A merger between Netflix and Warner Bros. Discovery (WBD) will face antitrust scrutiny from the US Department of Justice as regulators try to define the relevant market and measure market share.
McCarter & English partner and former DOJ antitrust attorney Robin Crauthers spoke with Equity Report about the merger’s potential antitrust implications. Robin explained that regulators would likely focus on the vertical aspects of the transaction, particularly whether WBD’s content would remain available to other streaming platforms.
Crauthers explained that regulators would likely spend the first part of the investigation determining what the relevant market is and would consider whether a narrower market exists for “premium streaming services,” such as Warner Bros., HBO Max. Amazon Prime Video or Apple TV. She noted that if licensing, pricing, and bidding practices differ significantly for smaller platforms such as Paramount, Peacock, Tubi or Roku, the DOJ might exclude them from the relevant market. That, she says, could make the market smaller and increase Netflix’s market share, giving it more market power.
“The DOJ would review the deal and examine how important Warner Brothers content is to other platforms in attracting subscribers, how licensing and bidding for that content currently works, and which companies tend to win those bids.” She noted that “Regulators would also assess whether a combined Netflix and Warner Brothers would be powerful enough to keep the content on its platform without losing licensing revenue.”
Crauthers said that the DOJ would review market data and the parties’ documents to understand how Warner Bros. content is sold or licensed today and how those arrangements might be affected by a change in ownership. She noted that “it could be that they will not have enough market power to maintain all that content only on Netflix, given it may not be able to raise prices enough to recover lost licensing revenue.”
Looking at previous large media mergers could inform the review, but Crauthers says they may not provide precedent. “The market is shifting; it is different now. When I was at the Division, I worked on a ton of broadcast media mergers.”