The Netflix-Warner Bros. deal now faces a wall of opposition

An $83 billion deal that would see the world’s No. 1 and No. 4 streamers combine has been announced, with Netflix edging out rivals Paramount Skydance and Comcast in the bidding war for Warner Bros. Discovery.

Now there’s just the matter of getting the thing approved.

Netflix appears to have convinced WBD of its ability to pass antitrust scrutiny through a combination of arguments: the deal would lower consumer costs through new bundles, there wouldn’t be a significant market share boost since most people subscribe to Netflix and HBO Max already, and nobody can hold a monopoly on “content” in the internet age anyway.

Those arguments will now face a wall of scrutiny as opponents to the merger pile on to argue against its legality to a Trump administration that reportedly already views it with “heavy skepticism.” Among the critics:

Paramount Skydance

A lot can change in a week. The newly merged Paramount Skydance appeared the runaway victor of the bidding war as recently as last month before ultimately losing out to Netflix. In hindsight, the company’s letter to the Warner Bros. board on Thursday reads like an early draft of its email to the Trump administration.

Paramount questioned the “fairness and adequacy” of the bidding process, writing:

“It has become increasingly clear, through media reporting and otherwise, that WBD appears to have abandoned the semblance and reality of a fair transaction process, thereby abdicating its duties to stockholders, and embarked on a myopic process with a predetermined outcome that favors a single bidder.”

Theater owners

Cinema United, the world’s largest movie theater trade group, representing more than 30,000 screens across the US, came out in opposition to the merger on Friday, highlighting the “unprecedented threat” the combination poses for the already embattled film industry.

The trade group warns that 25% of the US box office could be eliminated if Netflix opts to send films typically marked for wide theatrical release straight to its streaming platform. Cinema United wrote:

“The proposed acquisition of Warner Bros. by Netflix poses an unprecedented threat to the global exhibition business. The negative impact of this acquisition will impact theatres from the biggest circuits to one-screen independents in small towns in the United States and around the world. ...

Netflix’s stated business model does not support theatrical exhibition. In fact, it is the opposite. Regulators must look closely at the specifics of this proposed transaction and understand the negative impact it will have on consumers, exhibition and the entertainment industry.”

In its press release, Netflix said that it plans to “maintain Warner Bros.’ current operations,” which includes “theatrical releases for films” — so films in development will appear on the big screens through 2029.

Nevertheless, the likes of AMC and Cinemark are getting shelled on Friday.

The WGA

With union members already facing a severely contracted labor market, entertainment unions are unlikely to support any effort to further constrict the number of buyers in the industry.

Prior to Netflix’s emergence as the winner of the WBD bidding war, the Writers Guild of America — the union representing film and television writers — wrote that any major consolidation between entertainment giants would be a “disaster.” In an October statement, the union said:

“Merger after merger in the media industry has harmed workers, diminished competition and free speech, and wasted hundreds of billions of dollars better invested in organic growth. ... Combining Warner Bros. with Paramount or another major studio or streamer would be a disaster for writers, for consumers, and for competition. The WGAW will work with regulators to block the merger.”

Film producers

An anonymous collective of “concerned feature film producers” reportedly sent an unsigned letter to members of Congress on Thursday, arguing that the merger would allow Netflix to “effectively hold a noose around the theatrical marketplace.”

According to Variety reporting, Netflix’s proposal could have WBD films in theaters for as little as two weeks before dropping on the combined streaming services, though another insider denied the report.

The letter is said to have included a 2023 earnings call quote from Netflix CEO Ted Sarandos in which the exec said, “Driving folks to a theater is just not our business.”

Congress

Members of Congress on both sides of the political spectrum have already expressed heavy skepticism about the megamerger.

Republican Senator Mike Lee said the deal raises more competition questions than any transaction in a decade.

Democratic Senator Elizabeth Warren referred to it as an “anti-monopoly nightmare.”

Republican Congressman Darrell Issa, who represents California’s 48th district, also penned a letter critical of the proposed tie-up addressed to Attorney General Pam Bondi and Gail Slater, head of the Department of Justice’s antitrust division, urging them to “continue to protect a critical American industry.”

According to antitrust expert and Cornell law school professor George Hay, this deal presents an unusual regulation scenario — one in which regulators may have more tools to effectively break up a deal on antitrust grounds.

“Often the DOJ is shooting blind,” Hay told Sherwood News’ Rani Molla. “They have help this time from parties who know the numbers, know where bodies are buried. You have very interested parties like Paramount delighted to tell the DOJ everything they know.”

Whether Netflix will be able to successfully overcome all of these arguments is anyone’s guess. If the deal is squashed in court, though, the streamer will owe Warner Bros. a $5.8 billion breakup fee.