Are Netflix and Warner Bros Losing the Battle to Defend Their Merger?

Netflix's proposed £61bn acquisition of Warner Bros Discovery is facing significant scrutiny from US lawmakers, who are concerned about the merger's impact on competition, consumer prices, and the future of cinemas. During a recent hearing, Senators questioned Netflix's co-CEO Ted Sarandos about the potential consequences of the deal, which is currently under review by the US Department of Justice. This article delves into the current situation, implications for the UK, and what this merger could mean for the entertainment industry.

Last updated: 12 October 2023 (BST)

What’s happening now

Netflix's attempt to acquire Warner Bros Discovery has sparked a fierce debate in the US Congress, with lawmakers from both sides expressing scepticism. During a Senate antitrust subcommittee hearing, various concerns were raised regarding how the merger might affect competition in the entertainment sector, potential price increases for subscribers, and the sustainability of cinemas. With a competing bid from Paramount Skydance still on the table, the ultimate fate of this deal remains uncertain.

Key takeaways

The merger could significantly alter competition in the entertainment industry.
Lawmakers are concerned about rising subscription prices and the future of cinemas.
Netflix's co-CEO has made commitments regarding the future operations of Warner Bros.
Paramount Skydance continues to pursue its own bid for Warner Bros Discovery.
Regulatory approval from the Department of Justice is still pending.

Timeline: how we got here

The timeline of Netflix's proposed acquisition of Warner Bros Discovery reflects a series of strategic moves and regulatory hurdles:

April 2023: Netflix expresses interest in acquiring Warner Bros Discovery, signalling a desire to expand its content library and market presence.
June 2023: Netflix officially submits a bid of £61bn for Warner Bros Discovery.
August 2023: Paramount Skydance enters the bidding war with a competing offer of $108bn (£82bn).
October 2023: A Senate antitrust subcommittee holds a hearing to address concerns about the merger's impact, with Ted Sarandos testifying on behalf of Netflix.

What’s new vs what’s known

New today/this week

The recent Senate hearing revealed a bipartisan scepticism regarding the merger, with lawmakers questioning Netflix's claims about consumer benefits. Specifically, Senators raised issues related to job competition and the potential for increased subscription prices.

What was already established

Prior to the hearing, it was known that Netflix's acquisition would grant it control over Warner Bros' film and television assets, including HBO Max. The company had previously indicated that it would maintain Warner Bros' operations largely as they are today, aiming to preserve existing jobs and output.

Impact for the UK

Consumers and households

For UK consumers, the merger could lead to reduced competition in the streaming market, potentially resulting in higher subscription prices and fewer options for content. If Netflix were to consolidate Warner Bros' offerings, it could limit variety in programming and films available to subscribers.

Businesses and jobs

The merger could also affect the UK entertainment sector, with concerns that job opportunities may diminish as two major players combine. The potential for job losses could impact not just Netflix and Warner Bros employees, but also those working in cinemas and related industries.

Policy and regulation

The UK government will be closely monitoring the outcome of this merger, especially as it may influence domestic competition laws and regulations. If approved, similar mergers could be encouraged or discouraged based on this precedent, impacting future deals in the entertainment sector.

Numbers that matter

£61bn: The amount Netflix is proposing to pay for Warner Bros Discovery.
£82bn: The competing bid from Paramount Skydance for Warner Bros Discovery.
80%: Percentage of HBO Max subscribers who also subscribe to Netflix, highlighting market overlap.
45 days: The standard theatrical release period Netflix has committed to for Warner Bros films.
Countless: The number of jobs at stake across both companies and the broader entertainment industry.

Definitions and jargon buster

Antitrust: Laws or regulations that promote competition and prevent monopolies in the marketplace.
Subscription prices: The cost paid by consumers for access to services like streaming platforms.
Theatrical release: The period during which a film is shown in cinemas before it becomes available on streaming platforms.

How to think about the next steps

Near term (0–4 weeks)

Watch for updates from the Department of Justice as they consider the implications of the merger. Any announcements regarding regulatory decisions could shape the immediate landscape for both Netflix and Warner Bros Discovery.

Medium term (1–6 months)

Monitor developments related to Paramount's competing bid and any responses from Netflix. The outcome of these negotiations will likely influence the future of content creation and distribution in the UK and beyond.

Signals to watch

Official statements from the Department of Justice regarding approval or rejection of the merger.
Further hearings or discussions in Congress that may impact public sentiment around the deal.
Responses from stakeholders in the entertainment industry, particularly independent creators and smaller studios.

Practical guidance

Do

Stay informed about the implications of this merger for your entertainment options.
Consider the potential impact on subscription services you currently use.
Look for updates on job security in the entertainment sector if you work in related fields.

Don’t

Don’t rush to conclusions about the outcomes of the merger without considering multiple perspectives.
Don’t ignore the potential effects on cinema attendance and local theatres.
Don’t overlook the importance of competition in the entertainment industry.

Checklist

Review your current streaming subscriptions and assess their value.
Stay updated on regulatory news regarding the merger.
Engage with discussions about the future of entertainment and media.
Evaluate how changes in the industry may affect your viewing preferences.
Consider supporting independent films and creators amidst consolidation trends.

Risks, caveats, and uncertainties

While the merger promises potential benefits, there are significant risks and uncertainties, especially regarding market competition and consumer choice. Both Netflix and Paramount have vested interests that may not align with consumer welfare, and the outcome of the Department of Justice review remains uncertain. Furthermore, the cultural implications of consolidating content control warrant close examination, as they could shape what viewers consume and how diverse that content is.

Bottom line

The proposed merger between Netflix and Warner Bros Discovery stands at a critical juncture, with far-reaching implications for the entertainment landscape. As regulatory scrutiny intensifies and competing offers linger, both consumers and industry professionals should remain vigilant about the potential changes ahead. The question remains: how will this consolidation affect the content we love and the accessibility of diverse media?

FAQs

What is the primary concern regarding the Netflix and Warner Bros Discovery merger?

The primary concern is that the merger may reduce competition in the entertainment industry, leading to higher prices for consumers and fewer choices in content.

How is the UK affected by this merger?

The UK could face changes in streaming options and subscription prices, as well as implications for jobs in the entertainment sector if the merger proceeds.

What alternatives exist to Netflix's acquisition of Warner Bros Discovery?

Paramount Skydance has proposed a competing bid of £82bn, arguing that their offer is superior and could provide better outcomes for consumers and the industry.