Netflix has argued that its proposed $72 billion acquisition of Warner Bros Discovery's film studios and HBO Max is necessary to compete with YouTube. However, antitrust experts doubt regulators will accept this justification.
The streaming giant's deal, which would create a combined entity with 428 million subscribers, will face intense scrutiny from U.S. and global regulators due to its massive scale. Netflix maintains the merger is essential to challenge Alphabet-owned YouTube, which Nielsen data shows as America's most-watched TV content platform. Yet legal experts note fundamental differences between the platforms' content types, audiences, and business models make them unlikely direct competitors in regulators' eyes.
"Netflix's argument about competing for limited daily viewing time with YouTube ultimately doesn't hold water," said Abiel Garcia, antitrust partner at Kesselman Brantly Stockinger.
Netflix spends billions annually on premium originals like "Stranger Things" and "The Exorcist: Believer," dominating Nielsen's streaming rankings with eight of the top ten original series in a recent survey. Its subscription model ranges from $7.99 to $24.99 monthly, with advertising still a growing segment.
By contrast, YouTube thrives on user-generated content, music videos, tutorials, and influencer-driven advertising. With creators like MrBeast (450M+ subscribers), major music artists, and children's hits like "Cocomelon," YouTube now surpasses both Netflix and traditional TV in watch time.
October data shows YouTube commands 12.9% of streaming viewership versus just 9% for the combined Netflix-HBO Max entity.
Regulators recognize these distinctions. "It's difficult to argue YouTube replaces HBO Max and Netflix's premium content," noted Robin Crowthers, former DOJ antitrust lawyer. While merging companies often claim broad competition exists, antitrust agencies excel at identifying threats to specific market segments.
Precedent suggests Netflix faces challenges. The FTC previously convinced courts that Whole Foods' acquisition of Wild Oats harmed "premium natural/organic supermarkets" competition despite claims of broader grocery competition. Similarly, regulators blocked Tapestry's Capri acquisition over "affordable luxury" market concerns, citing internal documents contradicting courtroom arguments.
Netflix must now submit extensive internal competitive analyses earlier in the process due to recent merger review reforms. "This gives regulators a significant investigative advantage," said Shaul Sassman, former FTC antitrust lawyer.
Legal experts warn if Netflix's documents don't identify YouTube as a primary competitor or focus on subscription-based markets excluding YouTube, its justification collapses. Recent reports suggest Netflix also pitches the deal as cost-saving for overlapping subscribers through bundled services. However, Crowthers notes the DOJ remains skeptical of such consumer benefit claims while examining potential price hikes for non-bundled users.
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