Netflix co-CEO Ted Sarandos was in the hot seat defending the streaming giant’s $83 billion deal for Warner Bros. at a Senate hearing Tuesday, amid pointed questions from lawmakers about the threat the pact poses to competition, jobs and streaming prices.
The hearing, “Examining the Competitive Impact of the Proposed Netflix-Warner Brothers Transaction,” was called by the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights.
Sen. Mike Lee (R-Utah), the subcommittee’s chair, opened the hearing by saying the deal raises “antitrust concerns” that warrant scrutiny. Netflix and HBO Max both offer subscription streaming services, and Netflix and Warner Bros. compete to produce TV shows and films, he said. Netflix, with WB’s library and production capabilities, would have “the incentive and the ability to put rivals at a disadvantage” by limiting content licensing, he said, and it could starve movie theatres of films.
Through the deal, Netflix could become the “one platform to rule them all,” Lee said.
Sen. Cory Booker (D-New Jersey), the subcommittee’s ranking member, said the sale of Warner Bros. “to any competitor” raises concerns about competition and have a negative impact on “tens of thousands” of workers in Hollywood by reducing the amount of TV shows and films that get produced. “We know Netflix’s power,” he said, noting that he streams a lot of content on the service. “I have concerns about Netflix gaining more power over consumers” and leaving them with “fewer options.”
Sarandos, in his opening remarks, said Netflix’s original productions have generated 155,000 jobs, with productions in all 50 states. He said the Warner Bros. businesses that Netflix is acquiring are “very different from ours,” and that Netflix plans to operate those businesses “largely as they are today.”
“We’re buying a company that has assets we do not,” said Sarandos, reiterating Netflix’s pledge to preserve a 45-day theatrical window for WB’s movies.
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Sarandos insisted Netflix and HBO Max are complementary, and claimed that 80% of HBO Max subscribers also subscribe to Netflix. “We will give consumers more content for less.” He also said Netflix faces increasing competition from “deep-pocketed tech companies trying to run away with the TV business,” naming Google’s YouTube, Apple and Amazon’s Prime Video. He noted that Netflix’s share of U.S. TV viewership for December was 9% and that with HBO Max will be around 10%, still behind YouTube’s share of TV viewing.
On Dec. 5, Netflix and Warner Bros. Discovery announced their megadeal under which Netflix will acquire Warner Bros. Discovery’s studios and HBO Max for $27.75/share. Two weeks ago, Netflix switched to an all-cash offer, replacing its previous cash-and-stock terms — a change driven by pressure from David Ellison’s Paramount Skydance, which has been pursuing a hostile takeover attempt of Warner Bros. Discovery with what it alleges is a superior deal for WBD shareholders.
Booker said he invited David Ellison to the hearing given his company’s $108 billion hostile bid — but that Paramount declined to participate, citing the WBD’s board rejection of its offer.
Lee asked Sarandos that why Netflix needs to buy WB’s studios, if Netflix is already planning to spend $20 billion, up 10%, on original and licensed content in 2026. “Warner Bros. is both a competitor and a supplier,” Sarandos said. “Our history is about adding more” content and choices for consumers.
Lee also questioned Sarandos’ assertion that YouTube is a competitor, given that YouTube doesn’t fund original content directly. “They’re not in the same business,” the senator said, pointing out it doesn’t require a subscription or login. Sarandos said Netflix and YouTube are competing for the same content, viewers and ad dollars, and the exec pointed to “Iron Lung,” a self-financed movie from YouTube creator Markiplier, which led the box office over the weekend.
Netflix and WBD say that their deal will preserve industry jobs, as Netflix doesn’t have a studio operation of the size of Warner Bros., and they’ve pointed to Paramount Skydance’s claim that it could realise $6 billion in cost savings through the acquisition of Warner Bros. Discovery as predicated on massive layoffs. In addition, Netflix asserts that retail streaming prices will go down, arguing that consumers see HBO Max as complementary to Netflix’s service, and as such competitors like Amazon’s Prime Video and Disney+/Hulu will be forced to keep pricing in check to fight for market share.
Also testifying at the hearing was Bruce Campbell, WBD’s chief revenue and strategy officer. He said the deal will give Warner Bros.’ studios business access to Netflix’s distribution capabilities, while giving Netflix’s “nascent” productions operations a boost through WB’s studios.
Campbell said Netflix will be able to offer Netflix and HBO Max streaming services together “at a discount” and that Netflix will be able to put more Warner Bros. content on its core streaming offering: “I think that too will be pro-consumer.”
Netflix and WBD say they have proactively reached out to antitrust regulators in the U.S. and Europe to make their case for why the deal should go through. Indeed, the companies’ lawyers reached out to representatives in the Justice Department’s antitrust division the day Netflix and Warner Bros. Discovery announced their pact.
From Variety US