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NEW YORK: Netflix says it must acquire Warner Bros Discovery o compete with YouTube, but antitrust experts doubt regulators will buy that argument.<\/strong><\/p>\n The streaming giant\u2019s $72 billion takeover of Warner Bros Discovery\u2019s studios and HBO Max will face scrutiny from U.S. and global regulators, given its scale and the combined 428 million subscribers.<\/p>\n Netflix insists the deal is needed to challenge Alphabet\u2019s which media analysis firm Nielsen ranks as America\u2019s most-watched TV distributor.<\/p>\n But attorneys say the Justice Department is unlikely to see Netflix and YouTube as interchangeable rivals, given their different content, audiences and business models.<\/p>\n \u201cNetflix is trying to say it competes with YouTube because people only watch a certain amount of content a day,\u201d said Abiel Garcia, antitrust partner at Kesselman Brantly Stockinger. \u201cThat argument ultimately fails.\u201d<\/p>\n Netflix spends billions of dollars on scripted original movies and series like \u201cStranger Things\u201d and \u201cKPop Demon Hunters\u201d.<\/p>\n It frequently dominates Nielsen\u2019s ranking of most-streamed original series, accounting for eight of the top 10 originals in a recent ranking. Subscribers pay $7.99\u2013$24.99 monthly, while ads remain a small but growing revenue stream.<\/p>\n YouTube, by contrast, thrives on user-generated content and advertising built on music videos, how-to tutorials and influencers.<\/p>\n It commands more viewing time than Netflix or traditional TV, powered by creators like MrBeast, with more than 450 million subscribers, top recording artists and children\u2019s hits like Cocomelon.<\/p>\n In October, YouTube held 12.9% of streaming viewership, compared with Netflix\u2019s projected 9% share once combined with HBO Max post-merger.<\/p>\n REGULATORS WILL KNOW THE DIFFERENCE<\/strong><\/p>\n The DOJ is not likely to view those videos as a substitute for Netflix shows and movies, experts said.<\/p>\n \u201cNetflix is going to have a difficult time making arguments that YouTube is substitutable for the kind of content that\u2019s on HBO Max and Netflix,\u201d said Robin Crauthers, a partner at McCarter & English and former DOJ antitrust attorney.<\/p>\n While companies often seek to defend their mergers by pointing to competition from a broad universe of established and emerging players, antitrust enforcers are experienced in finding the ways that mergers quash competition in distinct sub-markets.<\/p>\n For example, the Federal Trade Commission convinced a court that Whole Foods Market\u2019s acquisition of rival Wild Oats Markets reduced competition among \u201cpremium natural and organic supermarkets,\u201d despite Whole Foods\u2019 argument that it competes with conventional grocery chains.<\/p>\n The FTC also successfully challenged the merger between U.S. handbag and accessories maker Tapestry and rival Capri as decreasing competition in the \u201caccessible luxury\u201d market.<\/p>\n The judge who blocked the Tapestry deal relied on documents showing the companies themselves thought of accessible or affordable luxury as a valid category, contradicting their argument at trial that affordable luxury was not a well-defined part of the industry.<\/p>\n NETFLIX FACES DOCUMENT SCRUTINY<\/strong><\/p>\n Because of recent reforms to the merger clearance process, Netflix will have to hand over more of its internal competition analyses sooner, said former FTC antitrust attorney Shaoul Sussman.<\/p>\n \u201cThat will definitely give the government a leg up in the investigation,\u201d said Sussman, of the law firm Simonsen Sussman.<\/p>\n If Netflix\u2019s documents do not cite YouTube as a major competitor, or if they focus on categories that exclude YouTube, such as paid subscriptions, that will undermine the company\u2019s argument, attorneys said.<\/p>\n Netflix has also pitched the deal as bringing down prices for the vast majority of HBO Max subscribers, who are already Netflix customers, by allowing the company to bundle the two products, Reuters reported last week.<\/p>\n But the DOJ is very skeptical of claims that mergers bring cost savings that will find their way back to consumers, Crauthers said, and will also consider whether the deal would allow Netflix to raise prices on subscribers who do not take both services.<\/p>\n \u00a0<\/p>\n<\/div>\n