Paramount bets on European regulators to block WBD-Netflix deal

The future of Warner Bros. Discovery, a media conglomerate that owns iconic movie studios, HBO Max, and cable networks such as CNN, TBS, TNT, Discovery, and HGTV, hangs in the balance. The company’s fate is tied to the outcome of a potential deal with Netflix, which has agreed to purchase Warner Bros. Discovery’s movie studio and streaming business for $27.75 per share. However, this deal is not without its challenges, and the company’s future may ultimately be decided by European regulators.

A quick look at the numbers reveals that Warner Bros. Discovery owns a significant portfolio of live U.S. sports rights, including March Madness, Major League Baseball, the National Hockey League, NASCAR, the French Open, All Elite Wrestling, and the College Football Playoffs. These rights would not be included in the sale to Netflix, but would instead be spun out into a separate publicly traded entity called Discovery Global, which would also own Bleacher Report, House of Highlights, and Warner Bros. Discovery’s other digital assets.

Regulatory Hurdles

The Netflix deal is not the only option on the table, as Paramount has made a hostile takeover bid of $30 per share for the entirety of Warner Bros. Discovery. This bid has been rejected by the Warner Bros. Discovery board, but Paramount has extended the deadline for its tender offer, giving shareholders more time to consider the proposal. Warner Bros. Discovery has responded by stating that less than 7% of its shareholders have tendered their shares to Paramount, and the company remains confident that its deal with Netflix will receive regulatory approval.

While much of the attention has focused on the potential antitrust implications of the deal in the United States, European regulators may ultimately play a decisive role in determining the company’s fate. Netflix is a global company with significant operations in Europe, and the European Commission has been known to take a tough stance on tech companies. Paramount believes that European regulators will block the Netflix deal, citing the continent’s track record of cracking down on big tech companies.

European Regulatory Landscape

Netflix is confident that it can secure approval from European regulators, with a source close to the company stating that there is a “95% certainty” that the deal will be approved. However, Paramount disagrees, and believes that the EU will take a dim view of the deal. The European Commission has already imposed strict rules on video-on-demand streaming services, requiring them to ensure that at least 30% of their programming in EU countries qualifies as European works.

Paramount’s confidence stems from the EU’s track record of being tough on tech companies, with recent crackdowns on Meta, Microsoft, Google, Apple, and Amazon. The company believes that European regulators will view Netflix as a big tech company that needs to be reined in, and that the deal will be blocked as a result. Additionally, the EU may be more protective of movie theater owners, who have expressed concerns about the impact of a Netflix-Warner Bros. combination on the film industry.

Movie Theater Owners’ Concerns

Netflix co-CEO Ted Sarandos has sought to reassure movie theater owners that the company will continue to release Warner Bros. films in theaters with a 45-day window. However, some industry experts believe that the EU may take a more parochial view of the issue, and that the deal could be blocked as a result. The EU’s Audiovisual Media Services Directive already requires video-on-demand streaming services to ensure that at least 30% of their programming in EU countries qualifies as European works.

As the situation continues to unfold, one thing is clear: the future of Warner Bros. Discovery hangs in the balance. The company’s fate will be decided by a complex interplay of regulatory approvals, shareholder votes, and industry trends. While the outcome is far from certain, one thing is clear: the media landscape is about to undergo a significant shift, and the consequences will be felt for years to come.