Netflix’s bid for WBD assets dubbed ‘hardest from regulatory perspective’

Netflix Inc (NASDAQ: NFLX) remains in focus today after Jonathan Kanter dubbed its 80% cash bid for Warner Bros. Discovery assets the “hardest from a regulatory perspective.”

Kanter served as assistant attorney general for the DOJ under the Biden administration. His remark arrives shortly after CNBC confirmed NFLX is emerging as the frontrunner in the race to buy WBD assets.

While Paramount is also in contention with a fully cash bid, Netflix Inc.’s scale makes its proposal more consequential.

On “Squawk on the Street”, however, Kanter discussed two big reasons that could make it difficult for NFLX to secure regulatory approval for a potential agreement with Warner Bros. Discovery.

Netflix’s bid for WBD assets comes with horizontal issues

Kanter expects Netflix’s bid for Warner Bros. Discovery assets to face intense regulatory scrutiny as it raises horizontal antitrust concerns.

Netflix and HBO are two of the three largest streaming platforms. Putting them together would – therefore – reduce consumer choice, limit competition in terms of subscription pricing, and weaken incentives for innovation, he argued.

According to Jonathan Kanter, such a merger will create a near duopoly in premium streaming – leaving smaller rivals at a disadvantage, which may prove a reason enough for regulators to decide against approval.

Vertical issues tied to NFLX’s proposal for WBD assets

Beyond direct competition, Kanter sees vertical concerns associated with Netflix’s attempt to buy WBD assets as well.

Warner Bros. Discovery’s vast content library, combined with Netflix’s global distribution power, could tilt the balance of bargaining in Hollywood.

“You also have vertical issues, meaning that the content libraries create distributional challenges,” he noted.

This raises fears that Netflix could lock up exclusive rights, restrict licensing, or dictate unfavorable terms to creators and distributors.

Such control over both production and distribution channels may amplify NFLX’s influence across the entertainment ecosystem.

Sen. Mike Lee cautions against Netflix’s bid for WBD assets

Senator Mike Lee, a longtime antitrust advocate, has voiced alarm over NFLX’s ambitions as well.

In a recent post on social media, Lee argued that a potential Netflix-Warner Bros. Discovery agreement will raise more competition questions than any transaction he’s ever seen.

In short, WBD’s potential decision to sign a deal with Netflix is fraught with risk. As per Jonathan Kanter, if regulators block the deal, the company could face asset deterioration during a prolonged review.

History also looms large – Warner has struggled under successive owners, from AOL to AT&T.

Kanter likened it to the cursed ring in Lord of the Rings: “Anyone who touches it seems to struggle with it.” The question now is whether WBD should pursue a merger at all – or risk repeating past mistakes.

Note that Warner Bros. Discovery shares opened in the red on Thursday morning.

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