The fight for control of Warner Bros. Discovery has taken on political and cultural significance because of the $70 billion company’s role in American news and entertainment. But now that the bidding war between Netflix and Paramount Skydance has reopened, it’s worth emphasizing that only two factors should matter in choosing the winner: shareholder value and consumer harm.
It’s irrelevant whether David Ellison, chairman and CEO of Paramount, is as conservative as his critics believe. Hollywood might hate the idea of someone on the right owning a movie studio, and some journalists might loathe the idea of CNN abandoning its left-leaning sensibility, but assuaging those feelings is not a job for the Warner Bros. board.
Donald Trump, for his part, might thrill to the idea of placing CNN in the hands of people he considers friends (or at least, used to). But the Justice Department’s antitrust division exists to protect consumers from anticompetitive behavior, not promote the president’s political interests.
The administration’s critics aren’t crazy to wonder whether Trump might try to hand WBD to a perceived ally. Ellison’s recent visit to the White House didn’t calm those suspicions. But even a rigorously apolitical process might leave Paramount the winner, because there’s a reasonable case to be made that its bid is the better offer.
It’s hard enough to figure out which bidder truly maximizes shareholder value. Netflix has offered $27.75 per share for WBD’s streaming and studio assets. Paramount has offered $30 per share for the whole company, including its collection of cable stations.
Paramount is reportedly preparing to up its bid, and the WBD board needs to decide whether there’s enough residual value left in the cable assets to make Netflix’s offer remain competitive. There might not be, given the pace of cord-cutting.
Netflix might also have more trouble clearing antitrust review, even if the president keeps his recent promise to stay out of it. Netflix already controls 20 percent of the market for subscription video on demand services. Amazon, which was founded by Post owner Jeff Bezos, comes in second place with its Prime Video service.
Adding HBO Max’s 13 percent market share from Warner Bros. would make Netflix appear dominant, though there is considerable overlap between Netflix and HBO Max subscribers. Netflix co-CEO Ted Sarandos argued before Congress that the relevant market should be defined much more broadly to include creator platforms such as YouTube.
The board also has to ask which partner is more likely to close the merger. The Paramount offer’s higher debt ratio might make financing more difficult. Netflix might also prove less mercurial than Ellison, a 43-year-old backed by his father’s fortune.
Progressives have urged corporate boards to adopt a nebulous “stakeholder capitalism” standard that gives them vast discretion to act against the interest of the shareholders who elected them. And lawmakers in both parties have urged federal regulators to depart from the consumer-welfare standard in reviewing deals. That’s a recipe for cronyism because regulators unconstrained by clear rules can press for ideological or personal advantage.
In a perfect world, political lobbying on both sides would be irrelevant to the deal, but America is a long way off from hosting a healthy antitrust regime.
The post How to weigh the Warner Bros. deal possibilities appeared first on Washington Post.
