In a strategic attempt to persuade shareholders of Warner Bros. Discovery (WBD) to support Paramount Skydance’s $108 billion hostile takeover bid, David Ellison has voiced strong concerns regarding the potential acquisition of WBD by Netflix. In a letter addressed to WBD shareholders on December 10, Ellison contended that European regulators would likely reject any bid from Netflix aimed at acquiring Warner Bros. Discovery, citing Netflix’s substantial dominance in the European subscription video on-demand (SVOD) market.
Ellison underscored that Netflix commands a remarkable 51 percent share of the continent’s SVOD market, framing its acquisition of WBD as a calculated strategy to eliminate a key competitor, particularly HBO Max. He argued that regulators in the European Commission and the U.K.’s Competition and Markets Authority would focus on Netflix’s significant market hold within a narrow SVOD framework, rather than a broader classification of “all internet-enabled video” which would include various platforms like YouTube and TikTok.
However, the consensus among European antitrust experts appears to diverge from Ellison’s predictions. Industry authorities interviewed by The Hollywood Reporter asserted that both the Paramount and Netflix bids would face regulatory scrutiny but ultimately posited that neither deal would likely be outright blocked. Cristina Caffarra, an antitrust economist with extensive experience in media mergers, pointed out that the European Commission has historically permitted similar mergers without interruption, suggesting that any review process would ultimately lead to regulatory remedies rather than complete obstruction.
Caffarra elaborated on past precedents, referencing Disney’s 2019 acquisition of 21st Century Fox, which proceeded after Disney divested several European television channels to address competitive concerns. Likewise, Amazon’s acquisition of MGM reached clearance without conditions, as EU regulators focused primarily on specific overlaps rather than broader competitive implications.
In a bid to bolster his position, Ellison emphasized that a merger with Paramount would enhance competition within the SVOD landscape. Pier Silvio Berlusconi, CEO of MFE-MediaForEurope, publicly supported the idea, suggesting that a Paramount-Warner’s merger would establish a stronger competitive environment than merely allowing Netflix, Amazon, and Disney to dominate.
Yet, the relevance of Netflix’s market share remains a point of contention. Analysts like Alice Enders have indicated that while Netflix’s share is significant, the rise of HBO Max illustrates that the streaming landscape allows for competition despite high barriers. Enders noted that the Paramount offer carries its own vulnerabilities, particularly regarding foreign investments from sovereign wealth funds, which could complicate regulatory approval in Europe, given heightened sensitivities towards foreign ownership in media.
Furthermore, Paramount acknowledged the implications of such foreign involvement, revealing in an SEC filing that Tencent had initially backed its offer but withdrew over concerns about regulatory scrutiny linked to foreign equity financing. The need to navigate these intricacies raises additional challenges for the Paramount bid.
Ellison has positioned his narrative around the potential implications of a Netflix acquisition, warning that it could undermine the theatrical distribution model and disrupt U.S. film production. He contrasted this with Paramount’s commitment to a robust release schedule, asserting that the latter would be more supportive of Hollywood’s ecosystem.
The political climate surrounding the bids is seemingly becoming increasingly pivotal, as President Trump has articulated intentions to influence the final decision regarding Warner Bros. Discovery. The alignment of the Ellisons with Trump and their efforts to shape media narratives towards a more favorable outlook for his administration are seen as strategic moves in their pursuit of a comprehensive media empire.
In this high-stakes atmosphere, experts suggest that the outcomes may ultimately pivot on geopolitical considerations rather than strict regulatory frameworks. Several analysts believe that the EU regulators, while theoretically independent, may be reluctant to challenge decisions that align with U.S. political interests, particularly in the wake of a strong endorsement from the Trump administration.
As the waves of negotiation and regulatory deliberations unfold, the fate of Warner Bros. Discovery rests at the intersection of market dynamics and political maneuvers, signaling the complexities of the current media landscape.
