Antitrust Experts Question Netflix’s Main Point
Netflix wants to buy Warner Bros. Discovery for a huge $72 billion, saying it needs to compete with YouTube. But antitrust experts aren’t convinced, and doubt regulators will accept that argument. This would be a major deal, putting Warner Bros. Discovery’s studios and HBO Max under Netflix, creating one giant streaming service with 428 million users. Still, legal experts think it will be tough for Netflix to prove that YouTube is a real threat that justifies such a big merger.
Netflix says buying Warner Bros. Discovery is the only way to compete with YouTube’s massive reach. According to Nielsen, YouTube is watched more in the US than regular TV and other streaming services. But lawyers think the Justice Department will see a big difference between Netflix’s fancy shows and YouTube’s homemade videos. These differences will really matter when regulators review the deal.
Netflix argues it is in a race with YouTube because people only watch for so many hours a day, says Abiel Garcia, an antitrust partner at Kesselman Brantly Stockinger. But that argument does not work. Netflix makes big-budget shows like Stranger Things and K-pop Demon Hunters. These are usually at the top of the ratings. Subscriptions cost $7.99 to $24.99 per month, and they also show ads.
YouTube focuses on regular people’s videos and ads. It features famous influencers, music, how-to videos, and content for kids. Big names like MrBeast, with over 450 million subscribers, get more views than most media. In October, YouTube had almost 13 percent of all streaming views. Netflix and HBO Max would have about 9 percent combined after the merger.
What Regulators Will Really Focus On
Experts think the Justice Department will separate the two platforms when deciding whether this deal harms competition. Robin Crauthers, a partner at McCarter & English and a former DOJ antitrust attorney, says Netflix will have a tough time: Netflix will struggle to argue that YouTube is the same as the kinds of shows you watch on HBO Max and Netflix.
Recent actions from regulators show they’re ready to narrow the playing field. The Federal Trade Commission (FTC) successfully showed that Whole Foods’ buying of Wild Oats hurt competition, even though people argued that they also compete with regular grocery stores. The FTC also blocked Tapestry and Capri from merging, saying it would hurt competition in both fancy and affordable products. In that case, both companies knew they were in that market, but told people they weren’t.
The Netflix and Warner Bros. deal will require many documents to be reviewed closely. Shaoul Sussman, a former FTC antitrust attorney now at Simonsen Sussman, says regulators will ask for internal documents earlier. That will give the government an advantage in the investigation, he said. If Netflix’s internal papers do not identify YouTube as a major competitor or focus only on paid streaming that excludes YouTube, experts think Netflix’s argument will be weaker. A deal would lower costs for HBO Max subscribers who already have Netflix, suggesting the possibility of bundles. But the Justice Department is usually suspicious of these claims. Crauthers said regulators will also consider whether Netflix could raise prices for people who don’t want bundles.
As regulators around the world prepare to review the deal, Netflix needs to show that its reasons make sense. YouTube is popular because of its unique content and how it makes money; Netflix must convince regulators that it’s really competing with YouTube.
The signs suggest that the claim may face resistance. For now, Netflix says the Warner Bros. Discovery purchase will help them in the changing digital entertainment world. But regulators have made it clear they need solid proof.
