The bitter battle between David Ellison and Netflix over ownership of Warner Bros. Discovery could end up with high-profile developments in Brussels, where regulators are expected to launch a formal antitrust investigation as part of the approval process if a deal is struck with one of the two U.S. candidates.
But even before the Warner Bros.-Discovery deal was finalized on the U.S. side, so-called “advance notice discussions” were already underway within European Union regulators to consider possible merger scenarios for the rivals.
Warner Bros. Discovery announced Tuesday that it will hold seven days of discussions with Paramount to “seek clarity” on its “best and final offer” in the hostile takeover effort. At the same time, WBD said it remains committed to its $83 billion deal with Netflix at this time and recommended that shareholders vote in favor of the deal at a special meeting on March 20.
So where do Netflix and Paramount stand with Brussels?
A man on a mission, Mr Ellison made the case for Paramount Skydance with members of the EU Competition Directorate as part of a recent strong lobbying campaign in Europe, visiting France and meeting with French President Emmanuel Macron, as well as Germany and the UK.
After that European tour, Ellison earlier this month sent an open letter to journalists around the world, including in the UK and France, stressing that if Paramount Skydance were to sign a deal with Warner Bros. Discovery, the combined company would produce at least 30 feature films a year, all of which would be released in theaters.
In the letter, published as a paid announcement in newspapers around the world, Ellison argued that audiences are “best served by more choice, not less, and a market that encourages all areas of film production, content creation, and theatrical release.” He argued that the Netflix merger would instead eliminate “meaningful competition by creating a monopolistic or dominant entity.”
Meanwhile, Netflix is also believed to be discussing the details of its Warner Bros. Discovery merger with EU regulators. And it’s something the US streaming giant is no stranger to.
Francois Godard, an analyst at Enders Analysis, said Netflix is ”well equipped to lobby in Europe.” He noted that the company has been in a long-standing dialogue with Brussels, with multiple back-and-forths over the EU’s Audiovisual Media Services Directive (AVMS) standards, which require foreign streamers to invest a portion of their profits in local productions. Netflix generally adheres to this code.
However, at this stage, it can be said that Paramount has an advantage in terms of image.
Max von Thun, director for Europe at the Brussels-based Open Market Institute, said even if the Netflix deal clears U.S. regulatory hurdles, he can’t rule out the possibility that it could hit a wall later in Europe, where the main regulatory issues would be the deal’s impact on European consumers and jobs in the production and theatrical exhibition business.
Von Thun said Paramount Skydance has a bit of an advantage with European regulators because the Netflix-Warner Bros. merger “will have a clearer impact on consumers,” adding that “Netflix is clearly a bigger player in streaming than Paramount.”
The EU is very sensitive to consumer price issues. If Netflix decides to combine Netflix and HBO Max (which Netflix executives have said they won’t do, at least initially), there are concerns that it would give Netflix and HBO Max even more leverage to drive up subscription costs. The combination of Netflix and HBO will give the combined Netflix and WB more leverage in negotiations with European independent production companies and content providers.
Godard says that, like in the US, Europe’s main concerns about Netflix’s Discovery deal with Warner Bros. revolve around concerns that a Netflix win could hurt its theatrical business.
That’s a concern, he says, and “obviously Paramount is in a good position to defend it.”
But at the same time, Godard believes Netflix can “give very strong reassurance to European regulators that they don’t want to crush theater releases.”
In mid-December, Netflix co-CEO Ted Sarandos met with Macron and French film chiefs while in France for the premiere of Emily in Paris Season 4. In a fireside conversation with Maxime Saada, CEO of Canal+ Group, he vowed to keep Warner Bros. movies in theaters. “Our intention is to honor traditional theatrical release slots and continue to release Warner films in theaters, and Warner Studios will continue to operate independently,” Sarandos said.
“Netflix is targeting intellectual property with this deal,” Godard said. “I think they understand that the theatrical window still generates much greater long-term intellectual property value than television or streaming,” he noted, citing the fact that the value of the “Harry Potter” and “Star Wars” series was created through theater.
The International Cinema Union (UNIC), which represents film industry associations and theater operators from 39 European countries, also recently met with the EU’s Directorate-General for Competition. A statement after the meeting emphasized that the theatrical release period is an “important principle” that must be upheld in any contract. But UNIC added that it does not support either of the current bids, noting that either merger could have “significant negative consequences for European cinema.”
German producer Martin Moskowitz, former president of Constantine, which produces the Resident Evil series, agrees. “Neither of these deals are good for business,” he says.
However, Moscovici believes Netflix has a slight advantage over Paramount when it comes to EU regulations.
He said Netflix is already “deeply integrated into local production” in Europe, where the consumer-industry relationship is “much deeper” than Paramount, so there is less “antitrust risk.”
“The only thing the EU would consider is glass windows,” Moskowitz said. Like Godard, he believes he can make a convincing case that streaming giant Netflix poses no potential threat to Europe’s declining moviegoing ecosystem.
Both Moscovici and Godard noted that Brussels may require guarantees on certain points or impose conditions on the candidate who emerges as the winner before the EU gives the deal the green light.
But as von Thun, Godard and other analysts have pointed out, EU regulators rarely block media mergers. That didn’t happen with Disney and 21st Century Fox in 2018, with Comcast’s bid for Sky in the same year, or with AT&T’s WarnerMedia and Discovery Communications in 2021.
Therefore, the EU’s biggest impact on the Warner Bros.-Discovery merger deal is “potentially a delay,” said Joseph Gulino, managing partner and international lawyer at DRRT. “In the U.S., we’re likely to see a move to approve deals more quickly if the Justice Department and the White House like them,” Gulino said.
Ultimately, it will be up to EU antitrust chief Teresa Ribeira to give the green light in Europe. Ribeira recently imposed hefty fines on Google and Elon Musk’s X for violating European Union rules.
However, while merger reviews are legally independent in various jurisdictions around the world, we must not forget the larger political picture.
In reality, “even if European regulators say they’re obviously not affected by what’s happening in the U.S., they’re taking that into account,” von Thun said.
In the end, President Donald Trump’s blessing on either deal may be as important to winning this battle in Europe as those who see it as a domestic issue in the United States.
“We are in a very dangerous geopolitical period,” von Thun says. “So I’m sure they[European regulators]are thinking, ‘Oh, if we block this and Trump approves it, are we going to get some backlash?'”
