Netflix has a big unanswered question. That may kill its Warner Bros. deal

Netflix is trying to make a huge purchase. It wants to buy Warner Bros. Discovery (WBD). This deal is massive. It is worth over $82 billion. It would change the entire world of movies and TV.

But this deal has a major problem. It has a big, unanswered question. This question is so important that it might kill the deal. This question is about antitrust. Antitrust means rules against a company getting too much power.

The problem comes down to one thing. The government must decide what the streaming market is. If the market is seen as small, Netflix is too powerful. If the market is seen as big, Netflix might be okay. The government’s answer to this one question will decide the deal’s fate. This article looks at the problem and the major risk for Netflix.

The Deal: A Giant Becomes Bigger Warner Bros

First, let’s look at what Netflix is buying. Netflix is the biggest streaming company in the world. Buying WBD makes it a giant.

Prized Assets

WBD owns many valuable things. These are called assets.

• HBO Max: This is the third-biggest streaming service in the US. Netflix buying it removes a major competitor.
• Famous Content: Netflix gets all the great shows and movies. This includes Harry Potter, DC Comics, and shows like Game of Thrones.
• Warner Bros. Studio: This is one of the oldest and most famous movie studios in Hollywood.

The Antitrust Concern

The government worries about market power. Market power is the ability of one company to control prices and choice.

• Fewer Choices: If Netflix buys a rival like HBO Max, there will be fewer companies selling streaming. This means less competition.
• Higher Prices: When competition is low, the big company can raise prices. It can also offer worse service.
• Control Over Hollywood: Netflix would control so much content that it could dictate terms. It could tell writers and producers what they can and cannot make.

The Unanswered Question: What is “The Market”? Warner Bros

The entire fight comes down to a simple, but tricky, question. This question is what lawyers call “defining the relevant market.”

Netflix’s Answer (The Wide View)

Netflix argues that the market is very wide.

• The Whole Internet: Netflix says that the market is not just streaming. It says the market is the whole internet. It includes YouTube, TikTok, and video games.
• The “Eye-Time” Argument: Netflix says its main rival is anything that takes up people’s time. This is called “eye-time.” Since people have endless choices on the internet, Netflix is not a monopoly. A monopoly is when one company controls everything.
• Why the Wide View Helps Netflix: If the market is the whole internet, Netflix is small. It has many rivals. Therefore, the deal should be allowed.

The Government’s Answer (The Narrow View)

The government, mainly the Department of Justice (DOJ), often argues the market is narrow.

• The Premium Streaming Market: The DOJ says the market is just premium streaming. This means services like Netflix, HBO Max, Disney+, and Amazon Prime. These services sell high-quality, exclusive shows.
• Why the Narrow View Hurts Netflix: If the market is only these few services, Netflix is already the biggest. Buying HBO Max gives them too much control over this small, important market. The combined company would control too much of the premium content people want to pay for.

The government has to pick one answer. The answer will decide if Netflix has too much power. This is the unanswered question that could kill the deal.

The Risk: DOJ Investigation Warner Bros

The DOJ is the part of the US government that enforces antitrust laws. They are taking this deal very seriously.

The Threat of a Lawsuit

The DOJ can file a lawsuit. A lawsuit is a legal fight. The DOJ can sue to stop the deal from happening.

• A Long Process: A lawsuit from the DOJ would mean a long, costly fight for Netflix. It could take years to finish.
• Comparing to Rivals: Government officials have already talked about this. They said the investigation would be huge. It would be as big as the past investigations into other tech giants. This means the government thinks Netflix is now in the same group as Google and Amazon.

The Breakup Fee

Netflix knows this risk is real. They have added a special clause to the deal.

• Paying to Fail: Netflix promised to pay WBD a huge fine if the government blocks the deal. This fine is the breakup fee. It is a massive $5.8 billion. This high fee shows how big the risk of a government block is. If the risk were small, the fee would be smaller.

The Movie Theater Problem

The deal also has a big fight with the movie theater industry. This is another big problem for Netflix.

The Release Window

Movie theaters are worried about the release window. The release window is the time a movie is only shown in theaters. After this time, it goes to streaming.

• Warner Bros. Tradition: Warner Bros. has a long history of showing movies in theaters first. They have contracts that last until 2029.
• Netflix’s Way: Netflix usually puts its movies on streaming very fast. They do not like long waits.
• Fear of Destruction: The movie theater companies are afraid. They say that if Netflix controls Warner Bros., it will cut the theater time very short. This will destroy the entire movie theater business. They have urged the government to block the deal for this reason.

Netflix has promised to keep releasing movies in theaters. But theaters do not trust them. They say Netflix’s business model is against theaters.

The Politics: Trump’s View Warner Bros

The deal also faces political problems. President Donald Trump has often spoken out against big mergers.

Anti-Big Tech Talk

President Trump and his team have often been critical of big tech companies.

• Targeting Rivals: The President has criticized the European Union for its tech fines. But he has also supported the US government when it has sued US tech companies.
• The Importance of Hollywood: Hollywood is very visible. A huge merger like this gets the attention of the President.

Rival Bidders

One of the rival bidders for WBD was Paramount Skydance. This company has close ties to powerful people. The far right has also been critical of Netflix. They believe Netflix pushes content they do not like. This political pressure adds risk to the deal.

Long-Term Impact on Consumers Warner Bros

The final decision will affect every person who watches movies or TV shows.

Loss of Creative Diversity

If Netflix becomes too powerful, it might hurt creative diversity. Diversity means having many different kinds of content and ideas.

• Fewer Buyers: If Netflix is the only big buyer, writers and producers have fewer places to sell their ideas. This means fewer types of shows will be made.
• Standardized Content: Netflix might only make the kind of content that works best for its platform. This could make all movies and shows start to look the same.

The Price of Monopoly

If the DOJ agrees with the narrow view of the market, it sees a monopoly forming.

• Price Control: A company with a monopoly can charge what it wants. It can make customers pay more.
• Service Quality: It can lower the quality of its service. It does not have to worry about competition.

The government must decide if the benefits of the merger (like more content in one place) are worth the risk of losing competition. Warner Bros

Netflix’s purchase of Warner Bros

Netflix’s purchase of Warner Bros. Discovery is a game-changing event. But the deal faces a major threat. This threat comes from a single, unanswered question. The question is: how wide is the streaming market? Warner Bros

If the Department of Justice (DOJ) uses the narrow view, it will see Netflix as having too much power. This could lead to a lawsuit to kill the deal. This risk is shown by the huge $5.8 billion breakup fee Netflix has agreed to pay. Warner Bros

The deal is also strongly opposed by the movie theater industry. They fear Netflix will destroy the theatrical release window. The government’s final answer to the question of “the market” will decide the future of Hollywood. It will decide the prices and choices for every person who watches streamed content. This is the biggest regulatory fight in the history of streaming. Warner Bros

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