Netflix beat out Paramount and Comcast to land a $72 billion deal for Warner Bros. Discovery’s studios and HBO Max streaming service.
Now it has to win over the Trump administration.
The streaming giant’s deal is expected to be investigated by the Justice Department, which has already begun considering how it would further cement Netflix’s dominance in the media industry.
It will also have to contend with the preferences of President Trump, who is close with Paramount Chief Executive David Ellison and his father and could pressure antitrust enforcers to steer Warner toward Paramount instead. A senior administration official said Friday that Trump advisers, including White House officials, are concerned about Netflix’s deal.
Paramount, meanwhile, had in recent days accused Warner of unfairly favoring Netflix’s deal, which it said would be frowned upon by regulators in the U.S. and abroad. Paramount, whose shares slumped Friday after Netflix prevailed, is now weighing its next move, people familiar with the matter said.
Netflix, the largest streamer, has said the deal for Warner’s vast TV and movie libraries as well as HBO and its HBO Max streaming platform would help it attract and retain more subscribers. Netflix has also said it would keep Warner Bros. and HBO making shows and movies which is good for the creative community.
Netflix co-CEO Ted Sarandos said Friday the company is “highly confident” the deal will win approval because it is “pro-consumer” and “pro-innovation.”
The Justice Department would have to formally investigate to determine whether it should challenge the deal. Merger investigations typically take at least 10 months before the government files suit to block the transaction.
More so than in previous administrations, the White House is likely to influence where regulators land, said Sam Weinstein, a professor at the Cardozo School of Law.
During Trump’s first term, the Justice Department unsuccessfully challenged AT&T’s acquisition of Time Warner after Trump had complained about Time Warner-owned CNN’s coverage of him.
More recently, the Trump administration approved Skydance Media’s merger with Paramount. Ellison, the son of Oracle co-founder Larry Ellison, a Trump ally, had promised the Federal Communications Commission that CBS News, a unit of Paramount, would deliver unbiased reporting and that Paramount’s diversity, equity and inclusion initiatives would end.
Trump’s current antitrust chiefs—Gail Slater at the Justice Department and Andrew Ferguson at the FTC—have had a relatively light touch so far when it comes to policing big deals. Both have made clear they are focused on protecting competition in cost-of-living sectors, such as healthcare and housing.
Many companies have gotten deals blessed by offering settlements, which typically involve agreeing to sell pieces of a business to a third party.
Some inside the Justice Department already believe Netflix’s acquiring Warner’s HBO Max might violate antitrust laws because of the combined entity’s scale among streaming services, The Wall Street Journal previously reported.
Netflix and HBO Max together would control around 30% of the U.S. subscription streaming marketplace.
Mergers of direct competitors are presumed to be illegal when the combined company has over 30% market share, according to Justice Department guidelines announced in 2023 under former President Biden and retained by the Trump administration.
Netflix has argued that the streaming marketplace should also include mostly free video platforms such as YouTube, Facebook and TikTok. It also believes that even if the market is limited to subscription-based services, there is no evidence that adding HBO Max would reduce competition or harm consumers, according to a person familiar with the matter.
Netflix has said HBO and its streaming service HBO Max will continue to operate as stand-alone entities after the deal closes but will be both bundled and separately sold alongside Netflix, which could mean lower prices for consumers.
In a potential sign of Netflix’s confidence, it agreed to pay Warner a so-called breakup fee of $5.8 billion if the deal was scuttled because the companies couldn’t obtain necessary approvals.
That fee is one of the largest in history and represents 8% of the total deal value, well above the 1% to 3% range that is more typical.
Warner Discovery and Netflix have said they anticipate the deal to take 12 to 18 months to close.
Netflix hired lawyers at Skadden to guide it through the deal, including antitrust veteran Steven Sunshine.
Paramount hired its own legal heavyweight in Makan Delrahim, who ran the Justice Department’s antitrust division during Trump’s first term. He joined Paramount as chief legal officer in September.
Netflix’s deal has already drawn scrutiny from lawmakers in both parties as well as in Hollywood.
U.S. Sen. Elizabeth Warren (D., Mass.) said Friday on X that the proposed deal is an “anti-monopoly nightmare” that will raise consumer costs and limit choice.
U.S. Sen. Mike Lee (R., Utah) earlier wrote on X that the potential deal “would raise serious competition questions—perhaps more so than any transaction I’ve seen in about a decade.”
Lee leads the Senate Judiciary Subcommittee’s antitrust subcommittee, which could hold hearings and force Netflix and Warner to answer questions about the deal.
The movie industry could also be radically altered by Netflix’s taking over Warner Bros. Netflix has historically preferred to keep most of its films on its platform rather than give them theatrical releases. It has indicated it will maintain Warner Bros.’ current operations including releasing movies in theaters, but some in the industry are dubious.
“The proposed acquisition of Warner Bros. by Netflix poses an unprecedented threat to the global exhibition business, said Michael O’Leary, president of movie industry lobbying arm Cinema United.
Write to Joe Flint at Joe.Flint@wsj.com, Dave Michaels at dave.michaels@wsj.com and Lauren Thomas at lauren.thomas@wsj.com