Netflix highlights industry competition as it seeks Warner Bros deal approval
Streaming giant says it makes up a relatively low share of US ‘TV time’ in quarterly letter to shareholders
Netflix executives said its $83bn deal to buy Warner Bros Discovery’s studio and streaming businesses would be a “strategic accelerant” for the company and claimed that they were “confident” in the group’s ability to gain regulatory approval.
“Our deal strengthens the marketplace and it ensures healthy competition,” said Ted Sarandos, co-chief executive, during a presentation to investors during Netflix’s fourth-quarter earnings presentation.
Sarandos added that the company had “made progress towards securing the necessary regulatory approvals” from the US Department of Justice and the European Commission.
The streaming giant highlighted its relatively low share of US “TV time” in its letter to shareholders in a preview of likely arguments it will make to regulators.
The comments came hours after the company amended its offer for WBD to all cash, in an effort to thwart a hostile bid from Paramount. Netflix did not increase its bid, which values the business at $82.7bn including debt.
The combination of Warner’s HBO Max service and Netflix would put the company over the 30 per cent US market share threshold. But Netflix is expected to argue that other streaming services, including YouTube, should be considered when surveying the marketplace.
Sarandos told investors on Tuesday that “the TV landscape, in fact, has never been more competitive than it is today”.
Many in Hollywood are concerned that Netflix will smother WBD’s movie business by prioritising streaming releases over wider ones in cinemas. Sarandos called the traditional cinema business “outdated” at a conference last April.
Sarandos on Tuesday said WBD would continue to release films as it always has. “This is a business and not a religion,” he said. “So conditions change and insights change.”
Greg Peters, co-chief executive, said his view on making a major acquisition changed after the Netflix team was able to look at WBD’s books during the due diligence process.
“Once we got under the hood, we saw exciting additions to our current business [that were] an effective complement to the streaming model,” he said. “Now with Warner Brothers, they bring a mature, well-run theatrical business with amazing films.”
The streaming group on Tuesday reported net income of $2.4bn, or 56 cents per share, on revenue of $12bn in the fourth quarter — results that were slightly ahead of Wall Street forecasts. Quarterly earnings were up 29 per cent compared to the same period in 2024.
Its shares were down 4.8 per cent in after-hours trading. Investors pointed to a decline in the company’s operating margin in 2025 to 29.5 per cent due to higher expenses related to the WBD deal, which totalled $275mn. The company also paused its share buyback programme to help fund the deal.
“The big disappointment in terms of the numbers is just on the margin guidance,” said John Belton, portfolio manager at Gabelli Funds. “That’s a little bit short of expectations, so you probably have slight negative earnings estimate revisions.”
In the most recent quarter, Netflix surpassed 325mn subscribers after posting a massive hit with the finale of Stranger Things, which reached 120mn views. It also streamed the boxing match between Jake Paul and Anthony Joshua as well as NFL games at Christmas.