Netflix Eyes Warner Bros. to Tackle YouTube, Sparks Antitrust Debate

Netflix is considering acquiring Warner Bros. Discovery in a bid to better compete with YouTube's dominance in viewership. The streaming giant argues that even with Warner Bros. Discovery, its share of viewing hours would still lag behind YouTube.

That said, the reality is a bit more complicated. this rationale is facing pushback. Antitrust experts and Paramount's CEO are skeptical, suggesting such a deal would be anti-competitive. Regulators are likely to examine Netflix's argument that it and YouTube are direct competitors, with some suggesting the Justice Department might not see them as interchangeable.

Netflix Co-CEO Greg Peters highlighted at a UBS conference that acquiring Warner Bros. Discovery would only increase Netflix's viewership share in the U.S. from 8% to 9%, still behind YouTube's 13%. This statement coincided with Paramount's filing of a hostile bid.

Peters also pointed out that if Paramount acquired Warner Bros. Discovery, the combined entity would control 13.8% of U.S. viewership, surpassing both Netflix and YouTube. Netflix argues that Paramount buying Warner Bros. poses a greater threat to competition than Netflix doing so.

In response, Paramount Skydance CEO David Ellison likened Netflix's argument to Coca-Cola justifying the purchase of Pepsi because Budweiser also makes beverages. He argued that top showrunners won't take their best work to TikTok or Instagram, but to platforms like Netflix, Amazon, Apple, HBO Max, and Paramount Plus. Ellison believes the deal would be anti-competitive and detrimental to Hollywood.

Ellison added that the consolidation of market share resulting from a Warner Bros. Discovery-Netflix merger would be unprecedented and deeply anti-competitive.

Reuters reports that antitrust experts are doubtful regulators will accept Netflix's reasoning. While Netflix claims the deal is necessary to challenge YouTube, experts argue that the Justice Department is unlikely to view Netflix and YouTube as direct rivals due to differences in content, audiences, and business models.

"Netflix is trying to say it competes with YouTube because people only watch a certain amount of content a day," said Abiel Garcia, antitrust partner at Kesselman Brantly Stockinger. "That argument ultimately fails."

Experts suggest the DOJ is unlikely to consider YouTube videos as a substitute for Netflix shows and movies. Antitrust enforcers are skilled at identifying how mergers can stifle competition in specific sub-markets, even when companies argue they face competition from a broad range of players.