Netflix co-CEO Ted Sarandos and Warner Bros. chief strategy officer Bruce Campbell defended their $83 billion merger deal during testimony to the Senate Judiciary’s subcommittee on antitrust, competition policy, and consumer rights on Tuesday.
The pending acquisition has raised concerns among lawmakers on both sides of the political aisle about Netflix’s dominance in the streaming market, as well as the potential impact to consumer prices, jobs in Hollywood and the theatrical business.
In his opening statement, Sarandos argued that the deal would “strengthen the American entertainment industry, preserve choice and value for consumers and create opportunities for creators.” He touted more than 155,000 American jobs created by Netflix productions and $225 billion contributed to the U.S. economy to date. Additionally, he said during his testimony that users pay 35 cents per hour to watch content on Netflix, while users pay over 90 cents per hour to watch content from Paramount.
Meanwhile, Campbell said the deal would allow Netflix to expand its “nascent movie and television production capabilities with the addition of the Warner Brothers studio assets,” give its own production capabilities access to Netflix’s distribution platform and allow for the spinoff of Discovery Global.
In addition to touting the deal’s benefits, the pair looked to reframe the competition conversation around pressure from the likes of Amazon, Apple and YouTube.
Despite being the industry leader with 325 million subscribers, Sarandos noted that the overlap between Netflix and HBO Max is around 80%. He added that the deal would keep “one of the most iconic Hollywood studios healthy and competitive” and give consumers “more content for less.”
Campbell pointed to the “dynamic and dramatic changes” in the industry since Warner Bros. and Discovery’s merger in 2022, noting that the current media landscape has resulted in consumer frustration, an abundance of streaming options making it difficult to find content to watch and a “flood of options” for consumers’ interest and attention, including social media platforms, digital and interactive games. He added that ad revenue has become less stable as viewers shift to streaming and social media.
“TV and film have never been more competitive than they are today, and this deal will not change that. Our goal is to win the moment of truth. That’s when Americans sit on their couch, pick up the remote control and decide what to watch. That’s where we compete today,” Sarandos said. “Consumers can easily choose between broadcast and cable, like CBS and so many other networks and streamers like Netflix, Disney+, HBO Max, Peacock, Paramount+, Tubi. That also includes deep pocketed tech companies who are trying to run away with the television business like Google’s YouTube, Amazon Prime Video and Apple.”
Sarandos specifically pointed to YouTube’s dominance in TV viewership tracked by Nielsen’s monthly Gauge report, as well as their NFL rights, exclusive deal with the Oscars and a deal with the BBC to produce original programming as evidence that they should be considered a direct rival to Netflix. Per Nielsen, YouTube has a 12.7% share of TV viewing in the U.S.
“Some of their creators have bigger budgets than typical Hollywood television shows. YouTube is not just cat videos anymore. YouTube is TV,” Sarandos added. “This explains why Netflix, with all of our success, are only about 9% of TV viewing time in the in the US. With Warner Brothers, we will be about 10%.”
Check out the other big highlights from the hearing below.
Sarandos declines to commit to residuals in testy exchange with Sen. Hawley
In a testy exchange with Republican Sen. Josh Hawley, Sarandos declined to commit to residuals, but said “top of market” payment has been Netflix business philosophy since it started operating.
“I would like to tell you this is a very complicated answer, because we prepay –,” Sarandos said, before Hawley replied: That’s usually on the way to no. That’s usually way a of saying no. I’m looking for yes.”
Sarandos replied that it is “not a yes or no answer,” before Hawley interjected again: “It kind of is. You’re disappointing me.”
Sarandos then said that Netflix would be sitting down with the unions for new contract talks in three days.
“I think you’ve got some work to do on that, Mr. Sarandos,” Hawley replied. “I would hope that you’d reconsider your position.”
A Netflix spokesperson told TheWrap that residuals have reached an all-time high of $493.9 million, up 5% from 2020 to 2023, and that streaming accounts for roughly 45% of that, with the lions’ share coming from Netflix.
Sen. Booker grills Sarandos on Trump interest in Netflix-Warner Deal
During the hearing, Senator Cory Booker also grilled Sarandos on his meeting with President Donald Trump, who has said he’d be directly involved in the Netflix-Warner Bros. deal’s regulatory review process.
Sarandos said he has met with Trump a few times and that they’ve discussed the state of the entertainment industry in general, including the production economy, runaway production, the value of incentives, the cost of tariffs, and ways to protect American jobs. He added that the the meeting with Trump isn’t unusual given that companies are typically in contact with the government in merger deal reviews and that Netflix is currently engaging with regulators, including the Department of Justice an the European Commission.
“I think it’s wholly proper for the president of the United States to talk to leaders of industry about the industries that they’re running,” Sarandos said. “I gave him some general overview of what we were doing [with the deal]. It was a very small part of the entire meeting. It was not a meeting specifically to talk about the deal.”
“The President, from my experience, has been nothing but interested in protecting and creating American jobs,” he added. “This merger is stands on its merits and will be reviewed by the Department of Justice, and that is the proper channel.”
When asked about his thoughts on Trump’s $16 million settlement with CBS over a ‘”60 Minutes” interview with former vice president Kamala Harris and the subsequent approval of Paramount and Skydance’s $8 billion merger, Sarandos said: “I believe that antitrust laws should be applied objectively, that they should be follow the facts.”
Booker also questioned Trump buying up to $1 million each in corporate bonds from Netflix and Warner Bros. Discovery in the days following the deal announcement. Sarandos declined to comment directly on on Trump’s personal finances, but said: “I don’t think anyone with access to private inside information should be trading stock.”
Sarandos added that there was no request or offer made regarding making political donations in connection with the Warner Bros. deal.
Sarandos, Campbell say Warner Bros. will continue to operate separately from Netflix, resulting in no layoffs
During the hearing, Sarandos and Campbell were asked about plans for potential layoffs related to the deal, to which they claimed there would be none.
“One of the reasons that the Netflix offer appealed to us so much at Warner Brothers discovery is that they don’t have the type of film studio and film distribution infrastructure that we do today. They don’t have the type of television studio that we do today,” Campbell said. “We believe, based on our discussions with them in the negotiation process, that they’re not only going to keep those operations intact. In fact, they’re going to invest in those operations and invest in continued production, including on our lots in Burbank and elsewhere.”
Sarandos declined to provide how many U.S.-specific employees Netflix has, but said he would follow up with the committee. Campbell also didn’t have the exact number for WBD, but said it is around 8,000 U.S. employees.
Sarandos commits to 45-day theatrical window
Additionally, Sarandos reiterated Netflix’s commitment to the 45-day theatrical window for Warner Bros. films.
“The industry has been under attack for five years now: the pandemic, a prolonged strike, production downturn for companies trying to squeeze more profits to that of their businesses,” he said. “We’ve not been doing that, and we got through the strikes, we got through the pandemic, and keep producing and keep growing. But anytime there’s change, the parties get nervous, and rightfully so. They need to know that people are looking out for them. We are looking out for them. In the theaters, I have been asked to give a blood oath about the 45 day window. I think giving my testimony to you under oath is good enough.”
Sarandos cited Netflix’s release of its films in independent theaters as well as the Stranger Things series finale, which resulted in “thousands of people, thousands of sold out shows that revitalized the theater business for what was otherwise going to be a soft weekend.”
“Now that this is going to be part of our business, we’re going to treat it as importantly as every other part of our business, and win. And you do that by making movies that people care about and go out to,” Sarandos said. “Warner Brothers did an exceptional job of that this year, they did $4 billion at the box office, which is one of the reasons why this company costs so much to buy. So we want to keep that going and actually improve and build on it.”
More to come….
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