• Absent political cover, Netflix bid likely headed to litigation
• With recent comments, Trump has created a bidding war for his support
• Paramount bid, regulatory path cleaner as onus shifts to Netflix

Better than the movies themselves, the drama surrounding the Warner Brothers Discovery sale has been riveting for M&A watchers. And, while nuances and wrinkles abound, there are a few critical plot twists that will likely drive the outcome of the process.

Paramount Skydance and the controlling Ellison family had widely projected themselves as the Trump administration’s preferred buyer of the assets, and the safest path through the regulatory landscape in the US. It appeared this was their prize to lose.

But, for now, despite putting forth a compelling financial offer and a more perceptible path to approval, rival bidder Netflix was able to ink a deal.

The traditional antitrust concerns associated with the Netflix deal, however, are real and significant, and the political support less clear.

Due to Netflix’s leading share of the market and HBOMax’s direct competition, an intuitive market definition around streaming platforms would see the post-merger entity holding a share well over 30% and firmly put the merger into the camp of presumptively illegal.

Netflix will engage with the DOJ around this crucial market definition however, likely arguing that streaming platforms compete against a wide variety of other entertainment outlets, including linear TV as well as other video services such as YouTube. At the base level, Netflix will likely contend that the relevant product market should be assessed based on consumers’ ‘viewing hours’. This expanded market definition would considerably ease regulatory concern.

Taken from a nuts-and-bolts antitrust perspective, the debate around the proper market definition will determine the outcome of the DOJ process.

Keep in mind however, that the Department of Justice (DOJ) antitrust division led by Abigail Slater has been maligned as being soft on enforcement and overshadowed by political influence. The consensus view amongst the DC antitrust bar is that the DOJ will be champing at the bit to bring a case against a Warner Bros./Netflix merger, if the political will to do so allows.

In this day and age though, political will is a fickle beast and starts and ends at the top.

Paramount and the Ellisons appeared to have President Donald Trump’s endorsement in the run up to the bidding, but that picture is starting to look a little fuzzier.

Trump has made a series of directionally negative comments about the Ellisons, media reports attributed to senior officials have suggested that Paramount has overplayed its hand. Trump has also lavished praise on Netflix’s CEO.

Recall this column warned last week about the shifting sands of political favoritism and the risk that comes with relying on it.

So, with his sowing of doubt around his preferred buyer, Trump has put both desirous bidders in a place where, to win over shareholders, they need to deliver a strong indicator of a Trump endorsement. The DOJ and other relevant regulators will almost undoubtedly craft their approach to adhere to his direction.

This essentially makes the most important competition assessment in this merger analysis much more to do with which bidder can offer the president his most desired outcome, and little to do with market share and theory.

Paramount and the Ellisons would appear to have less work to do, and a cleaner regulatory bill of health on traditional grounds. Afterall, the Ellisons came into the process with the promise of establishing a conservative media empire, which Trump has appeared to support previously.

In announcing the hostile offer, Paramount disclosed that it has already filed its HSR application for the transaction, and if it is able to secure antitrust clearance without a second request, or better yet through an early termination, that will largely be game over.

Pfizer recently was able to extract an early termination from the Federal Trade Commission that gave it a leg up over a rival when bidding for Metsera, even as the early termination program was supposedly paused. Some in the antitrust bar saw this as an indicator of political preference, and a similar development in the Warner Bros. matter should be considered a determinative indicator of the administration’s preference.

Shareholders see Paramount’s offer terms as competitive if not more appealing than Netflix’s, and if the regulatory path to consummation has been granted, there is very little Netflix can do beyond throwing significantly more compensation into the pot. A bidding war is likely to hot up into 2026.

At this point however and up until Paramount secures that approval, Netflix has an opportunity. It has the support of Warner Bros.’ leadership and a signed agreement. If it can find a way to gain Trump’s clear endorsement, it may actually pull this off.

But what can Netflix do to convince Trump that it is in his interest to support the company’s efforts?

Undoubtedly, Netflix has a team working on that challenge now, and one imagines them thinking creatively. Maybe it will come in drips and drabs, maybe there is one silver bullet it can offer that sways the Dealmaker-in-Chief.

Perhaps former President Barack Obama’s Higher Ground Productions contract is cancelled? Maybe Netflix takes a page from Amazon, when it attained the movie rights to Melania Trump’s life story for USD 40m, and buys The Donald Saga for a hefty fee? Money towards Trump’s presidential library may be too much of a rerun after Paramount was so generous? A board seat for Baron Trump, as the Ellison-associated consortium may provide in the Tik-Tok matter? It should all be considered.

There are myriad plotlines to discuss as the process continues: backlash from Hollywood and the California Attorney General; national security scrutiny of the Gulf state money funding the Paramount bid; labor monopsony concerns; remedy proposals… the list goes on.

But the most crucial takeaway for the moment is that Netflix may soon find itself with less room to maneuver. Paramount may well get expedited regulatory clearance and become increasingly attractive to already supportive shareholders.

Netflix needs to gain the support of Trump to hold on to its prize, or at the very least muddy the waters enough to damage shareholders’ perception that Paramount is the safe option. And they must act boldly.

Hell or High Water is a weekly column that offers commentary from our editorial team on the main deals undergoing regulatory reviews as well as the broader enforcement environment. The opinions expressed here are those of the writer only.