Netflix's Withdrawal from Warner Bros. Deal: A Win for Antitrust Law

By: Ethan Silver
Edited by: Alexandra Stillman and Ayla Mushtaq

Netflix shocked the entertainment industry on December 5, 2025, when it announced its agreement to acquire Warner Bros. Discovery (WBD). This $83 billion deal sought to merge the largest streaming platform with a century-old legacy media studio. [1] The merger also drew intense criticism—government officials, economists, and media experts quickly sounded the alarm for its negative implications on the media landscape. Then, on February 26, 2026, Netflix did something even more surprising: it backed out of the deal. After an intense bidding war, Netflix was unwilling to match ​​Paramount Skydance’s $111 billion dollar offer. [2] The proposed takeover would have meant more than just a larger Netflix streaming library and a threat to traditional cinema. It could have had massive ramifications on pricing, industry competition, and creative talent acquisition. From its announcement, the Netflix-Warner Bros. deal was fraught with controversy, both politically and economically. The problematic merger would have threatened antitrust laws and the competitive entertainment industry, making Netflix’s failure to acquire Warner Bros. beneficial for both antitrust laws and the media.

The deal was bound to attract antitrust attention. Netflix and WBD directly compete in the streaming video-on-demand (SVOD) market. Unifying two streaming giants could have violated Section 7 of the Clayton Act, which prohibits mergers and acquisitions with an effect that “may be substantially to lessen competition, or to tend to create a monopoly.” [3] Netflix dominates the market for streaming platforms with over 300 million subscribers globally—81.4 million of those in the U.S. The WBD-owned HBO Max, meanwhile, has 57.6 million U.S subscribers. Together, they would have controlled roughly 31% of the U.S. SVOD market and had a combined 139 million subscribers [4]. That market share is especially significant. Legal precedent dictates that this level of concentration is enough to raise antitrust concerns. In the 1963 case United States v. Philadelphia National Bank, the Supreme Court ruled that a merger resulting in a greater than combined 30% market share creates a “structural presumption” that the deal is anticompetitive. [5] This precedent would have placed the Netflix-WBD merger squarely in antitrust territory for the SVOD market. Paramount+, on the other hand, only has a market share of 13% and 58.8 million U.S. subscribers [6]. A merger between Paramount and HBO would thus be less concerning to antitrust regulators and the greater entertainment industry.

The Department of Justice (DOJ) offers an alternative method for evaluating the extent to which a deal is anti-competitive. Their 2023 Merger Guidelines use the Herfindahl-Hirschman Index (HHI) to measure market power and concentration. The index, a standard for market concentration, is calculated by taking the sum of the squared market shares of each firm. [7] According to the guidelines, a change of 200 points in highly concentrated markets, such as the SVOD market, would trigger violations in antitrust law. The Netflix-WBD deal would have increased the HHI by 432 points—well above the threshold for concern. [8] High market concentration risks price increases, unfair hiring practices, and an overall unhealthier economic landscape. The Paramount purchase would again be less dangerous, given the company’s smaller HHI. A Netflix-WBD merger would have only further exacerbated the consolidation trend already occurring in the SVOD market. As growth continues to slow, streaming platforms have sought mergers to increase profitability, such as the deal between Disney and Hulu. Taking both market share and HHI into account, it’s clear that the proposed merger would have threatened competition in an already consolidating market. 

The case against the Netflix-Warner Bros. merger was not as simple as calculating market share. Instead, the ruling would have hinged on which marketNetflix actually occupies. The streaming giant would likely have argued that the SVOD market is too narrow—that Netflix competes with broadcast television and cable. Streaming still represents a minority of that entire market. In fact, Netflix and Warner Bros. would have occupied only a combined 9.3% of viewership. [9] This alternative calculation is far below the 2023 DOJ Merger Guidelines and would not be substantial enough to raise any antitrust concerns. Netflix might have argued that the market is even broader: streaming services compete with theatrical releases and even general consumer screen time, such as video games, short-form videos, and online content. Its case is further bolstered by the fact that many consumers are subscribed to multiple streaming platforms. The company’s co-CEO claimed that over 80% of HBO Max users were already subscribed to Netflix. [10] This substantial overlap decreases the total impact that the merger would have had on market power, whether in the SVOD market or the broader television industry. 

The government’s case against the merger was further weakened by legal precedent. In FTC v. Meta (2024), a district court rejected the FTC’s narrow definition of a “personal social networking” market, including only a handful of apps, in favor of a broader definition including all social media platforms. [11] Netflix would have similarly sought to advance a broader definition of the media market, arguing that if its streaming service is down, consumers may turn on cable television, log in to YouTube, or scroll on TikTok instead. This substitution effect, discussed in the Meta case, may have played a similar role in determining whether Netflix exists in a broader market. Co-CEOs Greg Peters and Ted Sarandos justified the merger using this logic, as YouTube would have still held a larger U.S. viewership share than Netflix and WBD combined. [12] Of course, this would have depended on empirical evidence and economic analysis of the SVOD and TV markets.

The stakes for determining the proper market size were high. Even if the Netflix-Warner Bros. merger failed to meet the DOJ’s anti-competition concerns, the proposed deal threatened to have negative effects on the streaming market and the entertainment industry as a whole. First, there were horizontal integration concerns: without ample competitive pressure in the SVOD market, Netflix would have been incentivized to charge higher prices, leaving consumers little choice for other affordable streaming platforms. [13] There were vertical integration concerns as well. Netflix’s acquisition of Warner content meant that there was a risk of foreclosure, that is, withholding the distribution of Warner Bros. content or making it prohibitively expensive to license. [14] Finally, there were monopsony concerns. WBD and Netflix are direct competitors in the creative labor market. By merging, buyers of talent could have amassed too much bargaining power. [15] Economic experts and politicians alike identified these effects. Senators Elizabeth Warren, Bernie Sanders, and Richard Blumenthal voiced these concerns and their opposition to the merger in November 2025. [16] While the court could have ruled that Netflix’s market extends beyond merely SVOD, these worries wouldn’t have just disappeared—and they don’t disappear with Paramount Skydance’s acquisition, either. The concentrated streaming market will continue to be dominated by a handful of companies.

On the other hand, Netflix stated that the merger would lead to “More Choice, More Opportunities, More Value.” [17] It emphasized the complementary strengths between the two media companies, the potential for increased access to content for subscribers, and the ability for Netflix to grow and therefore strengthen the entertainment industry by providing more jobs. Additionally, vertical integration could have brought benefits as well by generating efficiencies. Netflix could have passed on the cost savings to consumers from no longer needing to pay for Warner distribution rights. The acquisition of WBD studio lots could have allowed Netflix to leverage economies of scale. [18] The proposed deal could have built a media company that combined the data and reach of Netflix with the legacy IP and infrastructure of Warner Bros. Discovery. It’s unclear whether these claims would have actually come to fruition or if Netflix would have simply used its increased market power to lower wages and raise prices. The good news is that these benefits can still come to fruition with the Paramount-Warner Bros. deal, with potentially fewer of the market competition side effects.

In the era of the online attention economy, traditional borders between entertainment industries are less clear than before. The Netflix-Warner Bros deal would have challenged our current understanding of antitrust laws and their application in the streaming age. These discussions are far from over: while Netflix’s decision to withdraw is a win, the merger between Paramount Skydance and Warner Bros. may still raise regulatory concerns and have similar implications for the entertainment industry. [19] Whatever the outcome, the fate of Warner Bros. will redefine both the entertainment landscape and antitrust law as we know it.

Notes:

1. “Netflix to Acquire Warner Bros. Following the Separation of Discovery Global for a Total Enterprise Value of $82.7 Billion (Equity Value of $72.0 Billion) -  About Netflix,” About Netflix, n.d., https://about.netflix.com/en/news/netflix-to-acquire-warner-bros.

2. Lauren Hirsch, Michael M. Grynbaum, and Benjamin Mullin, “Netflix Backs Out of Bid for Warner Bros., Paving Way for Paramount Takeover,” The New York Times, February 27, 2026, https://www.nytimes.com/2026/02/26/business/warner-bros-discovery-paramount-deal-netflix.html.

3. “SUMMARY OF SECTION 7 OF THE CLAYTON ACT,” by National Press Club - Washington, D.C., AAI PUBLIC INTEREST ADVOCACY WORKSHOP ON MERGERS, September 11, 2013, https://www.antitrustinstitute.org/wp-content/uploads/2018/09/Section-7.pdf.

4. Fred Ashton, “Netflix/WBD Deal Likely to Face Antitrust Investigation - AAF,” AAF, December 9, 2025, https://www.americanactionforum.org/insight/netflix-wbd-deal-likely-to-face-antitrust-investigation/.

5. John M. Yun, “Evaluating the Sale of Warner Bros Discovery to Netflix From an Antitrust Perspective,” Truth on the Market, December 8, 2025, https://truthonthemarket.com/2025/12/08/evaluating-the-sale-of-warner-bros-discovery-to-netflix-from-an-antitrust-perspective/.

6. Ashton, “Netflix/WBD Deal Likely to Face Antitrust Investigation - AAF.”

7. Ashton, “Netflix/WBD Deal Likely to Face Antitrust Investigation - AAF.”

8. “Netflix and Paramount Both Want Warner: What Will Antitrust Authorities Do?,” JD Supra, December 9, 2025, https://www.jdsupra.com/legalnews/netflix-and-paramount-both-want-warner-7794772/.

9. Ashton, “Netflix/WBD Deal Likely to Face Antitrust Investigation - AAF.”

10. Rowan Saydlowski, “Key Takeaways From the Netflix-Warner Bros. Senate Hearing - Americans for Tax Reform,” Americans for Tax Reform, February 5, 2026, https://atr.org/key-takeaways-from-the-netflix-warner-bros-senate-hearing/.

11. “MEMORANDUM OPINION,” by UNITED STATES DISTRICT Court, UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA, November 13, 2024, https://www.govinfo.gov/content/pkg/USCOURTS-dcd-1_20-cv-03590/pdf/USCOURTS-dcd-1_20-cv-03590-4.pdf.

12. Heath Newman, “It’s Not Personal, It’s Business: Antitrust Implications Of the Netflix-Warner Bros. Merger | University Of Miami Law Review,” January 21, 2026, https://lawreview.law.miami.edu/its-not-personal-its-business-antitrust-implications-of-the-netflix-warner-bros-merger/.

13. Dunlap Bennett & Ludwig, “Netflix’s $82.7B Warner Bros. Deal: A Legal Crossroads for Antitrust and Consumer Protection,” Business & Litigation Lawyers, December 30, 2025, https://www.dbllawyers.com/netflix-warner-deal-legal-crossroads/.

14. Ashton, “Netflix/WBD Deal Likely to Face Antitrust Investigation - AAF.”

15. Ashton, “Netflix/WBD Deal Likely to Face Antitrust Investigation - AAF.”

16. Lauren Forristal, “What to Know About Netflix’s Landmark Acquisition of Warner Bros.,” Yahoo Finance, February 10, 2026, https://finance.yahoo.com/news/know-netflix-landmark-acquisition-warner-203127005.html.

17. “Netflix to Acquire Warner Bros. Following the Separation of Discovery Global for a Total Enterprise Value of $82.7 Billion (Equity Value of $72.0 Billion) -  About Netflix.”

18. Newman, “It’s Not Personal, It’s Business: Antitrust Implications Of the Netflix-Warner Bros. Merger | University Of Miami Law Review.”

19. Lorie Konish, “Warner Bros. May Reopen Sale Talks With Paramount Following New Deal Terms, Bloomberg Reports,” CNBC, February 15, 2026, https://www.cnbc.com/2026/02/15/warner-bros-discovery-paramount-netflix.html.

Bibliography:

​‌‌‍‍​‍​‌‌‍‍​‍About Netflix. “Netflix to Acquire Warner Bros. Following the Separation of Discovery Global for a Total Enterprise Value of $82.7 Billion (Equity Value of $72.0 Billion) -  About Netflix,” n.d. https://about.netflix.com/en/news/netflix-to-acquire-warner-bros.

Ashton, Fred. “Netflix/WBD Deal Likely to Face Antitrust Investigation - AAF.” AAF, December 9, 2025. https://www.americanactionforum.org/insight/netflix-wbd-deal-likely-to-face-antitrust-investigation/.

​‌‌‍‍​‍Dunlap Bennett & Ludwig. “Netflix’s $82.7B Warner Bros. Deal: A Legal Crossroads for Antitrust and Consumer Protection.” Business & Litigation Lawyers, December 30, 2025. https://www.dbllawyers.com/netflix-warner-deal-legal-crossroads/.

​‌‌‍‍​‍Forristal, Lauren. “What to Know About Netflix’s Landmark Acquisition of Warner Bros.” Yahoo Finance, February 10, 2026. https://finance.yahoo.com/news/know-netflix-landmark-acquisition-warner-203127005.html.

Hirsch, Lauren, Michael M. Grynbaum, and Benjamin Mullin. “Netflix Backs Out of Bid for Warner Bros., Paving Way for Paramount Takeover.” The New York Times, February 27, 2026. https://www.nytimes.com/2026/02/26/business/warner-bros-discovery-paramount-deal-netflix.html.

JD Supra. “Netflix and Paramount Both Want Warner: What Will Antitrust Authorities Do?,” December 9, 2025. https://www.jdsupra.com/legalnews/netflix-and-paramount-both-want-warner-7794772/.

​‌‌‍‍​‍Konish, Lorie. “Warner Bros. May Reopen Sale Talks With Paramount Following New Deal Terms, Bloomberg Reports.” CNBC, February 15, 2026. https://www.cnbc.com/2026/02/15/warner-bros-discovery-paramount-netflix.html.

​‌‌‍‍​‍“MEMORANDUM OPINION.” UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA, November 13, 2024. https://www.govinfo.gov/content/pkg/USCOURTS-dcd-1_20-cv-03590/pdf/USCOURTS-dcd-1_20-cv-03590-4.pdf.

​‌‌‍‍​‍Newman, Heath. “It’s Not Personal, It’s Business: Antitrust Implications Of the Netflix-Warner Bros. Merger | University Of Miami Law Review,” January 21, 2026. https://lawreview.law.miami.edu/its-not-personal-its-business-antitrust-implications-of-the-netflix-warner-bros-merger/.

​‌‌‍‍​‍Saydlowski, Rowan. “Key Takeaways From the Netflix-Warner Bros. Senate Hearing - Americans for Tax Reform.” Americans for Tax Reform, February 5, 2026. https://atr.org/key-takeaways-from-the-netflix-warner-bros-senate-hearing/.

​‌‌‍‍​‍“SUMMARY OF SECTION 7 OF THE CLAYTON ACT.” AAI PUBLIC INTEREST ADVOCACY WORKSHOP ON MERGERS, September 11, 2013. https://www.antitrustinstitute.org/wp-content/uploads/2018/09/Section-7.pdf.

​‌‌‍‍​‍Yun, John M. “Evaluating the Sale of Warner Bros Discovery to Netflix From an Antitrust Perspective.” Truth on the Market, December 8, 2025. https://truthonthemarket.com/2025/12/08/evaluating-the-sale-of-warner-bros-discovery-to-netflix-from-an-antitrust-perspective/.