DOJ Scrutinizes Netflix-Warner Deal Over Monopsony Power in Content Markets

The Justice Department’s scrutiny of Netflix’s $72 billion bid for Warner Bros. Discovery (WBD) marks a significant escalation in the regulatory oversight of the streaming era. While traditional antitrust reviews often focus on consumer harm—such as potential subscription price hikes—this investigation is zeroing in on 'monopsony power.' This refers to the leverage a dominant buyer holds over its suppliers, which, in this case, are the filmmakers, showrunners, and production houses that fuel the global content machine. By merging Netflix’s massive distribution reach with WBD’s historic library and production infrastructure, regulators fear the resulting entity could unilaterally dictate terms that suppress creative compensation and stifle industry-wide competition for talent.

Central to the DOJ’s probe is Netflix’s existing reputation for aggressive negotiation tactics. Unlike traditional studios that offer backend residuals—payments that continue as a show or film finds success over years—Netflix has historically favored a 'buyout' model, paying a premium upfront but retaining all future upside. Filmmakers have long expressed concern that this model, while lucrative for some, eliminates the long-term wealth-building potential that defined the Hollywood elite for decades. If Netflix absorbs WBD, one of the few remaining major buyers capable of offering traditional theatrical and residual-based deals, the DOJ worries that the 'buyout' model could become the mandatory industry standard, effectively lowering the lifetime earnings of creators.

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The Justice Department’s scrutiny of Netflix’s $72 billion bid for Warner Bros.

This investigation mirrors recent antitrust actions in other creative sectors, most notably the DOJ’s successful block of the Penguin Random House and Simon & Schuster merger. In that case, the government argued that the consolidation of major publishing houses would lead to lower advances for authors. By applying a similar logic to the streaming landscape, the DOJ is signaling that it views the 'labor' of Hollywood—the writers and directors—as a protected class under antitrust law. This shift reflects a broader 'New Brandeis' approach to regulation, which looks beyond the checkout counter to assess how corporate concentration impacts the entire economic ecosystem, including workers and small business suppliers.

For Netflix, the stakes are exceptionally high. The acquisition of WBD is viewed by many analysts as a necessary move to secure a deep library of intellectual property (including DC Comics, HBO, and CNN) to compete with Disney and Amazon. However, if the DOJ demands significant concessions—such as guarantees on residual payments or the divestiture of certain production assets—the financial logic of the $72 billion deal could begin to fray. Investors are closely watching for any sign that the DOJ might seek to block the deal entirely, which would likely trigger a significant sell-off in WBD shares, given the company's high debt load and reliance on a strategic exit.

Looking ahead, the industry should expect a series of high-profile depositions from top-tier filmmakers and talent agents. Their testimony will be critical in establishing whether Netflix already uses its market data and scale to 'bully' creators into unfavorable contracts. If the DOJ finds a pattern of anticompetitive behavior, it could set a precedent that fundamentally changes how streaming content is licensed and produced, potentially forcing a return to more transparent, performance-based compensation models across the entire digital media landscape.