We’ve written before about the decision of Warner Bros. Discovery to put all or a portion of the company on the auction block.
In that piece we primarily argued that the government should allow a transaction to take place within the consumer welfare standard. Mergers and acquisitions should be permitted so long as there is not a threat to harm consumer welfare by allowing too much concentration of market power.
We also observed that conservatives should probably prefer a Paramount Skydance purchase of the Warner Bros. assets, including the fascinating possibility of news network CNN being owned by a conservative-leaning Paramount Skydance.
Most observers thought Paramount Skydance was the suitor most likely to be successful.
But yesterday’s news threw everyone a curve. Turns out Warner Bros. Discovery accepted Netflix’s bid, even though it was reportedly for a lower price per share. According to the Wall Street Journal, Warner Bros. Discovery preferred the idea of retaining its cable networks, while Paramount Skydance’s higher offer included purchasing them as well.
A Netflix purchase of Warner Bros. Discovery should concern those who value market competition. A marriage of Netflix and Warner Bros. would have more than twice as many subscribers as the second largest competitor.
It should also concern fans of the theater experience. Michael O’Leary, the CEO of Cinema United (and longtime friend of IPI) has said that “such a transaction ‘poses an unprecedented threat to the global exhibition business.’” Noted director James Cameron has said that Netflix buying Warner Bros. would be a “disaster.” And he’s got reason to be concerned—Netflix CEO Ted Sarandos has publicly stated that theatrical films are dead and that the theater experience is an “outmoded idea.”
Here's the thing—Paramount Skydance’s offer poses no antitrust concerns. If anything, it enhances competition, and could bring some much-needed reform to the news media business. Netflix’s purchase, on the other hand, merits thorough antitrust review because it would create a dominant player dwarfing its competitors.
And a little appreciated detail of the studio business is that Warner Bros. sells its shows to several different network and streaming services, whereas Netflix tends to keep its shows in-house. So Netflix’s control of the Warner Bros. catalog and creative output might well also be stewarded in a way that inhibits competition.
Sen.Elizabeth Warren tends to always oppose mergers of any kind, so it’s no surprise that she also opposes the Netflix purchase of Warner Bros. Discovery. The thing is, “even a stopped clock is right twice a day.” Given the assumption that President Trump also favors Paramount Skydance, this might be one of those rare occasions where President Trump and Sen. Warren might find common ground and say “pass the popcorn” while the Justice Department considers the threat to competition posed by a combination of Netflix / Warner Bros. / HBO / DC Studios.