“Stop the Netflix Cultural Takeover”
So ran the headline of an op-ed posted to Truth Social by President Donald Trump on January 11. Netflix, the thinking goes, has acquired too commanding a market position to be allowed to buy media conglomerate Warner Bros. Discovery, despite fierce competition among streaming services. In such a competitive market, it is the shareholders of WBD, not the president or some middle manager in his administration, who should decide whether the deal moves forward.
For nearly five decades, American antitrust enforcement has rightly operated under the consumer welfare standard – unless the government can demonstrate that consumers are likely to be harmed by market consolidation, mergers should be given the benefit of the doubt to proceed. The only alternative to this system is one where aloof government lawyers arbitrarily decide which companies may be bought and sold. Recent FTC and DOJ cases against Meta, Amazon, and Google – begun under Biden but continued under Trump – have sought, sometimes explicitly, to overthrow the consumer welfare standard.
These have mostly been laughed out of court. Judges are not falling for gerrymandered market definitions that pretend, for example, that Amazon doesn’t compete with Temu or that Meta holds a monopoly in a made-up “friends and family social media” market.
Any attempt to prevent the shareholders of WBD from selling to Netflix should be similarly dismissed. On the merits, there is no argument for consumer harm arising from the merger of Netflix and HBO Max in the streaming market. Perhaps the deal’s detractors believe that there are not enough streaming services out there, but the majority of Americans disagree. If any market is ripe for consolidation, it is streaming.
Fears of a bourgeoning Netflix monopoly are similarly overblown. Netflix is not even the top streamer by share of subscriptions – that distinction goes to Amazon Prime. Combined, Netflix and HBO Max would have about 34 percent of the market, but the logic of this argument requires combining Disney+ and Hulu as well since they are also owned by the same parent company. At 21 percent of the market, Netflix is actually the third largest streamer behind Disney (23 percent) and Prime (22 percent) seeking to acquire fourth-place Max (13 percent) to become number one.
Preventing them from claiming this spot would punish success. Unlike legacy studios WBD and Paramount, Netflix is the new kid on the block. They were the disruptor who pioneered modern streaming, now emulated by all the major studios. Netflix does not have an 80-year-old IP library, multiple major franchises, a studio footprint, theme parks, or cable assets. For them, acquiring WBD is not a merger of peers but an innovative young company joining the big leagues. They should not be prevented from doing this because they have been too successful in the estimation of some bureaucrat.
The op-ed posted by Mr. Trump echoes some of these specious legal arguments with a healthy dose culture war bloviation. Published by attorney John M. Pierce through One America News, the article argues that Netflix is making a bid to acquire unprecedented “cultural power” by purchasing the storied WB library, home to innumerable Hollywood classics, Looney Tunes, Harry Potter, Dune, Game of Thrones, and the rest of the great HBO library of shows. Mr. Pierce fancies himself the arbiter of what intellectual property transactions are permissible and believes that government intervention is warranted to prevent the wrong people from buying companies.
I use “wrong people” advisedly – Mr. Pierce seems unbothered by the competing offer from Paramount-Skydance. Indeed, his entire argument hinges on the fact that Paramount offered $30 per share in cash while Netflix offered $27.75 in a mix of cash and stock, and the board’s decision to accept the Netflix offer is a breach of fiduciary duty to shareholders. In his telling, the board’s decision to reject the “financially superior offer” can only be explained by ideological preference: Netflix won because they were the “woker” of the two companies.
There are three problems with this argument. First, Netflix has since revised its offer to all cash like Paramount’s, so they are roughly comparable.
Second, Netflix’s board may not be as conservative as the likes of Paramount owner David Ellison but calling them “woke” is a bit much. Yes, they hosted Cuties on their platform. They also stood by Dave Chappelle’s specials mocking the excesses of the trans movement and produced the once-cancelled comedian Shane Gillis’ Tires. Unlike WBD, they have not “updated” any classic films in their catalogue. It’s not exactly Landman, but it’s a far cry from censorious wokery.
Third and most importantly, WBD is the property of its shareholders. They have a right to dispose of their property as they see fit. That is a founding principle of America, and it would be a historic stain on our country if this principle were violated so publicly and vindictively on the 250th anniversary of our independence. As long as consumers are not harmed by this transaction (and they will most likely benefit), the political preferences of who is in the White House should not dictate whether a merger is allowed to proceed.
Call me a zombie Reaganite, but I think the people who own the company should decide to whom they sell it.
