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New Delhi: Netflix and Warner Bros. Discovery's plan to be taken over by Netflix would be subjected to intense regulatory scrutiny in the United States and elsewhere. The acquisition, in which the studios of Warner Bros and HBO Max would fall under the ownership of Netflix, would make the company a streaming giant, with approximately 428 million subscribers globally.
The rationale provided by Netflix is that the acquisition is required to compete with the Alphabet-owned YouTube, which is now the most-watched distributor of TV in the U.S., according to Nielsen. Antitrust experts believe that regulators will hardly accept such an argument, referring to inseparable differences in the content of the two platforms, audiences and business models.
Netflix has informed regulators that attention on viewers is scarce, and thus, it competes with YouTube in terms of screen time. According to antitrust lawyers, this is a weak argument. They mention that Netflix is orientated to high-budget scripted movies and series, whereas YouTube is constructed around the user-created videos and advertisements.
The ex-antitrust officials indicate that the Justice Department will not consider short-form creator videos, tutorials and music clips as alternatives to premium content on Netflix or HBO Max. Such a distinction may be very important in the determination of the relevant market by regulators.
Netflix allocates billions of dollars annually to create original content as series like Stranger Things or blockbusters. The majority of its sales are monthly subscriptions with costs ranging between $7.99 and $24.99, with advertisements serving as the secondary source of income.
YouTube is running on an entirely different paradigm. It extensively depends on advertisements and creator-driven content. It dominates the amount of viewing time of any individual streaming service with creators across the world, music labels and children's programming such as Cocomelon.
In October, YouTube had 12.9 per cent of the U.S. streaming viewership. The percentage of shares of Netflix would increase to approximately 9 per cent following the acquisition of HBO Max. Although YouTube has a bigger audience, experts believe that regulators will concentrate on competition on the paid streaming subscriptions and not on the duration of viewing.
The U.S. antitrust authorities have had a record of preventing deals through niche markets. History (such as grocery and fashion mergers) demonstrates that regulators frequently use internal documentation of companies to dispute pervasive competition assertions.
New developments in merger review regulations will compel Netflix to deliver the analyses of internal competition at the beginning of the process. The past regulators add that such documents might weaken the position of Netflix when they fail to clearly state YouTube as one of the core competitors.
Another claim that Netflix has put forth is that the deal would reduce prices due to the ability to bundle them to customers who were already subscribers to both services. These claims still do not make antitrust officials complacent, and they will scrutinise the likelihood of the merger resulting in increased charges on certain subscribers.
Regulatory questions over whether Netflix has defined its true competitors or not may be the only thing that determines the future of one of the largest media deals in history.
