A previous post detailed how Netflix and Paramount Skydance were competing to acquire part or all of Warner Bros. Discovery (WBD). In December 2025, Netflix announced that it had agreed a deal to buy WBD’s studio and streaming service business. However, Paramount has still pursued a hostile takeover of WBD.
In mid-February 2026, it emerged that WBD had reopened talks with Paramount. Paramount was given a week to make its final offer. Then, under the agreed deal, Netflix would have the right to adjust its bid. Things have developed quickly since then.
Paramount raised its offer price by $1 per share making the deal worth a total of $111bn. WBD stated that this was superior to Netflix’s offer and Netflix declined to increase its bid. Netflix executives stated that:
This transaction was always a ‘nice to have’ at the right price, not a ‘must have’ at any price.1
Paramount will also pay Netflix the $2.8bn fee WBD owes Netflix for terminating the deal.
Whilst it appears Paramount has won the race to acquire WBD, the deal still needs regulatory clearance from competition authorities in the USA and Europe. Paramount CEO, David Ellison, stated that the proposal offered WBD shareholders ‘superior value, certainty and speed to closing.’2
Should the deal go through, the merged company would be in a powerful position as one of the few remaining Hollywood film and television studios.
References
- Paramount set for $111bn Warner Bros takeover after Netflix drops bid
BBC News, Danielle Kaye and Nardine Saad (26/2/26)
- Ibid
Articles
Questions
- What are the similarities and differences between Netflix’ and YouTube’s business models? How close substitutes do you think they are?
- Do you think cinemas are a closer or more distant substitute to Netflix than YouTube?
- Which of the possible deals, do you think, raised the most competition concerns? What might be a possible remedy that could alleviate these concerns?
- Was WBD’s decision to accept the Paramount takeover purely determined by the size of Paramount’s bid?
- What is the significance of legacy assets to the acquisition of WBD?
The television streaming market is currently attracting considerable attention from policy makers. This follows Warner Bros. accepting Netflix’s offer to buy part of the company for $72bn. To understand how this deal came about and why there is policy concern, we need to go back a few years.
The media and entertainment conglomerate Warner Bros. Discovery (WBD) was created in 2022 when AT&T sold Warner Bros to Discovery.1 However, in June 2025 the company announced that it would split the business into two parts. One would be (a) the studio for TV and movie production, where for example the Harry Potter franchises were made, and (b) the TV streaming business, home to for example the hit TV series Succession. The other, the more traditional and declining TV networks, including channels such as CNN, Discovery and TNT Sports, would form a new company called Discovery Global. David Zaslav, WBD President and Chief Executive stated that:
We are empowering these iconic brands with the sharper focus and strategic flexibility they need to compete most effectively in today’s evolving media landscape.2
Shortly afterwards, rival media and entertainment conglomerate, Paramount Skydance, made a series of bids to purchase the entire WBD business. But these were rejected by the WBD board. Despite this, in October 2025 WBD made public that it was open to a sale and had received unsolicited interest from several companies. It was believed that this included offers from Comcast and Netflix.
Recent developments
In December 2025, Netflix announced that it had agreed a deal with WBD to buy its studio and streaming service business, including its back catalogue of shows. The deal is planned to be put to WBD shareholders in the next few months.3 Netflix has over 300m subscribers across the globe and streams popular shows, such as Stranger Things and Squid Games.
Despite this accepted offer, Paramount has subsequently pursued a hostile takeover of WBD by going straight to its shareholders. In addition, Paramount launched a lawsuit to get further information on how Netflix was chosen as the buyer and to provide WBD shareholders with information on the value of the TV network business that WBD was selling. This, however, was quickly thrown out of the courts.
Over time, Netflix and Paramount have tinkered with their bids to make them more attractive to WBD. Whilst Paramount’s bid was all cash, originally Netflix was offering a mixture of cash and shares. However, in January, it switched this to an all-cash offer. In February, Paramount made clear that if WBD instead accepted its offer, it would pay the $2.8bn termination fee that would be owed to Netflix.4 Furthermore, from early 2027 Paramount would pay WBD shareholders payments of $650m per quarter, known as ticking fees, if combining WBD and Paramount faced regulatory delay.
In mid-February 2026, it emerged that, following a waiver from Netflix, WBD had reopened talks with Paramount. Paramount was given a week to make its offer. Then, under the agreed deal, Netflix would have the right to adjust its bid. This is an attempt by WBD to end the hostile bidding war Paramount is pursuing and to provide clarity for its shareholders. WBD has reiterated that it will:
continue to recommend and remain fully committed to our transaction with Netflix. [However], we welcome the opportunity to engage with you and expeditiously determine whether Paramount Skydance can deliver an actionable, binding proposal that provides superior value.5
The insertion of the ticking fees by Paramount is in response to the substantial attention competition authorities across the globe are paying to the acquisition of WBD. The deal is being investigated by the US Department of Justice and, in early February, Netflix was questioned by the US Senate Antitrust Sub-committee. During this hearing, one of the Senators expressed his anger with the country’s competition laws and raised concerns that the deal would result in Netflix getting:
more power over consumers and leaving fewer alternatives and streaming platforms.6
While Paramount did not attend this hearing, it is believed that it has raised concerns about the Netflix-WBD deal to regulators. Netflix co-CEO, Ted Sarandos, has also met with Donald Trump to discuss the deal. However, Trump subsequently stated that the deal ‘could be a problem’.7
The EU and UK markets
Furthermore, whilst all the companies involved are American, both the mergers with Netflix and Paramount are being investigated by the European Commission as markets in Europe would be affected.
In the UK, a group of politicians and former policymakers, have written to the Competition and Markets Authority urging it to conduct a full investigation of the Netflix-WBD merger. The letter argues that the merger could have:
damaging consequences for consumers, the UK’s world-leading creative industries and the UK cinema industry.
and that:
At a time when the British consumer can ill-afford more price increases, Netflix would possess an unprecedented ability to raise prices to access television and films.8
The letter comes at a time when pressure is being placed on the CMA to adopt a generally more business-friendly approach.
The impact of the merger on the UK market is particularly complicated since Warner Bros.’ streaming service, HBO Max, is only due to launch in the UK in March 2026. This is still the plan, with WBD’s head of global streaming, Jean-Briac Perette acknowledging that:
We are likely the last scaled global streamer to come to market. We’ve tried to learn from the rest. We’re a complementary and distinct service to the more volume-driven or basic cable-like streamers in the market. More is not better. Better is better.9
An alternative route to regulatory approval
An easier route to regulatory approval may well be instrumental in allowing Netflix or Paramount to win the battle for WBD. Netflix stresses that the deal will create economic growth and jobs. Netflix’s Sarandos highlighted that:
This is not a typical media merger where you end up with what’s called the Noah’s Ark problem — two of everything. We are buying a company that has assets that we do not, and we will keep investing in those.10
The problem of economic power
In contrast, critics argue that either of the deals would create a new company with too much power. However, given the nature of the firms involved, the competition issues will be fundamentally different between the two deals.
The Paramount deal would primarily reduce the number of studios in the market. This could provide the new merged studio with more bargaining power over distributors, advertisers and creators. Ultimately, this could negatively impact on the final product that consumers watch in the cinema and on television.
The Netflix deal on the other hand would impact directly on the streaming market. In the USA, 80% of consumers have both Netflix and HBO Max.11 After the merger, consumers would have less choice of competing services and Netflix-HBO Max combined may well have an incentive to raise its subscription prices.
In the UK, there are currently three leading streaming services: Netflix, Amazon Prime and Disney+, each with around 23% of the market.12 The merger with WBD could allow Netflix to become the clear market leader.
Concerns about YouTube
When examining streaming markets in all countries, an important factor will be whether to include YouTube in the market. Netflix certainly argues that it is a key competitor, at the hearing Sarandos stated that:
we are competing for the same content, we are competing for the same viewers, we are competing often for the same ad dollars. YouTube is not just cat videos anymore. YouTube is TV.13
If YouTube is included, in the USA it would be the market leader with 13%, ahead of Netflix on 9%. However, the competition authorities may conclude that YouTube’s product and business model is sufficiently different and so not include it in the streaming market.14
The issue of cinemas
A second concern in the Netflix deal will be the Warner Bros.’ studio content that Netflix would own. The merged business may have an incentive to discontinue, raise the price or reduce the quality of the studio output that it supplies to cinemas. Thus, the competition authorities’ investigations will also pay close attention to the impact on the cinema market.
In line with these arguments, the Hollywood screenwriters’ union, the Writers Guild of America, has indicated that the Netflix-WMD deal should be stopped and filmmakers are clearly concerned about Netflix prioritising streaming.15
The competition authorities may well consider imposing remedies before they are willing to allow either deal to go ahead. With this in mind, it is interesting that Netflix has already made clear that it will continue the 45-day exclusive window that Warner Bros. provides cinemas to show its films.
It will be fascinating to see how the competing bids play out and how the competition regulators view them.
* * *
This post has been updated in a Postscript, following a further bid from Paramount that was not matched by Netflix.
References
- AT&T agrees deal to combine WarnerMedia with Discovery
The Guardian, Mark Sweney (16/5/21)
- HBO and CNN owner to split streaming and cable businesses
BBC News, Adam Hancock (10/6/25)
- Netflix’s co-CEO went to an antitrust hearing and a culture war broke out
NBC News, Saba Hamedy (3/2/26)
- Warner Bros gives Paramount seven days to make ‘best and final’ offer
The Guardian, Mark Sweney (17/2/26)
- ibid.
- NBC News, op. cit.
- Trump says $72bn Netflix-Warner Bros deal ‘could be a problem’
BBC News, Osmond Chia (8/12/25)
- UK politicians call for competition review of Netflix bid for Warner Bros
Financial Times (26/1/26)
- Warner streaming boss defends HBO Max UK launch ahead of Netflix takeover
Financial Times (9/2/26)
- NBC News, op. cit.
- Netflix and Warner Bros struggle to defend merger
BBC News, Danielle Kaye (3/2/26)
- Netflix, Disney+, Prime: Streaming platform market share report UK 2025
InsiderMedia, Jennifer O’Keeffe (2/12/25)
- BBC News, Danielle Kaye op. cit.
- Paramount sweetens Warner Bros bid with offer to pay Netflix break-up cost, other fees
Reuters, Harshita Mary Varghese and Aditya Soni (11/2/26)
- In a takeover of Warner Bros., Netflix makes a play for 21st century Hollywood’s throne
NBC News, Daniel Arkin (5/12/25)
Articles
Questions
- What are the similarities and differences between Netflix’ and YouTube’s business models? How close substitutes do you think they are?
- Do you think cinemas are a closer or more distant substitute to Netflix than YouTube?
- Which deal do you think raises the most competition concerns? What might be a possible remedy that could alleviate these concerns?
The enforcement of Article 102 of the Treaty on the Functioning of the European Union (TFEU) by the European Commission (EC) tends to focus on exclusionary abuses by firms with significant market power. Exclusionary abuses are actions that limit or prevent competition, as opposed to exploitative abuses that directly harm the consumer, such as charging high prices.
The treatment of exclusionary abuses has evolved over time. Initially, the approach towards enforcement was form-based (i.e. the nature of the abuses), but this changed when the EC produced new guidelines in 2009 which signalled a move to a more effects-based approach.
The EC plans to produce a new set of guidelines in 2025 and published a draft version in August 2024 as part of the consultation process with businesses and other stakeholders. These draft guidelines indicate a partial shift back to a form-based approach. Any moves in this direction made by the EC are likely to influence both national-level competition authorities and the courts.
The form-based approach to policy enforcement
A form-based approach to the enforcement of Article 102 assumes that certain types of business conduct are inherently anti-competitive except in very exceptional circumstances. In other words, there is a presumption that the characteristics or form of the behaviour mean that it must have a negative impact on competition and consumer welfare in virtually all real-world cases.
With a form-based approach to enforcement there is no requirement for the authorities to carry out detailed case-specific analyses of business conduct as part of an investigation. This had been the approach adopted by the EC before 2009. It is possible, however, that the same form of business conduct could have anti-competitive effects in some market situations but pro-competitive effects in others. The EC was criticised for not making enough allowance for the chances of this happening.
The effects-based approach to policy enforcement
In response to this criticism the European Union published a new set of guidelines in 2009 which signalled that the enforcement of Article 102 was moving to a more effects-based approach. The effects-based approach uses economic analysis to assess the impact of a dominant firm’s conduct on a case-by-case basis. Context-specific evidence is examined by the competition authorities to see if the behaviour effectively excludes rival businesses from the market that are just as efficient as the dominant firm.
The use of economics in this effects-based approach gradually increased over time. Initially, the analysis was predominately based on theoretical arguments, but increasingly cases included sophisticated analysis of market-specific evidence using econometric models and market simulations. This, however, led to the following issues.
- The increasing use of complex economic analysis makes it more difficult to meet the evidentiary standards of the courts and prove a case. As the effects-based approach places a greater burden on the competition authorities to meet these evidentiary standards (i.e. provide evidence of case-specific anti-competitive effects of the conduct) it disproportionality affects their ability to prove cases.
- Businesses with significant market power are more likely to make large profits and so have access to greater resources than government-funded competition authorities. Therefore, they will be able to employ more economic consultants with the relevant technical expertise to (a) carry out the analysis and (b) communicate the findings effectively in a court case
This led to concerns that the competition authorities were losing cases where there was strong evidence of exclusionary conduct by the dominant firm.
In response to these concerns, the EC announced in 2023 that it would be revising its 2009 guidelines to improve enforcement of Article 102.
The draft guidelines
The draft guidelines published in August 2024 split different types of potentially anti-competitive conduct by dominant firms into three categories.
The first category includes types of conduct where there is a strong presumption of anti-competitive effects: i.e. the sole purpose of the business behaviour is to restrict competition. These types of conduct are referred to as a ‘naked restriction’ and the documentation provides the following three examples:
- making payments to customers (typically other businesses) on the condition that they cancel or postpone the launch of a product that uses inputs produced by the dominant firm’s rivals;
- threatening to withdraw discounts offered to suppliers unless they agree to supply the dominant firm’s product in place of a similar product produced by a rival firm;
- actively dismantling infrastructure used by a rival firm.
The guidelines indicate a form-based approach will be taken when investigating these types of conduct as the EC will not have to provide any case-specific evidence of anti-competitive effects. A business under investigation can challenge the presumption of anti-competitive effects with appropriate evidence, but the guidelines make it clear that this would only succeed in exceptional circumstances. In other words, it is highly unlikely that the conduct could ever be justified on pro-competitive grounds.
The second category of anti-competitive conduct includes actions that are also presumed to have a negative impact on competition. The presumption, however, is not as strong as with naked restrictions, so firms have a better chance of proving pro-competitive effects.
There is a form-based element towards this second category of conduct as the EC will not have to provide any initial case specific evidence of anti-competitive effects. But, if a business under investigation does submit evidence to challenge the presumption of anti-competitive effects, the EC must demonstrate that (a) it has fully assessed this evidence and (b) the evidence is insufficient to prove that the conduct does have pro-competitive effects. As part of this process, the EC can provide its own case-specific evidence. Therefore, for this second category of conduct, the initial burden of proof effectively shifts from the competition authority to the firm under investigation, making it more of a form-based approach. However, if the firm uses relevant evidence to appeal its case, the burden shifts back to the competition authority and becomes a more effects-based approach.
The third category includes types of conduct where the EC must initially provide case-specific evidence that it reduces competition. For this category of conduct, the approach towards enforcement remains the same as in the 2009 guidelines and an effects-based approach is adopted.
It will be interesting to see the extent to which the final guidelines (a) follow the approach outlined in the draft guidance and (b) influence the enforcement of Article 102 by the EC and other national-level competition authorities.
Articles
Questions
- What exactly does it mean if a firm has ‘significant’ market power?
- What methods do competitions authorities use to assess whether a firm has a dominant market position?
- Explain the difference between conduct by dominant firm that is (a) an exploitative abuse of its market power and (b) an exclusionary abuse of its market power.
- Explain why a form-based approach towards the enforcement of competition policy is more likely to lead to Type 1 errors (false positives), whereas an effects-based approach is more likely to lead to Type 2 errors (false negatives).
- Provide some examples of exclusionary abuses that are not considered to be naked restrictions.
- Competition policy guidance documents commonly refer to ‘competition on the merits’. What is the precise meaning of this term?
High-tech firms, such as Google, Amazon, Meta and Apple, have increasingly been gaining the attention of competition authorities across the world, and not in a good way! Over the past few years, competition authorities in the UK, USA and Europe have all opened various cases against Apple, with particular focus on its App Store (see, for example, a blog post on this site from 2021 about the Epic v. Apple case in the USA).
The lead-up to the €1.8 billion fine issued by the European Commission (Europe’s competition regulator) on the 4th March 2024, began in 2019 when music streaming provider, Spotify, filed a complaint against Apple, after years of being bound by the ‘unfair’ App Store rules imposed by Apple.1
Apple’s App Store has traditionally served as the only platform through which application developers can distribute their apps to iOS users, and app developers have had no choice but to adhere to whatever rules are set by Apple. As iPhone and iPad users know, the App Store is the only way in which users can download apps to their iOS devices, establishing Apple’s App Store as a ‘gatekeeper’, as described in the European Commission’s (EC) press release expressing their initial concerns in April 2021.2 When it comes to music streaming apps, Apple not only serves as the exclusive platform for downloading these apps, but also has its own music streaming app, Apple Music, that competes with other music-streaming providers.
This means that Apple holds a dominant position in the market for the distribution of music streaming apps to iOS users through its App Store. Being a dominant firm is not necessarily a problem. However, firms which hold a dominant position do have a special responsibility not to abuse their position. The EC found that Apple was abusing its dominant position in this market, with particular concerns about the rules it imposed on music streaming app developers.
Apple requires that app developers use Apple’s own in-app purchase system. This means that users must make any in-app purchases or subscriptions to music streaming apps through Apple’s system, subsequently subjecting app developers to a 30% commission fee. The EC found that this often led app developers to pass on these costs to consumers through an increase in prices.
Although users could still purchase subscriptions outside of the app, which may be cheaper for users as these payments will not be subject to commission, the EC found that Apple limits the ability for app developers to inform users about these alternative methods. For example, Apple prevented app developers from including links within their apps to their websites, where users could purchase subscriptions. The implications of this extends beyond increased prices for consumers, potentially resulting in a degraded user experience as well.
These restrictions imposed by Apple are examples of what are known as ‘anti-steering provisions’, and it is this conduct that led the Commission to issue the fine for the abuse of a dominant market position.
Whilst this case has now been concluded, the spotlight is not off of Apple yet. The European Commission had required that all ‘gatekeepers’ must comply with their Digital Markets Act (DMA) by the 7 March 2024.3 One implication of this for Apple, is the requirement to allow third-party app stores on iOS devices.
Whilst Apple has agreed to this requirement, concerns have been raised about the accompanying measures which Apple will introduce. This includes varying terms for app developers based on whether or not they offer their app exclusively through Apple’s App Store. As outlined in a recent article,4 one implication is that app developers exceeding 1 million existing downloads through the Apple App Store will incur a fee of €0.50 per additional user if they opt to distribute their app also through a competing app store. This may act as a deterrent to popular app developers to offer their app through a competing store.
The success of a platform like an app store, relies greatly on generating ‘network effects’ – more users attract more developers, leading to more users, and so on. Therefore, not being able to offer some of the most popular apps would make it challenging for a new app store to compete effectively with Apple’s App Store.
Recently, Spotify, along with game developer Epic and others, have expressed various concerns about Apple’s compliance with the DMA in a letter to the EC.5 It will be interesting to see whether the EC is satisfied with Apple’s approach to comply with the requirements of the DMA.
References
- A Timeline: How we got here
Time to Play Fair (Spotify) (updated March 2024)
- Antitrust: Commission sends Statement of Objections to Apple on App Store rules for music streaming providers
EC Press Release (30/4/21)
- The Digital Markets Act
EC: Business, Economy, Euro DG
- Apple’s exclusionary app store scheme: An existential moment for the Digital Markets Act
VOXEU, Jacques Crémer, Paul Heidhues, Monika Schnitzer and Fiona Scott Morton (6/3/24)
- A Letter to the European Commission on Apple’s Lack of DMA Compliance
Time to Play Fair (Spotify) (1/3/24)
Articles
Questions
- Why might ‘anti-steering provisions’ that limit the ability of app developers to inform users of alternative purchasing methods be harmful to consumers?
- Why is the existence of Apple’s own music streaming service, Apple Music, particularly significant in the context of its role as the operator of the App Store?
- Reflect on the potential advantages and disadvantages of allowing third-party app stores on iOS devices, as mandated by the Digital Markets Act (DMA).
Competition authorities across the globe have recently been paying close attention to the activity of large firms in high-tech markets, in particular Google, Amazon, Facebook and Apple. One estimate suggests that 30 cases have been opened by the authorities since 2010, and a third of these were launched in 2020.
One of the most prominent recent cases in the US courts concerns a complaint made by Epic Games, producer of the popular Fortnite game, against Apple. The background to the case is Apple’s standard practice on its App Store of taking a 30% cut of all paid app and in-app purchases. Therefore, a Fortnite player purchasing $10 worth of in-game currency would result in $7 for Epic and $3 for Apple.
However, in August 2020 Epic decided, contrary to Apple’s terms and conditions, to offer players an alternative way to purchase in-game currency. Gamers would see a choice screen giving them the option to buy currency through the Apple App Store or to buy it directly from Epic. Crucially, purchasing directly from Epic would be cheaper. For example, the same $10 worth of in-game currency on the App Store would cost only $8 if purchased directly from Epic.
It is clear to see why Epic was in favour of direct payments – it earns revenue of $8 instead of $7. However, note that the benefits for gamers are even larger – they save $2 by buying directly. In other words, Epic is passing on 2/3 of the cost saving to consumers.
Apple very quickly responded to Epic’s introduction of the direct purchase alternative by removing Fortnite from the App Store. Epic then filed a complaint with the US District Court.
The Epic v Apple court case
The case concerned Apple restricting game developers’ ability to promote purchasing mechanisms outside the App Store. However, more broadly, it also examined Apple’s complete control of the iOS app market since all apps must be distributed through the Apple App Store. Epic had previously disrupted PC games distribution by launching its own platform with lower fees. The setup of iOS and Apple’s actions against Epic make this an impossible way to reach users.
The Court’s analysis of the Epic v Apple case depended upon several key factors. First, the market definition. To be found to have breached competition law Apple must have a significant share of the market. If the market is defined as that for iOS apps, this is clearly the case. However, if, as Apple argues, it is broader, encompassing the options to play Epic games through web browsers, gaming consoles and PCs, then this is not the case.
Second, even if the market is narrowly defined, Apple argues that its control of the app distribution market is essential to provide user friendly and secure provision of apps. Furthermore, revenue extracted from app producers can enable more investment in the iOS. Without Apple controlling the market, app producers would be able to free-ride on the visibility the App Store provides for their apps.
The ruling
The US Court announced its ruling on 10 September 2021. The judge decided that the market was broader than just iOS and thus Apple is not considered to be a monopolist. This has been touted as a major success for Apple, as it will allow the company to maintain its control of the app distribution market. However, the Court also ruled that Apple must allow game developers to link and direct users to alternative purchasing methods outside the App Store.
The Court’s decision in the Epic v Apple case closely follows concessions recently made by Apple for so called ‘reader apps’ such as Spotify and Netflix. Following an investigation by the Japanese authorities, these concessions allowed such apps to promote and receive purchases directly from consumers as long as they were made outside the app. These apps could be treated differently, as digital goods are consumed on multiple devices. However, the decision in the Epic case now extends such concessions to gaming apps.
It is unclear whether Apple will appeal the decision in the case Epic brought. If not, Apple stands to lose considerable revenue from its 30% share of in-app purchases. It will be very interesting to see how this ruling affects how Apple runs the App Store. Epic, on the other hand, has already made clear it will appeal the decision, aiming to prevent Apple gaining a share of any payment users make outside the app.
Matt Olczak and Jon Guest
Articles
Questions
- Why might a firm involved in a competition case, such as Apple, try to convince the authorities to define the relevant market as broadly as possible?
- Using the example of the Epic v Apple case, explain how Apple’s actions could be seen as both exclusionary and exploitative abuses of a dominant position.