EU Antitrust Review Could Delay Paramount-Warner Merger
David Ellison’s proposed merger of Paramount and Warner Bros. Discovery, valued at $110 billion, is poised to face a complex review in Europe. While regulatory clearance in the United States seems imminent, the European Union (EU) may introduce delays due to its thorough antitrust scrutiny process. This could extend the timeline for finalizing the merger significantly.
EU Antitrust Review Could Delay Paramount-Warner Merger
In January, Ellison undertook a European charm offensive, engaging with leaders and industry figures in France, Germany, and the U.K. He aimed to gain support for the merger, particularly from EU regulators who are crucial to the deal’s success. Once U.S. authorities conclude their assessment, the European and U.K. antitrust bodies will sequentially evaluate the transaction.
Implications of the Merger
The regulatory bodies in Brussels will investigate the competitive implications of the Paramount-Warner merger across various media sectors. This includes cinema distribution, cable television, and streaming platforms in all 27 EU member states. Key platforms under consideration include:
- HBO Max and Discovery+ (Warner’s offerings)
- Paramount+ and SkyShowtime (Paramount’s offerings)
According to industry analysts, the nature of this merger, which combines studios and streaming services, adds layers of complexity to the review process. Alice Enders of Enders Analysis emphasizes that the multiple media tiers in the EU complicate regulatory outcomes.
Market Position and Competition Concerns
Despite concerns, European cinema owners have shown support for the merger, recognizing it as preferable to a potential acquisition by Netflix. Combined, Paramount and Warner’s streaming services remain significantly lesser competitors in Europe compared to Netflix and Amazon Prime. Enders suggests that the streaming video on demand (SVOD) market is unlikely to pose major issues given the newcomers’ recent entry into the market.
However, the merger’s impact on traditional television is more contentious. Unlike Netflix’s previous bid for Warner’s assets, Ellison’s proposal encompasses all of Warner Bros. Discovery, including popular channels such as:
- Cartoon Network
- Eurosport
- Nickelodeon
- MTV
- Comedy Central
These channels operate under varying regulations across EU territories, making regulatory approval challenging. For instance, Comedy Central is free-to-air in Germany but varies as a licensed pay TV channel in Spain.
Regulatory Process and Potential Delays
The EU Commission is expected to conduct a detailed review, considering overlapping channels and sports rights as potential competition concerns. Past merger approvals, like the Disney-21st Century Fox deal, required concessions to alleviate overlapping interests. To avoid such a scenario, Paramount may have to divest some of its smaller channels.
In the U.K., the merger review could proceed more smoothly. Paramount will likely argue that combining its British operations with Warner’s brands does not substantially alter the competitive landscape. Financial backing from Middle Eastern sovereign wealth funds could introduce additional scrutiny, yet it is not anticipated to block the deal.
Timeline for Approval
Paramount’s position is that the merger will not significantly impact competition in the market, as they would hold less than 20 percent in any individual European market. A formal request for EU approval is anticipated soon, initiating a preliminary review that typically lasts 25 working days.
If the EU triggers a Phase II investigation, the review process could extend significantly, delaying the merger’s timeline. Historical data shows Phase II investigations average over 15 months. In contrast, prior media mergers like Disney-Fox and Amazon-MGM achieved rapid approvals.
Overall, industry watchers remain optimistic about the merger’s eventual approval, though the timeline is uncertain.
