Netflix Defends Proposed Warner Bros. Discovery Acquisition Amid Monopoly Fears, Citing Consumer Choice and Value

United States - Ekhbary News Agency

Netflix Defends Proposed Warner Bros. Discovery Acquisition Amid Monopoly Fears, Citing Consumer Choice and Value

Netflix Co-CEO Ted Sarandos recently appeared before the US Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy, and Consumer Rights, for a hearing titled “Examining the Competitive Impact of the Proposed Netflix-Warner Brothers Transaction.” This appearance comes amidst escalating scrutiny over Netflix's plans to acquire Warner Bros. Discovery's (WBD’s) streaming and movie studios businesses, a move that has sparked significant concerns regarding market concentration and its potential impact on consumers. The primary objective of Sarandos’s testimony was to assuage fears that a combined Netflix-WBD entity would stifle competition, reduce consumer choice, or lead to inevitable price hikes. Instead, Sarandos presented a counter-narrative, suggesting that the acquisition would, in fact, inject more value into the streaming ecosystem by offering a richer content library at competitive prices.

A central point of contention revolves around market dominance. Netflix, with 301.63 million subscribers as of January 2025, stands as the world’s largest subscription video-on-demand (SVOD) provider. Warner Bros. Discovery, including HBO Max and Discovery+, ranks third with 128 million streaming subscribers. Critics argue that merging these two giants would create an insurmountable lead, potentially reducing incentives for innovation and competitive pricing. However, Sarandos emphasized the complementary nature of their offerings, noting that a significant 80 percent of HBO Max subscribers already maintain a Netflix subscription. This overlap, he contended, signifies an opportunity to consolidate and optimize content delivery rather than eliminate competition.

Sarandos directly addressed the issue of affordability, a key concern raised by lawmakers like Sen. Amy Klobuchar (D-Minnesota). She questioned how Netflix could assure affordable streaming post-merger, especially given Netflix's own history of price increases, including a recent hike in January 2025. Sarandos countered by asserting the continued competitiveness of the streaming landscape. He highlighted Netflix's "one-click cancel" policy as the ultimate consumer safeguard: "If the consumer says, 'That’s too much for what I’m getting,' they can cancel with one click." This, he argued, empowers subscribers to dictate value, preventing any single entity from unilaterally imposing exorbitant fees without consequence.

Furthermore, the Netflix executive linked past price adjustments to an increase in "value" for subscribers, suggesting that enhancements in content quality and quantity justified these changes. He elaborated on this concept of value, not merely as a subscription fee, but as the cost-per-hour of content watched. Sarandos cited internal calculations suggesting Netflix subscribers pay an average of 35 cents per hour of content, significantly less than competitors like Paramount+, which reportedly charges 90 cents per hour. This metric, supported by independent research from firms like MoffettNathanson, aims to reframe the debate from raw subscription cost to perceived value.

The regulatory landscape remains complex. Sarandos revealed that Netflix is actively collaborating with the US Department of Justice to establish "guardrails" against future price hikes, demonstrating a willingness to address antitrust concerns proactively. He maintained that the merger presents "no concentration risk," portraying WBD not just as a competitor but also as a crucial content supplier. This perspective underscores Netflix's strategy to bolster its content pipeline and diversify its offerings, rather than simply eliminate a rival.

Beyond direct SVOD competitors, Sarandos broadened the scope of competition, pointing to tech behemoths like Google, Apple, and Amazon as formidable players "trying to run away with the TV business." He cited Nielsen’s The Gauge tracker, which in December showed YouTube (excluding YouTube TV) commanding a larger share of TV viewership (12.7%) than any single SVOD service, including Netflix (9%). This data served to contextualize Netflix’s market share, arguing that even with WBD’s assets, a combined Netflix-HBO Max would only account for approximately 21 percent of the total SVOD market, far from a monopoly.

The proposed acquisition is unfolding amidst a broader struggle for WBD's assets. Netflix recently sweetened its offer to an all-cash bid of $72 billion, valuing HBO Max and WB's film studios at $27.75 per share, or an enterprise value of $82.7 billion. This move signals Netflix's determination to secure key content creation capabilities. However, the path is not clear, as Paramount Global (via its Skydance bid) has launched a hostile takeover attempt, suing WBD over the Netflix deal and offering a higher $108.4 billion ($30 per share) for the entirety of WBD, including its lucrative cable channels. This escalating bidding war underscores the strategic importance of WBD's content library and production capabilities in the fiercely competitive media landscape. The ultimate outcome will not only reshape the streaming industry but also redefine how consumers access and pay for entertainment in the years to come.

Ekhbary News Agency