Yesterday I posted about the “merger” between Netflix and Warner Brothers/HBO Max. I use quotation marks because, although it’s being referred to as a merger, I think it is more properly viewed as an acquisition of Warner Bros. by Netflix. Today the editors of the Washington Post jump into the scrum:
Netflix’s Friday deal to acquire Warner Bros. might create more drama than either company has produced in a while. The Hollywood brand has been around for basically as long as movies, and the streaming service is on millions of TVs daily. The Trump administration has expressed skepticism of the tie-up, as have Democrats such as Sen. Elizabeth Warren (Massachusetts).
Warner Bros. passed on a bid from Paramount Skydance, which wouldn’t be so remarkable if it weren’t for the fact that the company is very friendly with President Donald Trump. The need for government approval of the merger gives the president leverage to demand things from Netflix or guide the company into his friends’ hands.
It feels like Warren has never seen a corporate merger she liked. Even though a long train of industry deals over the decades have never led to the entertainment monopoly she fears, she claims this one will lead to “higher subscription prices and fewer choices” while “putting American workers at risk.”
Maybe, just maybe, this time will be different. Perhaps Netflix will be the company that cracks the code. But Warner Bros. is the cursed monkey’s paw of the entertainment industry, tricking several corporate titans into believing they could take over the world by acquiring or merging with it.
concluding:
It’s hard to say what the new company would have a monopoly on. Netflix is a leading streaming service, but it only has a 25 percent market share and faces intense competition from several companies, including Amazon, which was founded by Post owner Jeff Bezos. If the market is defined as TV in general, Netflix’s current share is under 10 percent.
As Warner Bros. history proves, it’s nearly impossible to predict business trends in the entertainment industry. As long as both companies’ shareholders approve, the government would need to prove there will be harm to consumers if it wants to block the deal. Political favoritism and fear of bigness aren’t good enough reasons.
After writing my post yesterday I received the following email from Netflix:
Hi David,
We recently announced that Netflix will acquire Warner Bros., including its film and television studios, HBO Max and HBO. This unites our leading entertainment service with Warner Bros.’ iconic stories, bringing some of the world’s most beloved franchises like Harry Potter, Friends, The Big Bang Theory, Casablanca, Game of Thrones and the DC Universe together with Stranger Things, Wednesday, Squid Game, Bridgerton and KPop Demon Hunters.
What’s changing?Nothing is changing today. Both streaming services will continue to operate separately. We have more steps to complete before the deal is closed, including regulatory and shareholder approvals. You’ll hear from us when we have more to share. In the meantime, we hope you’ll continue to enjoy watching as much as you want, whenever you want – all on your current membership plan.
Notice that, reading between the lines, the email completely supports the first scenario I proposed yesterday. All that is mentioned is content. The memo is silent about production and there is no hint about whatever plans there are to reduce or even eliminate theatrical releases.
As I said yesterday, I don’t think much of companies acquiring their competitors and, when the companies are large enough, I think the practice should be banned. As Adam Smith wrote more than three centuries ago:
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the publick, or in some contrivance to raise prices
The bigger the companies, the broader the conspiracies and I don’t believe there is any foreseeable benefit to the public in two enterprises each worth tens of billions of dollars becoming one.
So now I’m waiting for the next shoe to drop. After considerable legal and bureaucratic wrangling I suspect that shoe will either take the form of an increase in the price I’m paying now or a decrease in what I’m able to stream (to induce me to subscribe to multiple services).
