Netflix Struggles to Defend Warner Bros Merger at US Senate Hearing

BBC Business (Finance)

WASHINGTON D.C. – Netflix executives faced a barrage of skeptical questions from lawmakers on Capitol Hill Tuesday, as the streaming giant sought to defend its blockbuster bid for Warner Bros. Discovery against mounting antitrust concerns. In a tense hearing before the Senate Judiciary's Subcommittee on Antitrust, lawmakers from both parties questioned whether the proposed merger would stifle competition, harm consumers, and consolidate too much power in an already shrinking media landscape.

The hearing places a significant political hurdle in front of Netflix's ambitious plan to acquire the legacy studio, a move aimed at securing a vast library of iconic content and fending off a rival bid from Paramount Global. Netflix's Chief Strategy and Legal Officer, Jessica Chen, was tasked with parrying pointed inquiries about the deal's potential impact on everything from subscription prices to creative freedom in Hollywood.

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The Grilling on Capitol Hill

The atmosphere in the hearing room was charged, with Subcommittee Chairwoman Anya Sharma (D-CA) setting a confrontational tone from the outset. She argued that decades of media consolidation have led to higher prices and fewer choices for Americans, framing the Netflix-Warner Bros. deal as a potential capstone to a dangerous trend.

"We are not talking about a startup trying to get a foothold," Senator Sharma stated in her opening remarks. "We are talking about the largest streaming company in the world attempting to acquire one of the most storied studios in Hollywood. The burden is on Netflix to prove this deal is not simply a power grab that will hurt American consumers and workers."

Questioning focused heavily on the potential for market dominance. Lawmakers repeatedly pressed Ms. Chen on whether a combined Netflix-Warner Bros. entity would leverage its market share to raise prices on its streaming services, bundle products in anti-competitive ways, and dictate terms to actors, writers, and directors.

• Key Concern: A combined entity would control a vast and irreplaceable library of intellectual property (IP), including Warner Bros.' DC Comics, Harry Potter, and Lord of the Rings franchises, alongside Netflix's extensive original programming.
• Senator's Argument: Senator Marcus Thorne (R-UT) noted, "When one company controls both the distribution platform and a massive portion of the must-have content, what stops them from walling it off and leaving competitors and consumers out in the cold?"

Netflix's Defense Strategy

In her testimony, Ms. Chen countered that the traditional view of the media market is outdated. She argued that Netflix's true competitors are not just other Hollywood studios but deep-pocketed technology giants that have aggressively entered the content space.

"With all due respect, Senator, our competition is not just Disney or Paramount," Chen testified. "Our competition is Apple, with a three-trillion-dollar market cap. It's Amazon, a global retail and cloud computing behemoth. It is YouTube and TikTok, which dominate the attention of younger audiences. In this landscape, our merger with Warner Bros. is a move to compete, not to monopolize."

Netflix's defense was built on three core pillars, which Ms. Chen articulated throughout the hearing:

• Redefining Competition: The company argues that regulators must look at the broader "attention economy," which includes social media and gaming, not just traditional film and television, when assessing market concentration.
• Pro-Consumer Innovation: Netflix claims the merger would lead to greater investment in new technologies and content formats, ultimately benefiting viewers with higher quality, more diverse programming accessible on a single, integrated platform.
• Commitment to Creators: Ms. Chen pledged that a combined company would offer creators "unparalleled resources and global reach," fostering a vibrant environment for new and established talent.

The All-Cash Offer Under Scrutiny

Central to the discussion was Netflix's recently updated, all-cash offer for Warner Bros. Discovery. Last month, the company revised its initial proposal, which included a mix of cash and stock, in a clear move to present a cleaner, more compelling bid than Paramount's anticipated offer.

While the all-cash nature of the deal simplifies the transaction, it also drew scrutiny from the subcommittee.

• Financial Firepower: The offer, estimated by sources to be in the region of $90 billion, demonstrates Netflix's immense financial confidence and its determination to win the bidding war for Warner Bros.' coveted assets.
• Debt and Future Spending: Senators questioned where the capital would come from and whether levering up the company's balance sheet with such a massive debt load would force it to cut costs elsewhere, potentially leading to layoffs or reduced content budgets in the long term. Ms. Chen assured the committee that the company's financing was secure and would not compromise its commitment to content investment.

The Shadow of Paramount and Industry Consolidation

Looming over the proceedings is the rival bid from Paramount Global. While Paramount has not yet formalized its offer, industry analysts believe it would be pitched to regulators as a more "traditional" and less disruptive merger of two legacy media companies. Lawmakers implicitly referenced this alternative, suggesting a Paramount-Warner Bros. tie-up might present fewer antitrust red flags.

This bidding war is symptomatic of a massive consolidation wave sweeping the media industry. The "streaming wars" have forced companies to seek scale and secure exclusive access to valuable IP. The recent acquisition of MGM by Amazon and Disney's earlier purchase of 21st Century Fox have set a precedent for mega-mergers, creating a "get big or get out" environment that is now before regulators.

Warner Bros. Discovery, with its legendary film studio, HBO's prestige television brand, and a deep catalog of globally recognized characters, is seen by many as the last major prize available.

The Path Forward

While the Senate hearing is a non-binding part of the process, the political pressure it generates can significantly influence the formal regulatory review. The ultimate decision on whether the merger can proceed rests with the Department of Justice (DOJ) or the Federal Trade Commission (FTC), which are charged with enforcing antitrust laws.

The skepticism displayed by the Senate subcommittee signals strong political and regulatory headwinds for Netflix. The company may be forced to offer significant concessions, such as divesting certain assets or agreeing to behavioral remedies, to win approval.

For now, the industry watches and waits. The outcome of this high-stakes battle will not only determine the fate of Warner Bros. but will also set a defining precedent for the future of media, entertainment, and the digital streaming landscape for years to come.