This week has seen a furious bidding war to acquire Warner Bros making headlines, in a move that could reshape the global entertainment industry.
Last Friday, it was announced that Netflix had been successful in its bid to acquire the media corporation for a hefty $72 billion (£54 bn), which was soon followed by Paramount launching a counteroffer amounting to an even greater $108.4bn (£81 bn) total.
The news has sparked responses from critics, including Donald Trump, who has said such a deal could amount to Netflix having too big a share of the market.
But why is this? And what does that mean for the UK entertainment industry and competition markets?
Our competition law expert, Ellen Huison, has shared her thoughts, below.
“Vertical foreclosure is an area of increasing concern for regulators across the world.”
Ellen Huison
"The former CEO of Warner Bros, Jason Kilar commented in relation to the deal: 'If I were tasked with doing so, I could not think of a more effective way to reduce competition in Hollywood than selling WBD to Netflix”, but why is this?" says Ellen.
"This deal will undoubtedly impact competition outside the US and attract scrutiny from regulators. Warner Bros holds an enviable bank of content, including Harry Potter, Friends, Game of Thrones and White Lotus, currently licensed across a variety of streaming platforms.
“Competition regulators, including the UK’s Competition and Markets Authority (CMA), will inevitably be concerned that Netflix could make all HBO and Warner Bros content exclusive to its own platform, resulting in what is called vertical foreclosure - an area of increasing concern for regulators across the world, and strengthen Netflix’s hold on the streaming market.
“It’s not the first time the CMA has successfully changed the terms of a global acquisition. Its intervention in Microsoft's purchase of Activision Blizzard in 2023 led to divestment of cloud streaming rights in the UK for key titles, including Call of Duty to a third-party competitor.
"By comparison, despite the Federal Trade Commission (FTC) in the US seeking an injunction to halt the transaction in its tracks, the FTC was unsuccessful, and the parties did not have to offer the same remedies as in the UK and EU, despite similar competition concerns.
"In relation to labour markets, earlier this year, the CMA fined sports broadcasters for sharing pay information on freelance production staff. Netflix and Warner Bros are significant employers of freelancers, and this deal could reduce competition for labour, which is a real concern for freelance production staff.
“Clearly, the parties are not naïve to the risk that the deal may attract scrutiny from competition authorities; rival bidder Paramount went as far as to suggest that its offer was most likely to gain the approval of competition regulators, and Netflix is reported to have offered a $5bn “breakup fee” if the deal fails to secure clearance.”
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