The Netflix and Warner Bros. Discovery merger was finalized swiftly — yet its road to regulatory clearance may not be as rapid.
Netflix shocked the entertainment sector on Friday when it declared its intended $72 billion arrangement to take over the legendary Warner Bros. film studio and the streaming service HBO Max. This joining of forces amalgamates two of the most sought-after streaming services in existence. Netflix reported having 300 million subscribers globally as of late 2024, the most recent time it disclosed this data point. HBO Max had 128 million users as of September 30.
Currently, Netflix holds 46% of mobile app monthly active users within the global streaming market, according to insights from market analysis firm Sensor Tower. Together with HBO Max, that percentage would increase to 56%, it determined.
“This arrangement solidifies Netflix’s status as the leading streaming platform for original productions,” indicated research insights from analysts at William Blair on Friday.
The magnitude of the merger invites significant examination from both industry professionals and U.S. legislators.
The Trump administration expresses “considerable doubt” regarding the merger, CNBC reported on Friday, with Sen. Elizabeth Warren previously calling for an antitrust investigation.
“This arrangement appears to be an anti-monopoly disaster. A Netflix-Warner Bros. partnership would fabricate a colossal media conglomerate wielding nearly half the streaming market — posing a risk of escalating subscription costs and diminishing options for viewers, while jeopardizing American employees,” remarked Warren, a Democrat from Massachusetts, in a statement.
The merger would also bestow Netflix authority over the renowned Warner Bros. film studio, further consolidating the cinematic landscape and heightening worries that the quantity or standard release periods of major titles could reduce.
It is commonplace in the aftermath of a deal announcement of this scale for interest groups, politicians, and corporate rivals to raise concerns regarding antitrust issues.
The Department of Justice is likely to assess the deal, as it has with other media mergers historically, and it can be a lengthy process. DOJ assessments might extend from several months to over a year.
Netflix suggested on Friday that it anticipates the agreement to finalize within 12 to 18 months, following Warner Bros. Discovery’s spin-off of its cable networks into Discovery Global.
Netflix leaders on Friday expressed they were “extremely confident” about the deal receiving regulatory sanction.
“This agreement is beneficial for consumers, fosters innovation, supports workers, encourages creators, and promotes growth,” asserted Netflix co-CEO Ted Sarandos during an investor call after the merger announcement.
“Our strategy is to collaborate closely with all relevant governments and regulators, but [we’re] quite certain that we will secure all the requisite approvals,” Sarandos elaborated.
As part of the agreement, Netflix has consented to a $5.8 billion termination fee payable to Warner Bros. Discovery should the deal face government obstruction.
Netflix’s offer surpassed competing bids from Paramount Skydance and Comcast.
Analysts from Deutsche Bank and William Blair expressed at least some degree of faith on Friday about the deal’s viability.
“A fusion of Warner Bros. Discovery with any of the three bidders would likely succeed even if the DOJ sought to obstruct the proposed merger,” wrote Deutsche Bank analysts on Friday, referencing insights from a veteran of the Department of Justice who allegedly sees no substantial antitrust issues with any of the three scenarios.
“Nevertheless … we lack all the detailed information that the DOJ will collect and scrutinize, nor do we know who the presiding judge of the case will be, and these elements could influence the result,” the Deutsche Bank analysts remarked.
Paramount, for its part, has been intensifying the situation.
Paramount’s legal team dispatched a letter to Warner Bros. Discovery this week, first reported by CNBC, wherein it claimed the sale process favored Netflix. The Wall Street Journal disclosed that in a different letter, Paramount contended that a Netflix acquisition would probably “never finalize” due to regulatory challenges.
Paramount was the only bidder aiming to purchase WBD’s substantial portfolio of pay-TV networks — and it’s doubtful it will abandon the pursuit without a fight.
Not so swift
Wall Street anticipated President Donald Trump’s second term to herald a surge in deal-making. Nevertheless, economic unpredictability has decelerated progress for some firms, with regulatory delays playing a larger role than expected.
“During Donald Trump’s administration, the antitrust review process has also devolved into a quagmire of political favoritism and corruption,” Warren stated in her remarks on Friday. “The Justice Department must impartially and openly enforce our nation’s anti-monopoly laws — not employ the review of the Warner Bros. deal to solicit influence and bribery.”
Paramount’s merger with Skydance remained in limbo for over a year before it ultimately received federal clearance in July.
The Federal Communications Commission (which is unlikely to evaluate the Netflix-WBD combination since it does not involve a broadcaster) approved the $8 billion merger shortly after Paramount agreed to settle a lawsuit involving the editing of a “60 Minutes” interview with former Vice President Kamala Harris by paying $16 million to Trump. Paramount had also ended its diversity, equity, and inclusion initiatives earlier that year following an FCC investigation into the company’s DEI policies.
In September, the newly merged Paramount Skydance, led by David Ellison, began setting its sights on Warner Bros. Discovery. The company is reevaluating whether to present a hostile bid directly to WBD shareholders to challenge Netflix as the prospective buyer, CNBC reported on Friday.
Ellison’s billionaire father, Oracle co-founder Larry Ellison, is known to have a close relationship with Trump.
The debate surrounding the approval of Netflix’s proposed acquisition of Warner Bros. would likely hinge on questions related to streaming — first, concerning consumer pricing, and second, regarding how to define Netflix’s audience.
Streaming subscription prices have increased across the board in recent years. In 2022, Netflix introduced a lower-cost, ad-supported subscription after years of resistance in an attempt to attract more subscribers. The subsequent year, Disney followed suit with its own affordable option.
Netflix is recognized for disrupting the traditional media landscape. The company concluded its DVD rental service in 2023 and fully embraced streaming. It has since experienced tremendous growth and has captivated audiences with original series like “Squid Game,” “Wednesday,” “Stranger Things,” and “Bridgerton.”
Its unconventional strategy and expanding presence in the industry may serve as a protective factor in the eyes of regulators.
“My prediction regarding the regulatory aspect is that Netflix will advocate and argue with their consultants for a very broad definition of their marketplace … incorporating broadcast, cable, subscription, and ad-supported streaming,” remarked Jeff Goldstein, a partner and managing director at AlixPartners, and co-leader of the U.S. Media group.
“And significantly, this would encompass YouTube,” he added.
YouTube has come to dominate the market in terms of viewership. Nielsen recently reported in October that YouTube commanded the highest share of television usage, with Netflix placing sixth and Warner Bros. Discovery in seventh. Conventional media organizations with linear channels — Disney, NBCUniversal, Fox, and Paramount — occupied the positions in between.
Detractors of the deal will likely frame Netflix’s reach more narrowly to illustrate excessive dominance, noted Goldstein.
“My belief is that streaming is not a defined category. Television viewership is a defined category … you know, audience might be a defined category,” stated media industry leader John Malone when asked about antitrust considerations surrounding the WBD sale process in November.
“But if you’re broadening the category, you must include YouTube, Facebook, and social networks, as well as TikTok,” he expressed. “That’s really the inquiry: is streaming a definable category? … Are studios a definable category … and will that receive rigorous examination? These regulatory matters can be rather unpredictable.”
— CNBC’s Julia Boorstin contributed to this report.
Disclosure: Comcast is the parent organization of NBCUniversal, which operates CNBC. Versant would become the new parent company of CNBC following Comcast’s anticipated spinoff of Versant.
