Paramount CEO David Ellison warned in a letter that Netflix‘s proposed acquisition of Warner Bros. would “extinguish” competition, while he argued that his company’s ownership of WBD would mean a boost to streaming and theatrical distribution.
Ellison’s letter, in response to Sen. Cory Booker (D-NJ), stuck to his main talking points for Paramount to win the battle for Warner Bros. Discovery and against Netflix acquiring its studio and streaming assets. He did not answer most of the senator’s questions about his dealings with the Trump administration, including his communications with the president, and whether there have been discussions about potential changes to CNN, long a Trump target, if Paramount emerges as the winner.
Ellison’s letter was sent last week, before Warner Bros. Discovery announced that it was reopening talks with Paramount after it sweetened its previous offer. Netflix has a deal in place to buy Warner Bros.’ streaming and studio assets along with HBO, with other cable channels spun off into a separate entity.
When Netflix co-CEO Ted Sarandos testified before the Senate Judiciary antitrust subcommittee on Feb. 3, Booker, the top Democrat on the panel, said that he also invited Ellison to appear, but he declined.
Booker followed up with a letter to Ellison, noting that the Paramount CEO had offered to instead provide written testimony to the committee, although the senator wrote that “not an adequate substitute” to an in-person appearance.
Read Cory Booker’s letter to David Ellison.
Read David Ellison’s statement to the Senate Judiciary Committee.
In his reply letter, obtained by Deadline, Ellison wrote that a Netflix-WB combination would be a “fundamental threat to fair competition in the entertainment industry. If permitted to proceed, the deal would consolidate an unprecedented degree of market power in the hands of a single dominant company.”
“I firmly believe that this proposed merger with Netflix would not advance competition, but rather extinguish it. In contrast, my own company’s alternative proposed combination with Warner Bros. Discovery would enhance competition and provide meaningful benefits — more choice and competitive prices — to American consumers,” Ellison wrote.
Ellison outlined a series of arguments against a Netflix-Warner Bros. transaction, zeroing in on Sarandos’ claim that YouTube is a chief rival. As the Justice Department reviews the Netflix deal, that more expansive market definition could make a huge difference in how government attorneys weigh the competitive landscape against antitrust concerns.
“This argument is not credible,” Ellison wrote, adding that Netflix and its subscription rivals operate “on a fundamentally different business model than free, user-generated platforms.” He wrote that among the top 500 programs on YouTube, “there is little-to-no overlap in terms of content that is also available on Netflix.”
“If regulators were to accept Netflix’s expansive market definition, it would effectively end any meaningful antitrust enforcement in the media and technology sectors,” Ellison wrote. “Every social media platform could claim to compete with every media service, and no transaction would ever raise concerns regardless of how concentrated a market actually became.”
Ellison also warned of the impact of a Netflix-WB deal on leverage in negotiations and pricing power in distribution, as well for theatrical releases. “Netflix releases would likely be diverted away from theaters and onto Netflix’s streaming service,” he wrote.
In his testimony, Sarandos was challenged on a number of fronts from lawmakers on both sides of the aisle.
He argued that YouTube’s dominance could not be discounted given the shift in viewing habits.
“About 50% of the engagement on YouTube today happens in the living room on a TV, not on … a mobile service, and growing very fast on television,” Sarandos said. “So if you’re watching YouTube, you’re not watching HBO Max, you’re not watching Netflix, you’re not watching CBS.” He pointed to YouTube’s recent purchase of the rights to the Oscars, long a signature event on traditional broadcast TV.
Sarandos also said, under oath, that the company would commit to a 45-day theatrical window, and he warned of Paramount’s purchase of WBD, noting the company’s plans for $6 billion in cost savings would translate into massive cuts, i.e. layoffs.
In his letter, Ellison did not address the potential for job cuts. He wrote that their transaction “would create a real streaming competitor that would benefit the subscribing public. It would not just preserve theatrical distribution from the sources that seek to diminish it, but it would strengthen cinemas as valuable and key distribution partners for films the American public cherish.”
Booker had asked Ellison if the company has retained lobbyists who are affiliated or formerly affiliated with the administration or the Trump family.
Ellison did defend the employment of “bipartisan advocates,” including lobbyists, “to help ensure that we effectively exercise our First Amendment right to petition government and help policy makers understand our industry and our business.” Paramount’s chief legal officer is Makan Delrahim, who led the Justice Department Antitrust Division in the first Trump term.
Booker also asked whether Ellison had ever donated funds to Trump, “directly or indirectly,” including through a political action committee, and whether there had been any communications regarding a personal benefit to Trump with a Paramount-WBD merger. Those questions also went unanswered.
In his testimony, Sarandos also was pressed by Booker on his meetings with the president. Sarandos said that the merger was discussed at a Nov. 24 meeting, but it was a “very small part” of the topics covered in the conversation. “I have confidence in this case on the merits and that it will be run by the Department of Justice,” Sarandos said.