Netflix, the world's largest online video service (OTT) with more than 300 million subscribers, has struck a surprise deal to acquire Warner Bros. Discovery (WBD), the Hollywood flagship studio with a 102-year history.
Paramount, Skydance, and Comcast also jumped into the bidding war, but Netflix gained the upper hand. The remaining hurdle is approval from the Donald Trump administration, and some in the market said it is hard to guarantee the final acquisition 100%.
According to the Wall Street Journal (WSJ) on the 5th, local time, the U.S. Department of Justice has begun reviewing how Netflix's acquisition of Warner Bros. would affect dominance in the streaming market.
If Netflix fails to win government approval, Netflix must pay Warner Bros. a breakup fee of $5.8 billion (about 8.5 trillion won).
That amounts to 8% of the total acquisition price of $72 billion (about 106 trillion won). Typically, breakup fees are set at 1–3% of the total acquisition price, which foreign media said reflects Netflix's confidence.
The White House is also paying attention to the transaction. Aides to President Trump have reportedly expressed concerns about the transaction.
President Trump is close to David Ellison, the Paramount chief executive officer (CEO) who competed with Netflix for the acquisition, and Ellison's father is Oracle founder Larry Ellison, with whom Trump is also known to be very close.
Given this backdrop, some observers said President Trump could exert pressure on the acquisition transaction. Paramount is already claiming a "preferential acquisition," saying, "Warner Bros. negotiated in favor of Netflix."
The core issue in the merger review is streaming market share. If Netflix and Warner Bros.' streaming service "HBO Max" are combined, they would account for about 30% of the U.S. subscription streaming market.
Under guidelines established by the U.S. Department of Justice in 2023, if the merged company's market share exceeds 30%, a direct merger between competitors is considered illegal.
Netflix argued, "Free video platforms such as YouTube, Facebook, and TikTok should also be counted as part of the streaming market, and there is no evidence that the HBO Max merger would lead to reduced competition or consumer harm." Netflix must also secure approval from antitrust authorities in countries outside the United States.