In his pitch to Warner Bros. Discovery shareholders to just accept Paramount Skydance’s $108 billion hostile takeover bid, David Ellison has repeatedly argued that European regulators won’t ever enable Netflix to purchase Warner Bros. Discovery. In his Dec. 10 letter to WBD shareholders, Ellison mentioned the Paramount buyout deal gives “a a lot shorter and extra sure path to completion,” insisting that the European Fee and the U.Okay.’s Competitors and Markets Authority would balk at permitting the world’s largest streamer to swallow one in all its few world opponents.
Ellison’s argument hinges on Netflix’s dominance in Europe. With roughly 51 p.c of the continent’s subscription video on-demand (SVOD) market, he characterizes Netflix’s transfer as “a blatant try to eradicate one in all Netflix’s solely viable worldwide opponents in HBO Max.” He says EU regulators would reject Netflix’s most popular market definition — a broad “all internet-enabled video” class that lumps subscription streaming along with YouTube, TikTok and different platforms — and as a substitute focus narrowly on SVOD, the place Netflix’s share is most pronounced. In his telling, EU legal guidelines such because the Digital Providers Act and Digital Markets Act have been written “for a state of affairs exactly like this.”
Not everybody agrees. The Hollywood Reporter spoke to a number of European antitrust consultants and most consider that each Paramount’s and Netflix’s buyout offers would face regulatory scrutiny by the EU, however neither is more likely to be stopped.
“The European Fee has by no means blocked this sort of merger, of platform or studio focus earlier than. They’re not going to begin doing it now,” says Cristina Caffarra, an professional antitrust economist who suggested on a number of prior media mergers earlier than the Fee, together with the current Amazon MGM buyout. The regulatory course of can be lengthy, she says, going to so-called “Section II investigations” which may take months and even years to finish, however the EU will land on “cures” to make sure truthful competitors as a substitute of an outright ban.
She factors to Disney’s buy of twenty first Century Fox in 2019, which cleared the EC after Disney agreed to dump a number of European factual TV channels, together with Historical past and Lifetime, as a result of these overlapped with Fox’s Nationwide Geographic channels in sure EU territories. Amazon’s 2022 acquisition of MGM, maybe a more in-depth comp to the Netflix-Warners deal, sailed by means of the EC unconditionally. In each instances, regulators zeroed in on particular overlaps — in channels, sports activities rights, or cable bundling — however appeared unconcerned by broader fears of studio consolidation, theatrical releases or streaming dominance.
European media corporations would seemingly choose a Paramount deal. Pier Silvio Berlusconi, chief govt of pan-European broadcaster MFE-MediaForEurope, has argued a Paramount-Warners merger would increase SVOD competitors.
“It will imply that as a substitute of three main over-the-top gamers – Netflix, Amazon and Disney– there can be 4, including one other competitor for them,” Berlusconi mentioned at a press briefing at MFE’s headquarters on Dec. 11.
However how a lot Netflix’s market share really issues can be disputed. “[President] Trump raised the problem of Netflix having a excessive market share and HBO Max including to that, which is true — however whether or not it’s a regulatory problem is one other matter,” says Alice Enders of U.Okay.-based Enders Evaluation. “On the web, there are not any actual boundaries to entry. The truth that HBO Max was in a position to acquire market share from Netflix reveals that…It’s laborious to argue that Netflix and HBO would create a mixture that will have an unassailable market share in streaming.”
Enders argues that Paramount’s bid incorporates its personal European vulnerability: The international cash, together with sovereign wealth funds from Saudi Arabia, Qatar and Abu Dhabi, and RedBird Capitol, managed by U.A.E. deputy prime minister Sheikh Mansour, backing Ellison’s Paramount Skydance bid.
“Europeans have very sturdy hesitation about permitting international state funding in broadcast media,” she says. “So I feel one thing just like the Netflix deal really has decrease regulatory boundaries.”
The foreign-ownership problem is especially delicate within the U.Okay., which just lately tightened its legal guidelines to forestall international state management of stories retailers and may intervene in media mergers underneath nationwide safety powers. These guidelines are believed to have contributed to RedBird’s determination to drag out of early-stage talks to accumulate ITV Studios earlier this 12 months. Whereas sovereign wealth backing wouldn’t mechanically derail a Paramount–WBD merger, it provides regulators political leverage to probe the deal extra deeply.
Paramount itself has indicated that international involvement within the WBD takeover might increase regulatory crimson flags. In its revised submitting with the U.S. Securities and Alternate Fee of its takeover bid, dated Dec. 8, Paramount mentioned the Chinese language media big Tencent was an inital backer of their buyout deal however had dropped its $1 billion financing dedication out of concern, since it will be a “non-U.S. fairness financing supply,” that its bid is perhaps topic to a evaluation by the Committee on Overseas Funding in the US (CFIUS). The SEC submitting mentioned the international sovereign wealth funds, placing up $24 billion for Paramount’s bid, had agreed to surrender a proper to take part in Warner Bros’ administration to keep away from the extra regulatory scrutiny.
As Ellison sharpens his regulatory case in Europe for a Paramount deal, he’s additionally framing the Netflix bid as a broader risk to Hollywood’s ecosystem. Netflix’s possession of Warner Bros. would “starve theatrical distribution” and speed up the erosion of U.S. movie manufacturing. Paramount, in distinction, has pledged to launch greater than 30 films a 12 months and defend theatrical home windows. “We’re pleasant to Hollywood and so they’re not,” is how Enders summarizes the studio’s pitch. “That’s not a contest argument. It’s a political argument. An industrial-strategy argument. And it performs into Trump’s concept of placing tariffs on international movies — all in regards to the decline of Hollywood as a manufacturing middle.”
More and more, the political argument often is the just one that issues. The president has already declared that he, not the regulators, will finally resolve who will get Warner Bros. Discovery. “I’ll be concerned in that call,” Trump mentioned on Dec. 7 when requested in regards to the competing takeover bids.
Paramount is betting laborious on that actuality. The Ellisons — David and his father, Larry — have spent months aligning themselves with Trump as they pursue a broader media empire. They pushed CBS Information towards a extra Trump-friendly editorial posture by putting in Bari Weiss as editor-in-chief, revived Rush Hour 4 reportedly at Trump’s urging. If their Warner deal goes by means of, David has reportedly promised to make sweeping adjustments at Warner-owned CNN, a community Trump has lengthy focused.
Within the present setting, that political alignment in Washington could imply greater than any regulatory objections popping out of Brussels. European regulators will be anticipated to dissect any deal that lands on their desk however will almost certainly wait till the DOJ has made its ruling. Europe’s antitrust authorities are, in idea, politically impartial, however they are unlikely to dam any deal bearing Trump’s stamp of approval.
Caffarra argues that geopolitical calculus — not market definition or competitors legislation— will resolve the destiny of Warner Bros. Discovery. “Everyone is aware of that when push involves shove, [the European Commission] won’t do something that remotely upsets the U.S. administration,” she says. “The ultimate determination has already been taken, and it’s no matter President Trump needs to do.”
