitrust questions surrounding the WBD sale.

“But if you’re going to expand the category to that, you have to take YouTube, Facebook and the social networking site, TikTok,” he said. “I mean, that’s really the question, is streaming a class? … Are studios a class … and will that be seriously considered? It’s a little bit difficult to predict those regulatory things.”

— CNBC’s Julia Boorstin contributed to this report.

Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC. Versant will become the new parent company of CNBC based on Comcast’s planned spin-off of Versant.