David Ellison’s Netflix Strategy Faces European Challenges

David Ellison, chief of Paramount Skydance, is pushing for a $108 billion hostile takeover of Warner Bros. Discovery. His strategy emphasizes that European regulators would likely prevent Netflix from acquiring Warner Bros. Discovery. Ellison believes that a Paramount buyout presents a quicker and more certain path for completion, particularly given Netflix’s significant market share in Europe.

Netflix’s Dominance in Europe

Netflix controls approximately 51 percent of the subscription video on-demand (SVOD) market in Europe. Ellison argues that Netflix seeks to eliminate HBO Max as a competitor, which would reinforce its dominance. He claims that regulators would reject Netflix’s broader market definition, which includes all internet-enabled video, and focus specifically on the SVOD segment.

Regulatory Perspectives

• Experts believe both Paramount’s and Netflix’s deals will undergo scrutiny.
• The European Commission historically has not blocked such mergers.
• Common solutions involve remedies rather than outright bans.

Cristina Caffarra, an antitrust economist, highlights that precedents like Disney’s acquisition of 21st Century Fox faced regulatory conditions rather than prohibitions. Similarly, Amazon’s purchase of MGM was approved unconditionally.

Industry Reactions

European media companies support a Paramount deal, believing it would enhance competition against major players like Netflix and Amazon. Pier Silvio Berlusconi of MFE-MediaForEurope argues that this merger would create a fourth competitor in the streaming space.

Challenges to Paramount’s Bid

Ellison’s bid faces challenges, particularly regarding the involvement of foreign investors. The backing of sovereign wealth funds from Saudi Arabia, Qatar, and Abu Dhabi raises concerns about foreign state control in media. This issue is heightened in the U.K., where regulations regarding foreign ownership have tightened. Although this may not derail the deal, it could lead to deeper scrutiny.

Political Influences

As negotiations evolve, Ellison frames the Netflix bid as threatening to Hollywood’s future. Netflix’s potential ownership of Warner Bros. could negatively impact theatrical distribution, while Paramount aims to protect it. Ellison’s political alignment with former President Trump further complicates this dynamic.

Trump’s involvement and influence over the regulatory process may significantly impact the outcomes of these acquisitions. Ellison’s efforts to secure the support of political figures highlight the intertwined nature of media and politics in this competitive landscape.

Conclusion

As both deals face evaluation from European regulators, geopolitical considerations may outweigh market definitions. The interplay between U.S. administration preferences and market competition laws is likely to shape the future of Warner Bros. Discovery.