And now, this week’s main event…

Everyone in the entertainment business remembers how the Trump administration stood aside when Bob Iger and Rupert Murdoch cut their giant deal, in 2017, delivering most of 21st Century Fox to Disney for $71 billion. But here’s a detail from that regulatory review that hasn’t been reported: Disney, in an effort to smooth approval, told regulators it would divest Hulu, the streamer it then co-owned with rival studios. The Department of Justice rejected the offer and insisted that Disney keep Hulu. Why? Trump 1.0 viewed a muscular Hulu as a necessary counterweight to Netflix’s growing dominance in streaming. (Disney, of course, then bought out Comcast’s stake.)

Now, with Netflix moving to acquire Warner Bros. and HBO Max, another Trump administration is again reckoning with an even mightier Netflix. Although co-C.E.O. Ted Sarandos projected confidence after his meeting with Trump last month, I’ll go out on a limb and suggest we may see a landmark U.S. v. Netflix this year. Provided, of course, that Paramount doesn’t up its ante to $34-a-share nosebleed territory, as my Puck colleague Bill Cohan has gamed out, or that Trump doesn’t post on Truth Social that he’s ordered the D.O.J. to stand down. But what kind of case would U.S. v. Netflix actually be? Whether they know it or not, Netflix has a lot riding on the answer.

Most observers assume the government’s play would be a straightforward Section 7 Clayton Act challenge, aimed at blocking the acquisition. But I’d like to raise the under-discussed, unlikely-but-still-conceivable possibility that the Trump administration goes much harder against Netflix than anyone is anticipating. What if the government frames the deal as exclusionary conduct designed to maintain monopoly power, and brings a Section 2 Sherman Act case that puts Netflix’s entire business under the microscope? That would allow prosecutors to tell a larger story: not just about this acquisition but about a pattern of self-preferencing by a dominant gatekeeper now seeking to lock up one of Hollywood’s deepest libraries and top TV brands.

If that’s the ambitious direction that the D.O.J. takes, the remedies might not stop at “deal blocked.” They could be structural, behavioral, and far-reaching—the kind that outlive any single transaction and redefine how the entire industry operates.

As the government mulls over its next move, it’s worth recalling that the feds tried to keep the huge studios in check during Hollywood’s midcentury golden age. The so-called Paramount Consent Decrees arose from a sweeping antitrust investigation into the studio system’s cartel-like control over both the production and exhibition of films. To settle the government’s Sherman Act case, which reached the Supreme Court in 1948, the Big Five (Paramount, Loew’s, Warner Bros., Fox, and RKO) agreed to spin off their theater chains and abandon tactics like block-booking (forcing theaters to license films in bundles), unreasonable clearances (exclusive rights for overly broad territories), and circuit dealing (bulk licensing across commonly owned venues).

These reforms helped independents gain traction. But starting in the Reagan era, deregulation crept back in, and consolidation surged. During Trump’s first term, the D.O.J. convinced a federal judge to scrap the Paramount Decrees, arguing that they’d outlived their usefulness in an era where digital companies like Netflix, Amazon, and Apple were creating and distributing content outside the traditional system. The philosophy was that looser rules would encourage innovation. And, sure enough, some experimentation occurred: Taylor Swift cut a direct theatrical deal with AMC for the Eras Tour concert film; Sony picked up the Alamo Drafthouse chain. But a vocal contingent, especially within labor, has called for reviving some version of the restrictions. Jon Voight’s plan to “save Hollywood” famously included tax incentives (Trump floated tariffs instead), but also pushed for a reboot of the “fin-syn” rules—the TV version of the Paramount Decrees, which barred the major networks from owning the programming they aired. (For a compelling argument that streamers are effectively engaging in modern block-booking—forcing consumers to take the mediocre with the must-see—have a look at a recent BYU Law Review article, “The Mansion That Disney Built.”) So what could the government seek from Netflix in a prospective case? One road map is the D.O.J.’s recent Section 2 monopolization case against Google. After prevailing at trial, the government didn’t settle for a wrist slap. A D.C. District Court judge barred Google from exclusive contracts across several products—Search, Chrome, Assistant, and Gemini—and ordered it to make certain search index and user-interaction data available to rivals. Google was also forced to syndicate its search and search-ads technology on fairer terms, to level the playing field. Now swap out “search” for “streaming.” What would the Netflix analogue look like? Start with mandatory licensing of content—think The Sopranos or Stranger Things appearing on a rival service like Peacock or Paramount+—on FRAND (fair, reasonable, and non-discriminatory) terms. Then maybe add a ban on exclusive windows for marquee shows, restrictions on how Netflix bundles its studio output with third-party content, and firewalls between studio-side dealmaking and the algorithms that determine content promotion. Maybe even transparency mandates on how Netflix prioritizes its originals over licensed fare.

Netflix, of course, would fight like hell to avoid that fate. Sarandos and co-C.E.O. Greg Peters should hope the government decides this is just a splashy merger and not a move by a dominant player to supercharge its capacity to foreclose rivals.

For now, Netflix seems willing to tempt fate in Washington, perhaps with good reason. As many observers have noted, any government challenge may first turn on market definition and Netflix’s post-merger share. Once a deal plausibly pushes merging companies past roughly a 30 percent share in a market, courts traditionally treat it as presumptively unlawful (though rebuttable). As that share approaches or exceeds 50 percent, judges may infer monopoly power.

Whether Netflix clears those bars depends almost entirely on how the lines are drawn—if you include YouTube and TikTok, Netflix isn’t even close. Limit the market to paid streaming services offering long-form scripted content, and a Netflix-WBD combination would reach an estimated 400 million global subscribers, which begins drifting into choppy waters. Factor in actual consumer engagement—say, share of first-run scripted viewing—and the numbers could jump into the danger zone. That’s why the market framing matters so much. There are options, and some theories seem more plausible than others. Despite what Hollywood’s guilds might like, it’s probably unlikely that Trump’s regulators frame this as a “creatives” case, focusing on the merger’s impact on writers, directors, and actors selling their talents to a diminished number of studio buyers—even though the D.O.J. would have some wind at its back after its 2022 victory blocking Penguin Random House’s acquisition of Simon & Schuster. Still, there may be some appeal in a vertical theory that focuses on streaming and its production supply—especially in a Trump 2.0 environment animated by concerns about conservative voices being suppressed on platforms perceived to be controlled by a liberal media establishment. That kind of grievance doesn’t map neatly onto price effects, but it fits comfortably within a Section 2 narrative about control, foreclosure, and gatekeeping. A lot of the bullishness around Netflix’s ability to fend off a challenge rests on courts accepting YouTube as a market peer, an argument that has some support in the F.T.C.’s recent loss challenging Meta’s acquisition of Instagram. In that case, a federal judge accepted that YouTube was a reasonable substitute for Facebook and Instagram, immediately diluting the government’s market share claims. Regulators may thus try to move beyond market share and focus on Netflix’s ability to dictate take-it-or-leave-it licensing terms that starve movie theaters, and raise prices and increase ads without suffering churn. It wouldn’t be surprising to see them collect data to quantify what economists call the “power to exert.” In the meantime, Netflix might want to lean on Microsoft president Brad Smith, a Netflix board member who, after all, bears scars from his days steering the software giant through its bruising battles with the government. When the feds come ringing, it helps to have someone around who’s already taken that call.

Thanks, Eriq. We’ll be back tomorrow with Scott Mendelson’s full box-office analysis for 2025.

Matt

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