Let the legal battle begin.
On Monday, a Las Vegas-based HBO Max subscriber sued Netflix over concerns that the streamer’s plans to buy some of Warner Bros. Discovery’s assets would create an anti-competitive environment in the entertainment industry and raise subscription prices.
Netflix said last week it agreed to buy Warner Bros. Discovery’s film and TV business, its Burbank lot, HBO and the HBO Max streaming service for $27.75 a share or $72 billion. It also agreed to take on more than $10 billion of Warner Bros.’ debt, creating a deal value of $82.7 billion.
Michelle Fendelander alleges in her lawsuit that if Netflix’s deal were to go through, it would decrease competition in the subscription streaming market. She is asking the court to issue an injunction to prevent the merger from happening or issue a remedy for the anti-competitive effects.
“American consumers — including SVOD purchasers like Plaintiff, an HBO Max subscriber — will bear the brunt of this decreased competition, paying increased prices and receiving degraded and diminished services for their money,” according to Fendelander’s lawsuit, which is seeking class-action status. The lawsuit was filed in a U.S. District Court in San Jose.
Netflix on Tuesday called the lawsuit “meritless” and “merely an attempt by the plaintiffs bar to leverage all the attention on the deal.”
The Los Gatos, Calif.,-based streamer is long seen as the winner of the subscription streaming wars, boosted by having successfully entered the streaming content space earlier than rivals and for its superior recommendation technology. By buying Warner Bros. Discovery’s assets, Netflix would gain access to more franchises and characters, including Batman, “Game of Thrones” and Harry Potter. Netflix said it plans to keep Warner Bros.’ commitments to bringing its movies to theaters.
But Fendelander and some industry observers are concerned that Netflix owning one of its streaming rivals will hurt the entertainment industry because it means less competition.
“The elimination of this rivalry is likely to reduce overall content output, diminish the diversity and quality of available content, and narrow the spectrum of creative voices appearing on major streaming platforms,” according to the lawsuit by Fendelander, who has never been a Netflix subscriber.
Streamers over the years have steadily raised their prices, and some analysts said they would not be surprised if subscription prices continued to go up.
Netflix executives said they believe their deal to acquire WBD’s assets will benefit key stakeholders.
“It’s going to mean more options for consumers,” said Netflix Co-CEO Greg Peters on a call with investors last Friday. “It’s going to be more opportunities for creators, more value for our shareholders. Together, we’ve got the chance to bring great stories, cutting edge innovation and more choice to audiences everywhere.”
Peters also pointed out at a UBS conference on Monday that Netflix combined with the assets it is acquiring from Warner Bros. Discovery would still amount to a smaller share of U.S. TV viewing than YouTube.
Whether the deal will get over the finish line remains to be seen, although Netflix executives say they believe it will. On Monday, Paramount said it would directly appeal to shareholders to offer an alternative bid.
