[House Hearing, 119 Congress]
[From the U.S. Government Publishing Office]
FULL STREAM AHEAD: COMPETITION AND
CONSUMER CHOICE IN DIGITAL STREAMING
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON THE ADMINISTRATIVE STATE, REGULATORY REFORM, AND
ANTITRUST
COMMITTEE ON THE JUDICIARY
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
SECOND SESSION
__________
WEDNESDAY, JANUARY 7, 2026
__________
Serial No. 119-48
__________
Printed for the use of the Committee on the Judiciary
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via: http://judiciary.house.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
62-503 WASHINGTON : 2026
COMMITTEE ON THE JUDICIARY
JIM JORDAN, Ohio, Chair
DARRELL ISSA, California JAMIE RASKIN, Maryland, Ranking
ANDY BIGGS, Arizona Member
TOM McCLINTOCK, California JERROLD NADLER, New York
THOMAS P. TIFFANY, Wisconsin ZOE LOFGREN, California
THOMAS MASSIE, Kentucky STEVE COHEN, Tennessee
CHIP ROY, Texas HENRY C. ``HANK'' JOHNSON, Jr.,
SCOTT FITZGERALD, Wisconsin Georgia
BEN CLINE, Virginia ERIC SWALWELL, California
LANCE GOODEN, Texas TED LIEU, California
JEFFERSON VAN DREW, New Jersey PRAMILA JAYAPAL, Washington
TROY E. NEHLS, Texas J. LUIS CORREA, California
BARRY MOORE, Alabama MARY GAY SCANLON, Pennsylvania
KEVIN KILEY, California JOE NEGUSE, Colorado
HARRIET M. HAGEMAN, Wyoming LUCY McBATH, Georgia
LAUREL M. LEE, Florida DEBORAH K. ROSS, North Carolina
WESLEY HUNT, Texas BECCA BALINT, Vermont
RUSSELL FRY, South Carolina JESUS G. ``CHUY'' GARCIA, Illinois
GLENN GROTHMAN, Wisconsin SYDNEY KAMLAGER-DOVE, California
BRAD KNOTT, North Carolina JARED MOSKOWITZ, Florida
MARK HARRIS, North Carolina DANIEL S. GOLDMAN, New York
ROBERT F. ONDER, Jr., Missouri JASMINE CROCKETT, Texas
DEREK SCHMIDT, Kansas
BRANDON GILL, Texas
MICHAEL BAUMGARTNER, Washington
------
SUBCOMMITTEE ON THE ADMINISTRATIVE STATE,
REGULATORY REFORM, AND ANTITRUST
SCOTT FITZGERALD, Wisconsin, Chair
DARRELL ISSA, California JERROLD NADLER, New York, Ranking
BEN CLINE, Virginia Member
LANCE GOODEN, Texas J. LUIS CORREA, California
HARRIET HAGEMAN, Wyoming BECCA BALINT, Vermont
MARK HARRIS, North Carolina JESUS G. ``CHUY'' GARCIA, Illinois
DEREK SCHMIDT, Kansas ZOE LOFGREN, California
MICHAEL BAUMGARTNER, Washington HENRY C. ``HANK'' JOHNSON, Jr.,
Georgia
CHRISTOPHER HIXON, Majority Staff Director
ARTHUR EWENCZYK, Minority Staff Director
C O N T E N T S
----------
Wednesday, January 7, 2026
OPENING STATEMENTS
Page
The Honorable Scott Fitzgerald, Chair of the Subcommittee on the
Administrative State, Regulatory Reform, and Antitrust from the
State of Wisconsin............................................. 1
The Honorable Jerrold Nadler, Ranking Member of the Subcommittee
on the Administrative State, Regulatory Reform, and Antitrust
from the State of New York..................................... 3
The Honorable Jamie Raskin, Ranking Member of the Committee on
the Judiciary from the State of Maryland....................... 6
WITNESSES
Jay Ezrielev, Founder, Managing Principal, Elevecon, LLC
Oral Testimony................................................. 9
Prepared Testimony............................................. 11
Jessica Melugin, Director, Center for Technology & Innovation,
Competitive Enterprise Institute
Oral Testimony................................................. 16
Prepared Testimony............................................. 18
John M. Yun, Professor of Law, Antonin Scalia Law School, George
Mason University
Oral Testimony................................................. 21
Prepared Testimony............................................. 23
Matthew F. Wood, Vice President, Policy and General Counsel, Free
Press
Oral Testimony................................................. 39
Prepared Testimony............................................. 41
LETTERS, STATEMENTS, ETC. SUBMITTED FOR THE HEARING
All materials submitted for the record by the Subcommittee on the
Administrative State, Regulatory Reform, and Antitrust are
listed below................................................... 78
Materials submitted by the Honorable Jerrold Nadler, Ranking
Member of the Subcommittee on the Administrative State,
Regulatory Reform, and Antitrust from the State of New York,
for the record
A statement entitled, ``IDA Statement Opposing A Merger
Involving Warner Bros. Discovery,'' Oct. 29, 2025,
International Documentary Association (IDA)
A press release entitled, ``DGA Statement on Warner Bros.
Discovery/Netflix,'' Dec. 5, 2025, Directors Guild of
America
A statement entitled, ``SAG-AFTRA Statement Regarding
Proposed Netflix/Warner Bros. Transaction,'' Dec. 5,
2025, Screen Actors Guild-American Federation of
Television and Radio Artists (SAG-AFTRA)
A statement entitled, ``The Warner Bros. Acquisition Is a
Threat to Workers, Consumers, and American Culture--It
Must Be Blocked,'' Jan. 7, 2026, Writers Guild of America
West and Writers Guild of America East
An article entitled, ``Hollywood Teamsters: Warner-Netflix
Geal Is `Another Call for Alarm' for Entertainment
Workers,'' Dec. 5, 2025, The Wrap
A statement from the Producers Guild of America, Jan. 6, 2026
A statement from the American Economic Liberties Project,
Jan. 7, 2026
An article entitled, ``The Warner Bros. Curse,'' Dec. 16,
2025, Planet Money, NPR
An article entitled, ``There are no good outcomes for the
Warmer Bros. sale,'' Dec. 10, 2025, The Verges
A report entitled, ``A More Perfect Media: Saving America's
Fourth Estate from Billionaires, Broligarchy and Trump,''
Jul. 14, 2025, Free Press
A press release entitled, ``Press Freedom Groups Tell FCC:
Media Consolidation Poses Grave Threat to Independent
News and Information in the United States,'' Aug. 5,
2025, Free Press
A statement from Cinema United, Jan. 7, 2026, submitted by the
Honorable Derek Schmidt, a Member of the Subcommittee on the
Administrative State, Regulatory Reform, and Antitrust from the
State of Kansas, and the Honorable Jerrold Nadler, Ranking
Member of the Subcommittee on the Administrative State,
Regulatory Reform, and Antitrust from the State of New York,
for the record
Materials submitted by the Honorable Becca Balint, a Member of
the Subcommittee on the Administrative State, Regulatory
Reform, and Antitrust from the State of Vermont, for the record
An article entitled, ``Movie Theatres Dread Any Warner Bros.
Merger, Fear `Tipping Point' Where While System
`rumbles,' '' The Hollywood Reporter
An article entitled, ``Gen Z Went to Movies the Most Often in
2025,'' Dec. 17, 2025, Indie Wire
A statement from Makan Delrahim, Chief Legal Officer, Paramount
Skydance Corporation, Jan. 7, 2026, submitted by the Honorable
Jim Jordan, Chair of the Committee on the Judiciary from the
State of Ohio, for the record
Materials submitted by the Honorable Scott Fitzgerald, Chair of
the Subcommittee on the Administrative State, Regulatory
Reform, and Antitrust from the State of Wisconsin, for the
record
An article entitled, ``A Merger Could Bring Better
Streaming,'' Dec. 14, 2025, The Wall Street Journal
An article entitled, ``Netflix-Warner Bros. Deal Is Free
Market David Slaying Hollywood's Outdated, Greedy
Goliath,'' Jan. 3, 2026, Townhall
An article entitled, ``The Netflix-Warner Brothers Deal Puts
America First,'' Jan. 5, 2026, Townhall
APPENDIX
A statement from Dr. Courtney Radsch, Director, Center for
Journalism & Liberty, Jan. 7, 2026, submitted by the Honorable
Jerrold Nadler, Ranking Member of the Subcommittee on the
Administrative State, Regulatory Reform, and Antitrust from the
State of New York, for the record
QUESTIONS AND RESPONSES FOR THEE RECORD
Questions submitted by the Honorable Scott Fitzgerald, Chair of
the Subcommittee on the Administrative State, Regulatory
Reform, and Antitrust from the State of Wisconsin, for the
record
Questions for Jessica Melugin, Director, Center for Technology
& Innovation, Competitive Enterprise Institute
Response from Jessica Melugin, Director, Center for
Technology & Innovation, Competitive Enterprise Institute
Questions for Jay Ezrielev, Founder, Managing Principal,
Elevecon, LLC
Response from Jay Ezrielev, Founder, Managing Principal,
Elevecon, LLC
Questions for John M. Yun, Professor of Law, Antonin Scalia Law
School, George Mason University
Response from John M. Yun, Professor of Law, Antonin Scalia
Law School, George Mason University
Questions for Matthew F. Wood, Vice President, Policy and General
Counsel, Free Press, submitted by the Honorable Jerrold Nadler,
Ranking Member of the Subcommittee on the Administrative State,
Regulatory Reform, and Antitrust from the State of New York,
for the record
Response from Matthew F. Wood, Vice President, Policy and
General Counsel, Free Press
FULL STREAM AHEAD: COMPETITION AND
CONSUMER CHOICE IN DIGITAL STREAMING
----------
Wednesday, January 7, 2026
House of Representatives
Subcommittee on the Administrative State,
Regulatory Reform, and Antitrust
Committee on the Judiciary
Washington, DC
The Subcommittee met, pursuant to notice, at 10:05 a.m., in
Room 2141, Rayburn House Office Building, the Hon. Scott
Fitzgerald [Chair of the Subcommittee] presiding.
Present: Representatives Fitzgerald, Jordan, Issa, Cline,
Gooden, Hageman, Harris, Baumgartner, Nadler, Raskin, Correa,
Balint, Garcia, Lofgren, and Johnson.
Mr. Fitzgerald. The Subcommittee will come to order.
Without objection, the Chair is authorized to declare a recess
at any time.
We welcome everyone to today's hearing on ``Competition and
Consumer Choice in Digital Streaming.'' I will recognize myself
for an opening statement. Before, I know the witnesses are
aware and I think the Members are, we have a briefing on
Venezuela at 11:30, so we're going to kind of see how things
flow and how we move here today, and, depending on that--I know
there are some Members that absolutely want to attend that, so
we'll just keep that in mind as we move through this.
For much of the 20th century, film distribution was
dominated by theatrical release. The golden age of Hollywood
saw the rise of movie stars in Blockbuster hits that drew
millions to the box office. The creation of television in the
1950s introduced a new and innovative way to consume media.
What was initially seen as a threat to the film industry
instead became one of its greatest synergies. Studios began
licensing films for TV broadcast, and the advent of the VHS
tape and DVD player opened up an additional revenue extreme for
direct consumer video sales.
The emergence of digital technology and broadband internet
fundamentally disrupted this model and, with it, the dominant
players. In the year 2000, only 1 percent of households had
broadband internet capability and that capability of delivering
high-quality videos online. By 2023, that number reached 80
percent of U.S. households.
Streaming platforms eliminated the need for theatrical
releases and physical distribution, which we know was troubling
to the industry. Instead of relying on theater chains, our
video sales content could be delivered directly to consumers on
demand. This shift lowered barriers to entry and enabled the
new competitors to challenge traditional studios on a global
scale. The result, as we're seeing today, is studios that did
not exist in Hollywood's golden age, acquiring the ones that
did.
The injection of disruptors has also forced legacy studios
to adapt to that. Netflix's introduction of the first streaming
only model in 2010 forced Paramount, Disney, Warner Brothers,
and others to develop their own platforms. Fifteen years later,
nearly all major film and TV studios have their own streaming
platforms.
Today, digital streaming is a primary method for consumers
to use and to develop access to TV and other media content.
According to a 2025 Nielsen report, streaming represented
nearly 47 percent of total TV usage and, for the first time
ever, outpaced the combined share of broadcast and cable. As
more content becomes fractionalized across multiple streaming
services, consumers are growing frustrated.
Separate, Nielsen's survey found that 46 percent of
streaming viewers are finding it difficult to find the content
they want to watch because of too many services.
A survey by the Motley Fool found that the number is even
higher with 62 percent of subscribers surveyed believing there
are too many options. This is particularly acute in sports
broadcasting. Fans who want to watch their favorite sports
teams are now having to subscribe to multiple streaming
platforms to access each game. This frustration is driven in
large part by increased prices.
According to The Wall Street Journal, since 2019, prices
for the top streaming services have risen an average of 87
percent. Disney Plus, Apple TV, and NBC Peacock have all seen
price increases of more than 100 percent since their creation.
Households who subscribe to an average of four streaming
platforms are quickly seeing their monthly streaming bills
equal or surpassing their monthly cable bill.
As consumer demand for streaming continues to rise,
platforms must compete for viewers by offering high-quality
content. Netflix, Apple, and Amazon, for example, have made
significant investments in movie studios to deliver
Blockbuster-level movies and award-winning TV straight to
consumers, and it appears to be working. Netflix has 18 Oscar
nominations in 2025, and Apple TV Pluribus just became the most
watched show in the streaming studio's history, but that
content does not come without a cost.
To make a Blockbuster film will now cost the studio more
than $200 million. A high-end TV show could easily exceed $10
million per episode. Pluribus cost Apple TV a reported $15
million an episode. As a result, many of these companies
operate with negative profit margins for several years before
achieving profitability. Netflix is the only platform to
maintain consistent profitability since 2022.
In other words, the barrier to sustaining a competitive
streaming service is high. It's no surprise then that many of
these companies are choosing to buy rather than build their own
content. Disney, for example, acquired 20th Century Fox in
2019. Amazon acquired MGM Studios in 2022. Most recently,
Netflix announced an agreement to acquire Warner Brothers
Studio. This deal, one of the largest of 2025, would combine
two of the top four streaming services by global subscriber
count. As expected, the reactions to this merger have been
mixed.
Let me be clear. This hearing is not about picking winners
or losers in the merger context. This is for Warner Brothers
shareholders. Today, we're here to start a much-needed
conversation about whether further consolidation in the
streaming industry would be helpful or harmful to consumers.
Economic theory teaches us that mergers create
efficiencies, and that's no different when it comes to the
streaming industry. By vertically integrating content
production and distribution, platforms can eliminate and also
work on lowering redundancies and focus on delivering high-
quality content to consumers at lower prices.
Some will argue that eliminating arrival will hurt
competition or further entrench a dominant player. Others may
say it will harm our already distressed theatrical film
industry. We should take all those concerns very seriously.
I would remind colleagues that the antitrust law is meant
to protect consumers by promoting competition, and any
potential harm should always be weighed against consumer
benefit. A merger that results in greater choice in video
libraries at lower prices is welcomed.
While delivering to consumers a solution to their current
frustration with the fractionalized streaming content, it does
not strike me, certainly, to think, and many of the other
members, as a merger, we should initially be concerned with a
look at the entire entity of what's being promised.
I want to thank our witnesses for being here with us today,
and I look forward to your testimony.
I now will recognize the Ranking Member, Mr. Nadler, for
his opening statement.
Mr. Nadler. Thank you, Mr. Chair. Mr. Chair, the
entertainment and media landscape has been transformed in
recent years. Many of these changes have brought undeniable
benefits, such as streaming services that give viewers more
options at their fingerprints than ever before. Many of these
changes have also come at a cost, as lax antitrust enforcement
and waves of consolidation have concentrated power in just a
few major players.
One thing that seems to be constant over the last few
decades: A merger involving Warner Brothers. It began with the
disastrous AOL-Time Warner merger in 2000, and then the short-
lived partnership with AT&T in 2019, and then its latest
incarnation since 2021 as Warner Brothers Discovery. Now, once
again, Warner Brothers is up for sale to another media giant.
This time, it has accepted a bid from Netflix, the global
leader in streaming services and a major content producer in
its own right, to control Warner's streaming and studio assets,
including such mammoth properties as DC Studios, HBO and HBO
Max, and Warner Brothers' motion picture and television groups,
as well as Warner's 128 million streaming subscribers.
What we know today about this proposal raises a host of
questions about its effect on the pricing, production, and
distribution of content going forward. We have also heard great
alarm from the movie theater industry, which despite claims
from Netflix that it will keep theatrical businesses operating
largely as they are, takes seriously comments from its co-CEO
who called movie theaters, quote, ``an outmoded idea'' and,
quote, ``not consumer friendly.''
Further, label groups like the Writers Guild of America and
the Directors Guild have raised concerns and say that this
proposed merger is not in their interest or the publics.
Serious concerns have been raised about whether this deal,
which by some measures would give the merged company over 30
percent of the streaming market, could reduce competition,
diminish consumer choice, raise subscription prices, threaten
jobs, wages, and working conditions in the creative industries,
and reduce diversity of content and viewpoints.
Netflix argues that this merger would allow it to better
compete with the range of other platforms that are battling for
eyeballs and attention from viewers, including other streaming
giants like YouTube, traditional movies and television, social
media, and more. If Netflix must get bigger to compete, that is
a sign of a market that is already highly out of balance.
Under the Netflix deal, Warner's cable channels, including,
most notably, CNN, would be spun off into a separate business
that would not be part of the sale. Another major media
conglomerate, Paramount Skydance, has now made a hostile bid to
control all of Warner's properties, including CNN.
Even though the Warner Brothers' board has rejected the
Paramount bid for now, Paramount could still pursue a buyout of
Warner Brothers. A potential merger with Paramount presents its
own set of antitrust concerns, by collapsing what are now five
major movie studios down to four, thereby reducing competition
and substantially increasing concentration within an already
concentrated industry. Not only could this bring higher prices
and less choices for consumers, but it could also bring fewer
jobs and lower wages for content creators.
The Paramount bid also brings its own unique set of
circumstances of concerns because it would place CNN under the
control of the Ellison family, the same billionaires who have
curried favor with Donald Trump by imposing control over the
content of CBS News.
Just weeks ago, Bari Weiss, the controversial minder placed
in charge of CBS News, spiked a story on 60 Minutes that would
have shed light on the Trump Administration's lawless campaign
to send migrants to be tortured in an El Salvadoran prison.
Presumably, the Ellisons have similar designs on making CNN
more Trump friendly.
A merger with either Netflix or Paramount would result in a
behemoth that poses significant antitrust and other public
policy concerns that require careful scrutiny.
I have long believed that the unchecked concentration of
economic power in any industry poses a danger to economic
fairness and to our democracy. While I do not prejudge the
merits of any proposed merger, I am concerned with any deal
that would significantly increase the concentration in a market
that is already highly concentrated. Such increased
concentration could not only harm consumers, but we have also
heard great concern from the creator guilds who are borne the
brunt of decades of media consolidation that historically has
been followed by fewer jobs, downward pressure on wages, and
reduced creative opportunities.
That is why it is so important that any merger be reviewed
with careful and impartial analysis by the antitrust
regulators. Unfortunately, under the Trump Administration, the
antitrust review process has been dangerously corrupted and
politicized.
Just last month, we heard from a former senior Trump
Administration antitrust official who testified that, under
this administration, the rule of law is being replaced by the
rule of lobbyists and corporate interests.
We know that the White House routinely intervenes in
Justice Department matters, often to benefit the President and
his cronies. Already, Trump himself has said, quote, ``I'll be
involved in that decision,'' when asked about the Warner
Brothers deal.
Does he intend to put his thumb on the scale in favor of
Paramount as a reward for his friends, the Ellisons who,
according to press reports, have already promised to implement,
quote, ``sweeping changes'' over CNN if they were to take
control? This is not a farfetched scenario. There are troubling
reports that Trump tried to block the AT&T-Time Warner merger
as retaliation for CNN's critical coverage of him during his
first administration and campaign.
Mr. Chair, we have seen this movie before, and the sequel
is almost always worse. A hallmark of the second Trump
Administration has been a determined effort to exercise control
over the independent news media, whether through frivolous
lawsuits against media outfits, limiting press access to the
White House and the Pentagon, and gutting funding for public
radio and PBS. The White House must not be allowed to use the
merger review process as another tool in its campaign to bend
the media to its will.
A proposed merger, whether it be with Netflix, Paramount,
or some other suitor, must be analyzed on its own merits. What
we know already about the antitrust review process under this
administration calls for serious congressional oversight, and,
unfortunately, our Republican colleagues have turned a blind
eye to their oversight responsibilities during this Congress
and today is just one more missed opportunity.
It is vitally important that we examine the Warner
Brothers' merger closely to ensure that any deal will protect
competition, consumers, and workers, and I appreciate our
witnesses being here today to lend their expertise. I look
forward to today's hearing, and I yield back.
Mr. Fitzgerald. The gentleman yields back. I now recognize
the Ranking Member of the Full Committee, Mr. Raskin, for his
opening statement.
Mr. Raskin. Mr. Chair, thank you very much, and thank you
to all the witnesses for joining us today.
Against the background of a media industry that is already
heavily concentrated under the control of several multibillion-
dollar media companies, we're gathered to discuss the proposed
acquisition of Warner Brothers Discovery by Netflix, two giant
rivals in the field of entertainment. The alternative acquirer,
Paramount Skydance, is itself not only a giant rival in
entertainment but also a rival in news.
In ordinary times, we'd proceed carefully with an
acquisition of this size to ensure that it passes scrutiny
under American antitrust laws, but these are not ordinary
times. Just last month, this Subcommittee heard testimony from
whistleblower Roger Alford who served in antitrust at the DOJ
during both the first and second Trump terms. During Trump's
first term, Alford served as Deputy Assistant AG and during the
second as the principal Deputy Assistant AG, which is second in
command.
He testified to the pervasive practice of lobbyists
attempting to corruptly influence antitrust law enforcement at
the Department of Justice, telling us that corporate lobbyists
now boast about their ability to overrule both the professional
antitrust experts and President Trump's own hand-picked
leadership at the antitrust division. Just to be clear,
Professor Alford is a strong supporter of President Trump. He
served in both the first and second terms.
He sees clearly that this political and financial
corruption of antitrust law betrays Donald Trump's avowed
populist agenda, as he sees it, the one of lower prices,
affordability, and increased choice and competition that the
President once long ago promised the American people on the
campaign trail. Well, we already know well how this corruption
works in Trump's Washington.
Professor Alford gave a detailed description of what he
called the HPE-Juniper merger scandal. He told us that on
numerous occasions in a variety of matters, we implored our
superiors and lawyers on the other side to call off the
jackals, but to no avail. Today, cases are being resolved based
on political connections, not on the legal merits.
These warnings from a top Trump appointee command our
urgent attention. Yet, my Republican colleagues refuse to
conduct any kind of serious oversight of what's going on in the
administration.
In 12 months, our colleagues have had just one
administration official come and appear before the Committee:
FBI Director Kash Patel. Committee Democrats have invited two
Trump officials as Minority witnesses, and, as you know, we
only get to invite one witness, but we have had two of them:
Mr. Alford and FTC Commissioner Alvaro Bedoya. The Chair has
had only one.
We urgently need the Attorney General, Pam Bondi, to appear
before the Judiciary so we can conduct oversight over an
increasingly out of control, lawless, and corrupt Department of
Justice, both in the antitrust domain and in many others.
It's not just DOJ. The whole government is now saturated in
pay to play corruption and lawlessness. Take the example of
Skydance's acquisition of Paramount last year. In late 2024,
incoming FCC Commissioner Brendan Carr accepted two tickets
worth $12,000 to go to the Kennedy Center Gala. The donor was
Paramount whose proposed merger with Skydance was about to
acquire Commissioner Carr's approval.
Now, I concede that $12,000 these days is petty cash
compared to the billions of dollars that are being raked in by
the President routinely and the corruption flowing throughout
the administration, but pre-Trump, a $12,000 gift to an FCC
commissioner that you're about to appear before would have been
a scandal.
Well, at the gala, Commissioner Carr reportedly pulled his
host aside and gave them advice. Paramount owns CBS. President
Trump had sued CBS for $10 billion in damages because he didn't
like the way that they edited an interview with Vice-President
Kamala Harris. Well, that, of course, is an entirely frivolous
legal claim. I don't like the way that Fox News edits the
interviews with Donald Trump, but that doesn't constitute
defamation against me. That's just stupid.
Commissioner Carr reportedly told the Paramount executives
that Trump's grudge against CBS News was so serious that it
would make review of the merger, quote, ``tougher than
anticipated,'' and they might need to make some concessions
directly to the President to convince him to approve the deal.
Once in office, Carr sat on the merger for months. Why?
Trump could extract extraordinary benefits from the companies
in exchange for approval of the deal. Look what he got: A $16
million contribution to his Presidential library, millions
dollars more committed in free advertising, a promise to
install a Trump-friendly monitor minder in the CBS newsroom,
and the cancellation of the Late Show with Stephen Colbert.
Only then did Carr permit the merger to proceed.
Ladies and gentlemen, this is not antitrust law. This is a
political and financial shakedown substituting for an antitrust
merger review. It's got nothing to do with antitrust law or
consumer choice or lower prices. It is corruption. It's exactly
what Professor Alford was warning us about, and one key result
of this corruption is a newsroom that refuses to broadcast news
that the administration disfavors.
A few days after Alford testified, CBS' 60 Minutes was
scheduled to air a special on CECOT, the notorious torture
prison in El Salvador, introduced to inmates there as hell on
earth, that the Trump Administration has used as a dumping
ground for immigrants, many of them lawful asylum seekers.
Right before the story was set to air, it was indefinitely
postponed. Why? What happened? Well, we don't have to wonder.
Bari Weiss, the new Editor-in-Chief at CBS and the new
government-imposed Pravda-Like media monitor and minder said
she would not let the broadcast go forward without getting
comment from a government spokesperson on the air. The Trump
Administration had refused to allow any of them to comment on
the air.
Here's Sharyn Alfonis, the 60 Minutes correspondent who
said:
Our story was screened five times and cleared by both CBS
attorneys and Standards and Practices. It was factually
correct. In my view, pulling it now after every rigorous
internal check has been met is not an editorial decision. It's
a political one. We requested responses to questions in our
interviews with DHS, the White House, and the State Department.
Government silence is a statement. It's not a veto. Their
refusal to be interviewed is a tactical maneuver designed to
kill the story. If the administration's refusal to participant
becomes a valid reason to spike a story, we have effectively
handed the government a kill switch for any reporting they find
inconvenient.
I hope that this kind of consolidated corporate government
censorship troubles all our colleagues, Democrats and
Republicans who still have a First Amendment bone in their
body. This kind of censorship regime aligns us with the State
of press freedom in Putin's Russia or Mohammad bin Salman's
Saudi Arabia.
The economic effects of these side deals must trouble us,
too. Each new merger acts as a new opportunity for the
President to enrich himself and his family and friends. The
cost of businesses involved in these deals now, even as a term
in the economic literature, the Trump Transaction Tax, every
party to this kind of transaction now bears the risk of a
political shakedown for money, concessions that are not
connected to proper antitrust review. It's about what enriches
and satisfies the President.
Hundreds of economic studies and gangster States show that
these kinds of corrupt practices reduce investment, distort
markets, increase costs, and lead to lower employment.
Here we are again. When Warner Brothers announced that it
would put itself up for sale, President Trump promised that
``I'll be involved in that decision,'' although no law gives
him a role in it.
Mr. Issa. Mr. Chair, I must object. I fully believe that
opening statements can be as long as--for the Ranking Members,
can be as long as necessary if they stay on topic. This is
clearly a bashing of the President and beyond the pale of this
Committee.
Mr. Raskin. I'm not going to accept any subject matter or
content regulation by the gentleman from California. I'm about
to finish, so let's not belabor a ridiculous point. We've never
interrupted an opening statement of anybody on your side of the
aisle. What a ridiculous thing to do.
Mr. Fitzgerald. I would just remind the Ranking Member that
we're up against an 11:30 kind of hard stop for a briefing.
Mr. Raskin. OK. I appreciate that and I'll be done in a
minute. OK?
The President seems to want Paramount and Netflix to
compete for his approval of a deal. Both companies are already
lobbying the White House right now, and to State the obvious,
President Trump is not an antitrust expert, nor is he committed
to antitrust law. He's long been critical of CNN, which is
owned by Warner Brothers. For years, he's told us that he hates
their reporting, he hates their reporters, and he wants to sue
the network.
Does anyone doubt that one way to entice the President's
favor is to promise him more direct control over CNN?
Mr. Chair, we should be calling in the government officials
who participated in or acquiesced in these side deals. To date,
I am sorry to say the closest we've gotten to hearing from a
real administration witness is Professor Alford who we invited
here at the Minority's invitation when he could have been your
witness months ago.
This proposed merger poses significant antitrust questions.
I'm eager to discuss them, but this Committee must also do the
work of ensuring that the antitrust laws are actually being
enforced and not being replaced by a system of corruption.
Thank you, Mr. Chair. I yield back.
Mr. Fitzgerald. The Ranking Member yields back. Without
objection, all their opening statements will be included in the
record.
We'll now introduce today's witnesses: Mr. Jay Ezrielev is
the founding and managing principal of Elevecon, a consulting
firm. He also serves as an adjunct Professor at George Mason
University Antonin Scalia Law School. He previously served as
an economic adviser to the FTC Chair Joseph Simons.
Ms. Jessica Melugin: Ms. Melugin is the Director of the
Center for Technology and Innovation at the Competitive
Enterprise Institute. Her research focuses on antitrust, online
privacy, artificial intelligence, telecommunications, social
media, and net neutrality regulation.
Dr. John Yun: Dr. Yun is a Professor of Law at the George
Mason University Antonin Scalia Law School. His research
focuses on antitrust and intellectual property, data, and
privacy. He previously served as the Acting Deputy Assistant
Director of the Bureau of Economics at the Federal Trade
Commission.
Mr. Matt Wood: Mr. Wood is the Vice President of Policy and
General Counsel at Free Press, a nonprofit organization that
advocates on issues relating to media and technology. Mr. Wood
leads the organization's policy and legal efforts.
We welcome our witnesses and thank them for appearing
today.
We will begin by swearing you in. Would you please rise and
raise your right hand. Do you swear or affirm under penalty of
perjury that the testimony you are about to give is true and
correct to the best of your knowledge, information, and belief
so help you God?
Let the record reflect that the witnesses have answered in
the affirmative.
Thank you and you can be seated.
Please know that your written testimony will be entered
into the record in its entirety. Accordingly, we ask you to
summarize your testimony in 5 minutes.
Dr. Ezrielev, you may begin.
STATEMENT OF JAY EZRIELEV
Mr. Ezrielev. Mr. Chair, the Members of the Committee,
thank you for the opportunity to testify on competition and
consumer choice and digital streaming. I am Jay Ezrielev,
founder of the economic consulting firm, Elevecon. I'm also an
adjunct Professor at Antonin Scalia Law School at George Mason
University. From 2018-2020, I worked at the FTC as the economic
adviser to Chair Joseph Simons.
Digital streaming has revolutionized how we consume video
content. It has driven innovation in both content creation and
distribution, which benefits consumers. It is now the most
popular way we consume video content.
We now have two potential Blockbuster merger deals in
digital streaming with both Netflix and Paramount seeking to
acquire Warner Brothers. These deals have the potential to
reshape the competitive landscape in digital streaming. There
is an understandable concern about these deals, what these
deals will mean for streaming and content creation.
Will we continue to have innovation and new compelling
content delivered via digital streaming. The two potential
deals will face antitrust merger review, most likely by DOJ.
Will this review make sure that we continue to have the
benefits of digital streaming competition?
The two deals come at a pivotal time for antitrust.
Antitrust enforcement agencies have been shifting the focus of
enforcement from the core focus of harm to competition to
pursuing broader policy goals. This shift began under the Biden
Administration with the antitrust enforcement agencies pursuing
a broader policy agenda, such as combating unfair treatment of
workers and seeking to diminish corporate power.
This is a troubling development for antitrust. Deviating
from the core antitrust principles will diminish antitrust as a
tool for preventing harm to competition. Expanding antitrust
beyond this core principle replaces efficient market function
with enforcers' views of what is fair and equitable. It chills
entrepreneurship by supplanting an entrepreneur's judgment
about the best way to allocate capital. It is this
entrepreneurship that has brought us enormous innovation and
prosperity.
While it's still early days, antitrust enforcement agencies
under the current administration are continuing to apply a
broad scope of antitrust enforcement. Even more troubling,
States are increasingly pursuing their own antitrust agendas
beyond preventing harm to competition.
In reviewing the potential Netflix and Paramount deals,
antitrust enforcement should focus on the core antitrust goal
of preventing harm to competition. The enforcers should not be
picking which of the two deals should go through based on what
they think will deliver the best outcome for consumers. This
choice is for Warner Brothers Discovery shareholders.
The enforcers should also not use their leverage to extract
a settlement that advances a policy agenda. The focus should be
strictly on preventing harm to competition.
I don't know if there is a compelling antitrust case
against either of the deals. However, I would be highly
skeptical of an enforcement case based entirely on a structural
presumption, or a presumption of substantial lessening of
competition based on an increase in market concentration in the
relevant market. Such an increase in market concentration
should be a starting point for determining whether to move
further in the investigation. An increase in market
concentration is not by itself a reliable indicator of harm to
competition.
Most importantly, let's keep antitrust focused on
preventing harm to competition and not on advancing a political
agenda.
[The prepared statement of Mr. Ezrielev follows:]
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Mr. Fitzgerald. Thank you, Doctor. The doctor yields back.
Ms. Melugin, you may now begin.
STATEMENT OF JESSICA MELUGIN
Ms. Melugin. Chairman Fitzgerald, Ranking Member Nadler,
and the distinguished Members of the Subcommittee, thank you
for inviting me to testify. My name is Jessica Melugin. My work
focuses on technology and antitrust at the Competitive
Enterprise Institute, a nonpartisan public policy organization.
I am also an antitrust and competition fellow at the Innovators
Network Foundation.
It's sometimes said that history does not repeat itself,
but it often rhymes. Certainly, there is a familiar tone in
today's conversation around the merits of antitrust
intervention in digital streaming markets to what we've heard
before in past calls to intervene in entertainment mergers.
In 2005, after what The Wall Street Journal then described
as, quote, ``The not so gentle prodding of Federal antitrust
authorities,'' the movie rental chain Blockbuster dropped its
bid to purchase rental chain rival Hollywood Entertainment.
Defenders of the merger pointed to the emerging competitive
threat of a then up-and-comer who had signed up three million
subscribers to rent DVDs through the mail. That disruptor was,
of course, Netflix.
While regulators fretted about the combined market power of
two brick-and-mortar DVD rental chains, the market was busy
shifting the paradigm.
An increasingly widespread internet soon disrupted
traditional models of distribution once again. Netflix was
adept enough to navigate that transition from the post office
to telecom, and the company now finds itself more directly
involved in the conversation around preserving competition in
the entertainment industry.
While the details of these separate cases have changed, the
lessons of regulatory restraint remain the same. Just as the
Federal Trade Commission could not have anticipated the
technological shifts that rendered physical DVD rentals nearly
obsolete, antitrust regulators today still cannot predict what
might come next. They can, however, observe current market
dynamism to better understand how allocating economies of scale
and vertical--allowing economies of scale and vertical
integration could benefit consumers.
As digital streaming companies and adjacent market
participants adjust to a landscape where consumers' time and
attention are now the most important remaining scarcities,
regulators will likely evaluate their attempts to merge, adapt,
and compete. This process should follow well-established
methodologies, using economic evidence to determine the
relevant market and possible anticompetitive effects, while
equally assessing the potential proconsumer consequences.
Determining the proper relevant market will be the first
step of any antitrust litigation, but it won't be an easy task
here. Government efforts to block mergers will likely attempt
to establish the narrowest possible definition of the relevant
market; namely, subscription video-on-demand exclusively. Does
that provide an accurate reflection of how consumers view
possible substitutions? Do broadcast, cable, and satellite
channels still provide ample competitive pressure to restrain
prices, encourage output, or maintain quality for merged
streaming services?
Looking forward, rather than backward, does YouTube TV or
even the standard YouTube or TikTok platform sufficiently
compete with streaming for consumer attention? Social media's
vast and free-to-the-company content may well constitute a
sufficient competitive threat to streaming services that
justifies their need to bolster their holdings of more
evergreen rewatchable content libraries and the production
capabilities of traditional studios.
Perhaps concerns about preserving competition are less
about horizontal issues between merging streaming services and
more about the ability of traditional companies to survive and
compete with social media giants.
Even the narrowest relevant market will prove challenging
for regulators to defend in court. If opponents of a merger
succeed in defining the market as confined exclusively to
subscription video-on-demand, market shares will be difficult
to establish.
Muddying the waters of market share are the widespread
practices of consumers maintaining many subscriptions
simultaneously, known a multihoming; bundled subscriptions like
Disney Plus that might also include ESPN and Hulu--or maybe
not; third-party bundles offered through mobile carriers,
internet service providers, or credit cards; Amazon Prime
subscriptions that might result more from e-commerce interest
than from streaming entertainment interest; and different
tiered offerings with or without advertising offered for
different prices.
Regardless of the relevant market, the market shares agreed
on, courts will then be required to evaluate the competitive
effects of the merger. Proposed mergers may hold the promise of
significant economic efficiency gains and commensurate benefits
for consumers.
Even horizontal aspects of mergers, such as those involved
in Netflix and Warner Brothers Discovery deal may benefit
consumers. Increased selection, cost savings, and more accurate
recommendations are all possibilities.
Regulators must recognize that traditional media companies
require flexibility to adapt to prevent meeting the same fate
as the Blockbuster dinosaur. Constraining these entities from
pursuing such arrangements by pretending the market is static
will neither benefit consumers nor competition in the long run.
Thank you for this opportunity.
[The prepared statement of Ms. Melugin follows:]
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Mr. Fitzgerald. Thank you, Ms. Melugin. Dr. Yun, you are
now recognized.
STATEMENT OF JOHN M. YUN
Mr. Yun. Good morning. Thank you, Chair Fitzgerald, Ranking
Member Nadler, and the distinguished Members of this
Subcommittee. It's a true honor to be here. My name is John
Yun, and, obviously, we're here to assess the potential
combination of Netflix and Warner Brothers and associated
assets.
I see three main issues and there are more, but these are
the three that I'll focus on, but happy to discuss more:
(1) The consumer-facing combination downstream in the
streaming service market been Netflix and HBO Max. What's going
to happen to those prices and the bundles? What's the relevant
market to assess that competition?
(2) What happens to HBO Max? Does it remain an independent
streaming option, or it will be integrated? If so, how?
(3) What about the upstream assets, the combination of
Netflix production studio, as well as Warner Brothers Studios?
What happens to that content library, the content creators,
that distribution? Is there an incentive to foreclose others
from access to that previously do have access?
As I mentioned, these invoke both what we call horizontal
and vertical issues in antitrust. Horizontal issues are your
standard issues of competition between competitors. Think Coke
versus PEPSI, Samsung versus Apple. Those are the same issues
that we can see both in the streaming market downstream and the
streaming production market upstream.
There's also something called a vertical issue, though, and
that's the possible control of two or more levels of the supply
chain. Here, the primary concern that I've seen is that Netflix
now will control WB Studios' assets and distributions and IP
properties. What does that mean for consumers?
All of these questions are going to be governed under the
Clayton Act, Section 7, which is substantial lessening of
competition or a tendency to create a monopoly, and the courts
have consistently examined three markers to whether this is
going to be met or not and that's usually prices, output, and
innovation. Other objectives have been called on and looked at,
at times, but these are the three that almost inevitably the
court's rule examine.
That being said, let's start with question (1), the
combination possibly of Netflix and HBO Max. The key question,
as mentioned previously, will be what is the relevant market in
which these streaming services compete? Is it limited to just
other streaming services, like Amazon Prime Video, Apple Plus,
Peacock, and Paramount Plus? If so, what's the market share? We
do have debates of whether market shares are good proxies for
market power, which is what we're really interested in, but the
courts have been clear, this is what they will look at.
The combination of Netflix and HBO Max will, according to
some estimates, and these are just public estimates, can be
above 30 percent. I'll mention in a moment why that matters.
There are other sources, though, that put it below 30 percent,
so it will be a key question of what the real data shows.
Assuming it does hit the 30 percent or more marker, the
reason this matters is a 1963 Supreme Court case, Philadelphia
and National Bank, and it established a structural presumption
that if you're above that 30 percent, there's a presumption
that the deal is illegal and harmful to consumers. It doesn't
mean it is. There is an opportunity by the parties to
demonstrate that the procompetitive benefits outweigh that
presumption. It's not an illegal call, but it is a strong
presumption and relevant for this assessment.
It's pretty close to 30 percent, the sources I've seen, so
that does move it a little bit closer to the parties' favor,
but it is still above that presumption, so it's going to be an
incentive to the parties. I say that not cynically, but it
could be the reality that the market is broader than just
streaming services. It could include YouTube. It could include
TikTok. It could include cable, satellite, et cetera. That's
going to be a key question and something that I think I'm happy
to explore further later.
In terms of question (2), will HBO Max remain an
independent service is a concern I've seen publicly and in
forums, just in preparation for this hearing. An astounding
statistic that Netflix has shared is that 75 percent of HBO Max
subscribers are also Netflix subscribers. That makes me sort
of, based on my economic training, think that this is going to
be integrated into some type of premium tier. Happy to discuss
further. That's just a prediction. It's unlikely that HBO Max
will remain an independent service post-merger.
Question (3) is the vertical concern, that Netflix's
control of WB's assets upstream will lead to some type of
foreclosure of that. For example, Harry Potter was available on
Peacock even though that's a WB property. Ted Lasso was
produced by WB Studios for Apple Plus. Will all of that stop
post-merger? That consideration I think will also be part of
what the agencies and the courts examine.
With that, my time is up, so thank you very much.
[The prepared statement of Mr. Yun follows:]
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Mr. Fitzgerald. Thank you, Doctor. Mr. Wood, you're now
recognized for 5 minutes.
STATEMENT OF MATTHEW F. WOOD
Mr. Wood. Chair Fitzgerald, Ranking Member Raskin, Ranking
Member Nadler, and the distinguished Members, thank you so much
for inviting me today.
This hearing is about competition and consumer choice and
digital streaming, and that means we must talk about the string
of mega mergers, both past and newly proposed. Runaway
consolidation eliminates choice. Companies routinely break
promises and evade merger conditions, and under the Trump
Administration, these deals pose tremendous danger to free
expression.
I must clarify something, though, before I begin, because
of the companies involved in these mergers talks and confusion
about our name. My organization is called Free Press Action, a
republic interest group that works on media tech and telecom
policy, and for more than 20 years, we've been analyzing these
markets, opposing harmful mergers, and fighting both government
censorship and undue corporate control.
We are not affiliated with The Free Press, which is the
publication Paramount Skydance purchased last year before
making its founder the editor-in-chief of CBS news.
I don't solely practice antitrust law, but since leaving
corporate firms, I've spent much of my last 16 years opposing
mergers that enrich executives, bankers, and lawyers at
everyone else's expense.
While Paramount is still pursuing Warner Brothers
Discovery, the winning bid for now is Netflix's $82.7 billion
deal to buy a company that, as Mr. Nadler noted, is somehow
always up for sale in deals that amounted to bad industry bets
and huge debts.
Netflix is the largest streaming service in the world, with
more than 300 million subscribers. Warner Brothers HBO Max is
well over 100 million, third largest in the U.S. by most
accounts. Paramount is likely the fifth largest streamer in the
U.S., and that combo, of course, would couple two of the big
five Hollywood studios, impacting the market for theatrical
releases, movies, and TV.
Both potential mergers could severely harm the viewing
public, creative industry workers, journalists, movie theaters
that depend on studio content, and their surrounding Main-
Street businesses in your districts, too. We fear that either
deal will reduce competition in streaming and adjacent markets,
with fewer choices for consumers and fewer opportunities for
writers, actors, directors, and production technicians. Jobs
will be lost. Stories will go untold.
Now, we still need to crunch the numbers for an array of
markets and metrics. We'll listen critically to claims about
supposed merger benefits, and we'll ask whether there is
sufficient competition left to ensure that the billions saved
in promised synergies are passed along, not pocketed.
The job for antitrust enforcers is clear. They must engage
in careful product market analysis to determine if these
mergers violate the law and whether they promise any real
efficiencies, not just speculative assurances, as the case law
says about alleged benefits to the public.
Either Netflix or Paramount buying Warner Brothers could be
presumptively illegal under DOJ's merger guidelines. Members of
this Subcommittee and others in Congress have suggested so on a
bipartisan basis. Section 7 of the Clayton Act prohibits any
merger that would, quote, ``substantially lessen competition or
tend to create a monopoly in any line of commerce.'' That is
clearly a risk here.
In our view, either deal likely places far too much power
in too few hands over what Americans watch and where they get
their news. The numbers for that news component are dwarfed by
the dollars thrown at the streaming side in studio catalogs,
but in addition to HBO, Warner Brothers, of course, owns CNN
and other cable channels. Netflix doesn't want those.
Paramount's Ellison family desperately does.
We're all too familiar with claims that media giants need
to merge to continue producing news. Their trickle-down notion
is that more money for shareholders means more investment in
news or content creation, but as history shows, companies merge
to save money, not spend it. Every merger obliterates jobs.
Post-merger companies will reduce output and raise prices
whenever they can, and having fewer voices make censorship
easier with fewer corporate gatekeepers to lean on.
Even more dangerous than the notion that mergers can save
the news is the way this President has weaponized the merger
review process. In conjunction with other threats made in plain
sight, his agencies have used deal approvals to win favors. The
FCC has blessed mergers moments after deal proponents promised
to follow the President's demands to end diversity policies.
They've capitulated on chilling requests to reshape their
newsrooms.
The merger that spun Paramount Skydance, as Mr. Raskin has
said, was graced by an FCC investigation and a multimillion-
dollar settlement of a specious lawsuit over editing choices in
an interview with then Vice-President Harris. Paramount
installed a former Trump Ambassador as a bias monitor and
recently spiked that 60 Minutes investigation into Trump
Administration wrongdoing.
Now, Paramount Skydance's CEO promises, as Mr. Nadler says,
to, quote, ``make sweeping changes to CNN if he takes it
over.'' Tilting a merger review process to facilitate that
outcome should be unthinkable under the First Amendment.
Should a President use merger reviews to gain political
outcomes he wants? Some may think it depends on which party
holds the White House, but that answer abdicates the antitrust
oversight this Subcommittee conducts and the antitrust laws
enforcers must apply.
Thank you and I look forward to your questions.
[The prepared statement of Mr. Wood follows:]
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Mr. Fitzgerald. Thank you very much. We will now proceed
under the 5-minute rule with questions, and I recognize the
gentleman from California, Mr. Issa.
Mr. Issa. Thank you, Mr. Chair. Today, we're going to speak
about disproportionately the Warner Brothers acquisition,
needless to say. I could begin this by talking about the
political differences that have been alleged in the two buyers
and the seller. I could, of course, continue to talk about the
last administration that never found a merger that they could
accept and blocked many even when overthrown repeatedly by the
courts. I could but I won't because, in fact, this is an
antitrust hearing, and I would like to focus on that. I
admonish all our witnesses in their answers to get off the
politics and get on to the specifics of antitrust law.
I'm going to start with Professor Yun. You mentioned the
Philadelphia case, but you had some doubts even though Nielsen
has said that in the streaming, you have a 37 percent market
share already by Netflix, an additional 6 percent to be
acquired. Is there any reason that we shouldn't believe that
this is at least in the ballpark of correct based on one of the
largest and most historically significant rating organizations?
Mr. Yun. Thank you, Representative Issa. I appreciate the
opportunity to speak on this.
Yes, you're hitting on the key issue, which is the
reliability of the data that we're using for this presumption,
and this presumption is very important. Again, we can debate
whether it should be, but it is standing law today.
Mr. Issa. Right, but it's standing law to push the scale to
where there is essentially no further choice and you, more or
less, close the door.
Even if, in fact, hypothetically, they're at 29 percent,
and let's just say that Warner Brothers is 5 percent, you're
still going over the 30 percent, and few would doubt that
you're going to end up with that.
Let me get into a couple of points that you hit. Since
2011, Netflix has increased price 10 times and a total of 39
percent increase after adjusting for inflation. Is that, per
se, a demonstration of market power by any reasonable
definition?
Mr. Yun. I can get in the weeds. I would say that almost
every streaming service has some degree of what we in economics
call market power. It's not the same as what we think in
antitrust. What do I mean by that? Earlier, there was a chart
that was shown that showed--
Mr. Issa. Well, let me back you up, because I have limited
time. The reality is that the price and the cost of receiving a
streaming service on an adjusted basis led by Netflix has gone
up but not down. From a standpoint of a market, a market that
is functional, that we would normally think lowers costs as
volume goes up, would you say that this market shows signs of
not being functional based on Netflix's consistent lead above
the rate of inflation?
Mr. Yun. The reason why I have some concern about the
premise that this is necessarily a problematic market is simply
because I saw a chart that showed the highest price increases
were from Apple Plus, Peacock, and Paramount Plus, who have the
lowest share in these markets and the lowest--
Mr. Issa. Aren't they all still losing money?
Mr. Yun. Yes, no, I--
Mr. Issa. OK. Isn't there a difference between when you're
making money and you increase prices beyond inflation and when
you're losing money and you're trying to minimize your losses?
Mr. Yun. I think that's fair.
Mr. Issa. OK. I want to go on quickly. You talked about
vertical and horizontal, and there's plenty of caselaw,
including the Supreme Court case that broke up the relationship
between the studios and the theaters being owned. Aren't we
again in a situation where if Netflix post-acquisition controls
a massive library to the exclusion of others, that, in fact, we
have the same situation again in which--and I'll just use my
own girds--if you can exclude and you are a must-have and must-
pay and must-buy, isn't that, in fact, a situation in which, at
a minimum, everyone would have to have Netflix to have access
to not just new production but a vast library that, in fact, by
definition, every child grows up watching?
Mr. Yun. I think it's a relevant concern. It's something
they will definitely look at for sure.
I did look at some statistics that showed what is the
percentage of Warner Brothers in terms of theater production,
and it's at that 15-20 percent, so roughly 80 percent is
outside of that. I think that--
Mr. Issa. Of course, theater production is important. I was
talking about libraries, and they are both important.
Let me just close with one closing question, which is:
You've looked in the past at the years that this Committee
oversaw the potential mergers to create competition against
Verizon by Sprint, AT&T, T-Mobile, ultimately making a decision
that a relative duopoly was better than one strong player and
many weak. Aren't we in many ways in that same situation, if
you could opine on that?
Mr. Yun. It's going to depend on how we define the relevant
market in terms of what is really constraining Netflix's price.
Yes, if it's fairly narrow, yes, the consolidation is
definitely going to be something that's sufficient for probably
the presumption.
Mr. Issa. Thank you, Mr. Chair.
Mr. Fitzgerald. The gentleman yields back. I now recognize
the Ranking Member from New York, Mr. Nadler.
Mr. Nadler. Thank you, Mr. Chair. Mr. Wood, supporters of
large media mergers, often promise innovation, better services,
and more content. Looking back, did those mergers deliver to
the public?
Mr. Wood. In a word, no, I don't think they did, Mr.
Nadler. You have listed a litany of deals that involve this
company itself. Warner Brothers is now currently up for sale
again. I would say with respect to streaming, for example,
that, yes, there has been innovation. Consumers have benefited
from some of these technological changes, but it's not because
of the mergers.
The merger promises that are made are often paper thin,
very hard to enforce if they're even real in the first place,
and companies routinely break those promises because there's
very little antitrust enforcers can do after the fact to unwind
a deal. That's a pretty extraordinary remedy. If they promised
not to fire people or promised not to raise prices and they do,
there's not much people can do besides wag a finger at them.
Mr. Nadler. Hollywood unions, such as the Writers Guild,
are opposing acquisition by either Netflix or Paramount because
of concerns that consolidation will reduce employment
compensation and creative opportunities. What happens to
independent producers and creators when the number of potential
buyers for their work shrinks?
Mr. Wood. Yes, so thank you. We've spoken to some of those
writers. We've spoken to some of those independent producers.
They're very concerned and rightly so. When the number of
buyers for their work shrinks, it's not just that there are
fewer open doors; there are fewer doors at all, so they have
fewer places they can take their content.
They also have the loss of competition and diversification
in the market, fewer smaller independent producers or fewer
scrappy competitors who are willing to get a chance on
something different. It tends to homogenize content and, by
design, reduce the number of outlets and number of choices they
have.
Mr. Nadler. What would the effects of these consolidations
be under the diversity of content that we see today?
Mr. Wood. Well, thank you. As I was saying, it would be
less diversity. I don't know if there is a metric we can apply
to that, but we do see companies in the broadcast space and the
streaming space and the studio space homogenizing their
content, making things more so-called mainstream, taking fewer
risks, needing more money to come back in through the door to
justify the huge budgets for the few features they put out. It
tends to reduce price--sorry. It tends to reduce choice and
increase prices and just to, as you said, reduce diversity and
the differentiation between the products these companies have
to put out to compete and survive.
Mr. Nadler. Reduce the amount of conflicting information
and opinions given to the public?
Mr. Wood. Yes. That's something our organization has worked
on for years. When it comes to the news and competition there,
the FCC's tests for that are different from antitrust but
related in many ways. They look for more competition, more
diversity, and localism.
We're often told that, well, the only way we can have more
competition in local news is to have fewer competitors. The
only way to have more diversity is fewer voices, and the only
way to have local content is to nationalize everything. We,
frankly, don't believe those claims, and we've seen them harm
communities time and again.
Mr. Nadler. Everything you just said seemed very
concerning. The way to have diversity is to have fewer voices.
Mr. Wood. Yes. As my colleagues on the panel have said
sometimes you're going to have a situation where if a firm is
failing or can't compete, then a merger might save them and
preserve that voice. We are very skeptical of those claims
because in Warner Brothers' case, for example, by last year's
metrics, they were the second most successful studio. They're
the third largest streamer in the country.
The notion that a company simply has to be sold or else the
shareholders won't make any money, to us, is very questionable.
I know that the streamers, in general, have not made as much
money as they'd like and some have lost money.
There are legitimate questions there about the
profitability of streaming, but as a going concern in an
overall business, we just simply are very skeptical of claims
that these companies need these mergers to survive or thrive.
Mr. Nadler. Thank you. I understand that Netflix has made
promises that it would mitigate possible competition concerns.
In particular, it says that it would continue to sell shows to
rival streamers. How should these promises be considered in the
analysis of potential anticompetitive or public policy harms?
Mr. Wood. If you're asking me, again, yes. As I said a
moment ago, I think that these promises are very hard to
enforce, I could imagine a condition in a merger approval if it
went through. It's just that whatever these companies agree to,
it's sometimes easier for them to lawyer their way out but not
even technically break the promise.
Then, once that promise is broken, as I said, there's very
little that enforcers can do to unscrambled the egg and put
things back together and make companies whole who aren't
getting the benefits of these promises that were made.
Mr. Nadler. Thank you. Mr. Chair, I have a number of
unanimous consent requests for the record from a series of
labor groups coming out against or raising serious concerns
with the Netflix-Warner Brothers merger.
Mr. Fitzgerald. Very good. Go ahead.
Mr. Nadler. Oh.
Mr. Fitzgerald. Unanimous consent.
Mr. Nadler. First, is the IDA statement opposing a merger
involving Warner Brothers Discovery. The DGA statement on
Warner Brothers Discovery/Netflix. The SAG-AFTRA statement
regarding proposed Netflix/Warner Brothers transaction. A
prepared statement for the record of the Writers Guild of
America West and the Writers Guild of America East. The
``Hollywood Teamsters: Warner-Netflix deal is another call for
alarm for entertainment workers.'' Finally, the Producers Guild
of America.
Mr. Fitzgerald. Without objection. The gentleman's time has
expired. I now recognize the gentleman from Virginia for his
questions.
Mr. Cline. Thank you, Mr. Chair. The witnesses for being
here for a timely hearing on a--at this moment in time with
this a snapshot of a marketplace in constant change and
constant motion.
We recognize that the country operates under free-market
principles, and businesses should be able to transact as long
as they don't create clear antitrust problems. Clarity is
something that is in the eye of the beholder, but I do think,
in contrast to Mr. Wood's opinion, general skepticism--the
standard is not general skepticism about whether a company
needs a merger to survive. That's really not what we're talking
about here. We're talking about the definition of the relevant
streaming market and the regulators and how they're defining
it.
Ms. Melugin, why don't you have a go as to how you would
define the relevant streaming market today for antitrust
purposes, and what single biggest mistake that regulators are
making when defining it.
Ms. Melugin. We had a very helpful example recently with
the decision in the Meta trial, which was seeking to unwind a
merger, and unfortunately the judge kind of anticipated
questions like this and said this is just not a market
definition that they buy. It had excluded too many entities
that provided real competition to Meta. That the mistake you
could make here would be the same.
I'm not privy to the kind of privileged information that
talks about market shares, or eyeball time spent on streaming,
but regulators probably will be, and it will be their job to
make a case that it's not comparing apples to apples in terms
of finding out who might be a good substitute. It's about what
consumers feel is a substitute.
That would include saying it might be apples to oranges
with some of these streaming services and other variants in
social media, but would a consumer maybe substitute an apple
for an orange if they had to, they probably will.
That goes to a really, as we've all agreed, an incredibly
important piece of this is what is that market share. If it's
above that 30 percent threshold, it doesn't mean that it's a
closed case and its anticompetitive, you still have a court
that's going to assess what are the competitive tradeoffs here.
You have a very difficult task if it even just is above
that 30 percent mark to say there aren't going to be economic
benefits to consumers here, but if you expanded the market
definition you might not even get to that 30 percent number. It
will be for the courts to decide, I suspect.
Mr. Cline. Dr. Yun, how would you define relevant streaming
market today, and what is the single biggest issue facing
regulators and the mistake that they might be making?
Mr. Yun. Your question hits what I think will be probably
80 percent of the investigation and the debate between the
parties and the courts and the agencies.
It is natural to think it's a streaming market. They're
probably the closest competitors. As just mentioned, does it
include other services.
Let me just share with you, sir, the lines are being
blurred. Netflix also offers not only on-demand, but also live
sports, they offer podcasts, and they offer video games.
YouTube TV, the linear TV that replaces cable, now has on-
demand. YouTube itself will now carry the Oscars.
The line is blurring between these, and I say that not
because it's going to be defined broadly. I say that simply
because it's hard to cabin these platforms into specific
categories that we want to do. It will be the job of the
agency. It's a data question. No one can sit here and say what
the market will be. It's going to be based off the data.
Mr. Cline. Under current antitrust law, when does vertical
integration in media markets pose competitive harm rather than
generate efficiencies?
Mr. Yun. That's the key issue. The key question, there are
other vertical issues, but as I mentioned in my opening
statement, the key vertical issue is whether Netflix is in
control of Warner Brothers Studios' IP property and
distribution rights, does that create the opportunity for them
to foreclose third parties who previously had access to those
assets.
That question is something that is a very detailed one.
It's going to look at margins at various levels. What is their
incentive to do so. What is their market share upstream and
downstream. Are there substitutes for these IP properties.
These questions have already been asked here at this hearing
and it is going to be asked by the agencies. Again, we're not
going to know until we see the data.
I will say this, though, usually this is fixed through a
commitment by the parties to offer this content through
arbitration going forward, 5-10 years typically. This was
Comcast NBCUniversal, this was AT&T Time Warner. They're going
to probably do the same here. Studies have shown it has been
effective in preserving competition. This is done by Dennis
Carlton, et cetera. These commitments are court-ordered and
enforced, and I'm guessing Netflix will offer the same.
Mr. Cline. Thank you. I yield back.
Mr. Fitzgerald. The gentleman yields back. I now recognize
the Ranking Member of the Full Committee, Mr. Raskin, again.
Mr. Raskin. Thank you, Mr. Chair. If Paramount were to
acquire Warner Brothers, it would put CNN under the same
ownership as CBS. When the Ellisons, who own Skydance, were
seeking to acquire Paramount, they made Trump-friendly changes
in the newsroom, including installing an ombudsman, which news
staff referred to as a hall monitor for them, and so we can
only assume the same kind of fate for CNN.
Mr. Wood, when there is consolidation in the news media,
how does this affect the freedom of speech and expression in
the marketplace for ideas generally, and specifically in the
Trump period given the very specific phenomena that have arisen
in terms of the review process.
Mr. Wood. Yes. Thank you for the question, Ranking Member
Raskin. Your question lays it out well and there really are two
distinct threats, at least. First, typically speaking, when you
have fewer competing voices, you have fewer people working to
get stories, you have fewer risk takers. Reduction of
competition reduces the number of opportunities to even tell
different stories.
In this administration, we've seen not just consolidation
at large as a problem, it's the merger process itself being
used, as you detailed so well, as a carrot and basically
saying, if you don't agree to change your news coverage, then
we won't approve your deal. That's the thing that should be
completely out of bounds, but has happened very often with this
administration.
Mr. Raskin. What is happening at CBS News under the new
management?
Mr. Wood. Well, I am not a media critic, but I can
certainly see what's happening. I know even yesterday there
were concerns about the evening news and how it was being used
to praise the administration rather than to potentially
criticize its actions.
It's the litany of changes that you discussed, the pulling
of the story from 60 Minutes, all the changes to the evening
news and the way that they are seemingly looking for
administration approval of their news rather than reporting on
the government as any journalist would want to do.
Mr. Raskin. Well, I'm really a stranger to antitrust law. I
never taught it. I never even took it. I am going to be reading
some books on it this year in anticipation of maybe a change in
our political fortunes in the new Congress.
Is there anything within antitrust law which considers the
specific First Amendment implications with respect to media
mergers that makes it a different kind of analysis from other
business antitrust analysis?
Mr. Wood. I wouldn't say--I would want to look at that
myself. I did take it, but it was a while ago now and I've done
a lot--
Mr. Raskin. Dr. Yun, you might know.
Mr. Yun. It's a great question. I would say that generally
speaking court precedent would say no, they wouldn't exam it.
Mr. Raskin. It's just treated the same way?
Mr. Yun. It's output prices and innovation, and First
Amendment issues would fall.
Mr. Raskin. OK. I would like to ask all our witnesses, does
everybody agree that Federal antitrust agencies should be
subject to intensive congressional oversight? Starting, Dr.
Wood, with you.
Mr. Wood. Yes.
Mr. Raskin. Dr. Yun, do you agree with that.
Mr. Yun. It seems quite reasonable.
Mr. Raskin. Yes. Ms. Melugin?
Ms. Melugin. Yes.
Mr. Raskin. Yes. Dr. Ezrielev?
Mr. Ezrielev. Yes.
Mr. Raskin. Yes. OK. All right. When I raised the question
of whether corruption was interfering with proper antitrust law
analysis I was chided by one of my colleagues for ranging far
afield from the subject.
If corruption has actually entered, and perhaps some people
can never see corruption when it comes to Donald Trump, so set
him aside for a second, if corruption actually entered the
antitrust review process through money corruption or political
influence, would that be a problem? Again, I would like to
maybe ask each of you. Yes, Mr. Wood.
Mr. Wood. It would definitely be a problem. I wouldn't be
naive and think that political influences never played a role
before. What we're seeing so extraordinary in this
administration is the openness of it, and the use of antitrust
and merger review, I would say the misuse, to ring out
conditions from companies who want approval of their deals.
Mr. Raskin. Yes. Dr. Yun, do you agree?
Mr. Yun. Yes. I was at the agency 18 years. I'm an
antitrust purest, it should be based off the staff and their
recommendation.
Mr. Raskin. It's an economic analysis. It's not a question
of whether you can mobilize this lobbyist or this political
force to your side.
Mr. Yun. Absolutely.
Mr. Raskin. Ms. Melugin.
Ms. Melugin. Yes, I would agree, this should be matters of
traditional laws established in a bipartisan way over the last
40 years, the consumer welfare standard and economic analysis,
no matter who is installed in any given administration.
Mr. Raskin. OK. Dr. Ezrielev?
Mr. Ezrielev. Yes, I'm against corruption in the agencies.
Mr. Raskin. All right. Mr. Wood, let me come back to you.
Antitrust law did start with the idea of both benefiting the
consumers, but also benefiting society by having competitive
forces. Would you just say a word about what consolidation
means generally for a free society?
Mr. Wood. Well, your question about antitrust and First
Amendment concerns is obviously valid and important in the
media context. There's a marketplace of ideas that has shrunk,
too. I agree with my colleagues, the market questions are the
paramount question, although I shouldn't say paramount in this
case, but we have to be certainly cognizant of the impacts on
our civic information and democracy being impacted by the loss
of that source of information.
Mr. Fitzgerald. The gentleman's time has expired. I now
recognize the gentleman from Texas.
Mr. Good. Ms. Melugin, consumers increasingly subscribe to
multiple streaming services, and recent year's subscription
costs have gone up significantly. At the same time, most
streaming services haven't been profitable despite increasing
subscription costs. Hard to say those words. You struggled,
too. I get it.
Where do we go from here, and will subscription costs keep
rising, will they eventually run out of business due to lack of
profitability, and how does regulating the current market help
things for consumers in competition?
Ms. Melugin. That's a bundle of excellent questions and
observations that I would simply say that the best way is that
they're still sorting this out. It's a relatively new advance
here, the streaming services, and there's going to probably
need to be some amount of consolidation. There's probably going
to be some amount of failure.
Failing in a market system isn't the same as a government-
imposed failure on these companies or having taxpayers on the
hook. It's kind of the natural part of creative destruction
that happens. There might need to be some calling from the
herd. There might need to be some consolidation for achieving
economies of scale.
That even in the different forms of streaming services we
see now, like Amazon Prime is a fascinating example of one that
is tied to an e-commerce delivery package, people are trying--
these companies are trying lots of different approaches to
become profitable and to give consumers what they want.
This latest deal that we're talking about today is a lot
about combining Netflix distribution advantages and expertise
and recommendations and things like that with very valuable
library content at Warner Brothers. Will that be successful for
them and they'll be able to gain more market share if this deal
is allowed and drop prices, I don't know. It's not about for
me--my job isn't picking the winners or losers or telling these
companies how to act. It's saying that these are the sound
rules of the road in traditional antitrust, and we should stick
to that whoever we're evaluating.
Mr. Good. Thank you. Dr. Ezrielev, forgive me if I
mispronounced your name, in the current market only Netflix has
been consistently profitable, with HBO and Disney Plus only
recently turning a profit, while most streaming services
operate at a loss. Correct me if I'm wrong, too.
What impact would be preventing a merger between Netflix
and Warner Brothers, or Paramount, or any other company, have
on the market, or any of these businesses, and will we ensure
competition, or will it lead to a situation where companies
will end up running out of business like Blockbuster?
Mr. Ezrielev. Thank you for asking that question. There
were a lot of questions.
Mr. Good. We're good at that here.
Mr. Ezrielev. I'll take it one-by-one. It's important to
let the market sort this out. This market has been very
successful in generating growth and innovation and new content,
and at the core of it is that these companies are trying to
create content that is appealing to consumer.
At the same time there's been growth in streaming. Just
because you are losing--earning a negative margin at current
demand levels, it doesn't mean that's going to continue as
demand grows. That's been the driving dynamic of this space.
It is rational for companies to create more and more
content to gain more consumers for your streaming service so
that as demand grows, you'll be able to earn higher margins
later on.
As far as the impact of this deal, that this is just market
trying to reallocate capital to meet demand the best it can. In
terms of Netflix and Warner Brothers, there are complimentary
assets on both sides. The way you could combine these assets to
generate even more compelling content, stream content in a more
efficient way, find consumers, create content that is appealing
to viewers, this is how you grow the service, and that's going
to be good for Netflix and Warner Brothers. I think. I don't
know. The future will tell.
It's going to be good for the entire industry. We need this
kind of dynamic competition to drive more innovation, better
content, better ways of delivering content to viewers, and,
also, to use data more effectively to reach viewers with
content that they'll find appealing.
Mr. Good. Thank you.
Mr. Fitzgerald. The gentleman yields back. I now recognize
the gentlewoman from Vermont.
Ms. Balint. Thank you, Mr. Chair. I'm going to start by
just doing some level setting. Americans don't like these
mergers. They don't want a few giant companies controlling what
they see and what they hear. We want choices. We want more
choices. We want artistic freedom. We don't want a handful of
companies deciding the content that we see. I hear this over
and over again from my constituents.
When these giant companies merge, things get better for the
people at the top over and over again. Every single time. Worse
for the rest of us. I want us to remember that two of the three
companies we're talking about today exist because of at least
one previous merger. It wasn't long ago that Paramount,
Skydance, Warner Brothers, and Discovery were separate
companies. We need competition. We do not need more
consolidation.
Mr. Wood, thanks so much for being here today. Why is it
that our media landscape right now has become so consolidated?
Mr. Wood. Thank you for the question, Congresswoman. It's
just decades now of lax antitrust enforcement. That certainly
started to turn a corner with the last administration. Even the
first Trump Administration we did see efforts there to try to
block AT&T from buying Time Warner.
There have been some bright spots. There have been some
mergers that we've opposed that have been stopped, like AT&T
buying T-Mobile, Comcast buying Time Warner Cable. Those are
few and far between. There's been this sort of flood of deals
that have gone through. As you said, ``it always gets better
for the people in the C-suite, but much less often for their
customers.''
Ms. Balint. I agree. I agree with you, too, that it is lax
antitrust enforcement. You touched on this earlier, who wins,
who loses when these mega mergers happen? Let's put a finer
point to it. Who wins?
Mr. Wood. It's the companies and their shareholders,
although not always because a lot of these deals have been bad
bets for them as well. We've talked today about potential
innovation and efficiencies and competition being improved in
some sense by merger, and I wouldn't say that's impossible, I
would just say that's a pretty high bar.
What you really need is for those efficiencies to be passed
along to people rather than just pocketed by the companies. You
need to have remaining competition.
Ms. Balint. I agree.
Mr. Wood. Sufficient incentive for them to not just pocket
those savings, but to actually have to put them back into the
business and try to keep their customers happy.
Ms. Balint. I agree. From what we've heard so far,
Paramount and Netflix have submitted bids that already raise
significant concerns. We're at the start of what's going to be
a very long battle about this. Our Committee is not responsible
at all for deciding which deal, or neither, violates the law.
That decision is in the hands of the Department of Justice. We
know that the DOJ has not been unbiased. That is a strong
concern that many of us on this Committee have.
At the last meeting of this Subcommittee, Roger Alford, a
DOJ whistleblower, described the pay-to-play climate at the
antitrust division. President Trump recently has said he will
be, quote, ``involved in the Warner Brothers deal.'' What do
you think he means by that, Mr. Wood, when he says he's going
to be involved? What is he talking about?
Mr. Wood. Well, I'm smiling because it sometimes is down to
which movies he wants to see made, so it can get kind of
ridiculous. It's also just about the Trump family's own fates
and fortunes here, and then these political choices. Again,
it's not that the political choices aren't real, or somehow are
completely invalid, but the government should not be imposing
its will on companies. That's a violation of the First
Amendment, when they're dangling antitrust review and approval
based on content changes.
Of course, as we're all saying, this should be a market
analysis. I agree with my fellow witnesses, that market
definition is key here, the merger proponents will always try
to expand that market and say we're not that concentrated,
opponents of the deal will try to shrink it, those are, again,
interesting questions, and they're asked in good faith, but
that doesn't mean that the White House weighing in does
anything to advance that analysis. It probably just impedes it
and takes it off track.
Ms. Balint. Our job essentially here is to be the watchdog,
to be doing the oversight, to be the eyes and ears of our
constituents who can't be in this Committee hearing room. I
urge the Chair of this Committee to take the role of this
Committee seriously. There is strong evidence that our
antitrust enforcement system is being corrupted, and we have to
use our constitutional authority to investigate.
Monopolies hurt all Americans, and whether it's in meat
packing, whether it is in firetruck manufacturing, whether it's
a monopoly of the seed industry, or in this case, if it's in
the media landscape, we have to be effective watchdogs and not
just roll over for an administration that is not doing its due
diligence for the American people.
With that, Mr. Chair, I have two unanimous consent that I
bring before the Committee. In relationship to whether further
consolidation in the industry is going to be a threat to moving
theaters and theatrical releases, ``Movie Theaters Dread Any
Warner Bros. Merger, by the Hollywood Reporter.'' The second
one, ``Gen X Went To Movie Theaters Most Often in 2025,''
according to New Exhibition Report. Thank you so much, and I
yield back.
Mr. Fitzgerald. Without objection.
Chair Jordan. Mr. Chair.
Mr. Fitzgerald. The gentlewoman yields back.
Chair Jordan. If I could, while we're on unanimous consent,
have the unanimous consent request from the Chief Legal Officer
of Paramount Skydance Corporation for a statement to be entered
into the record.
Mr. Fitzgerald. Without objection. The gentleman from North
Carolina is now recognized.
Mr. Harris. Thank you, Mr. Chair. Thank you all to the
panel for your time and your expertise you've given today.
Real quickly, Dr. Ezrielev, as the government, if the
government is going to intervene to stop these mergers, it has
to prove that the merger is eliminating competition rather than
creating benefits for consumers.
Now, you mentioned in your written testimony a phrase that
caught my attention when you talked about significant
efficiencies that would counterbalance any harmful effects
associated with an increase in market concentration.
What potential efficiencies could you foresee arising from
the mergers between Warner Brothers, Netflix, or Paramount?
Mr. Ezrielev. Thank you, Congressman, for that question.
There are several sources of efficiencies. The most obvious one
is that this is a vertical deal, so both--that means I'm
talking about Netflix and Warner Brothers. The same goes for
Paramount and Warner Brothers. It means that they're both
creating content and distributing content. By combining the
distribution channels of both Netflix and Warner Brothers,
there are more efficient ways of distributing content to
viewers. Sometimes you could achieve elimination of double
marginalizations so that you don't charge your affiliate a
margin so that you're saving costs. That's potentially a cost
savings.
Another source of efficiency may be better use of data. One
of the things that Netflix does very well is recommending shows
to people who are likely to enjoy those shows, and that
requires a lot of data analysis. Also, creation of shows that
are going to appeal to the right audience shows that people are
going to watch, that's very risky, it requires a lot of data.
Combining the data of both HBO Max and Netflix, they will
be able to better understand what viewers want to see. They
will be better able to market the shows so that the right
show--the right content is reaching the right viewer. Those are
two of the bigger ones, but there are probably others.
Mr. Harris. Very good. Thank you, sir. Ms. Melugin, in your
written testimony you did mention that today's calls for an
antitrust intervention in digital streaming markets as similar
to those of the past. How is this conversation we're having
today similar to that in 2005 when you specifically talk about
Blockbuster seeking to purchase its rival, Hollywood
Entertainment.
Ms. Melugin. I think it's just a big temptation for all of
us as human beings, and regulators especially, for whatever
reason, to take kind of a snapshot of things as they are and
view them as static and then deal with those problems as they
see them, but, in fact, of course, we have to remember, and we
get reminded periodically, it's not static. It's dynamic.
While the marketplace is out making changes that no
regulator should be expected to understand there's a certain
amount of economic data that should and will be evaluated in
whatever deal ends up happening, that's fair, there's great
precedent to that.
There are considerations, like efficiencies offsetting any
potential competitive harms; that's great. At some point there
has to be some amount of regulatory humility that also enters
the conversation that says we can't actually predict to say how
will Netflix do after this deal. I don't know. They don't know.
The people who have skin in the game usually make the best
guess.
We've heard about merges that weren't successful in the
market as well. No one can know the future, and you just have
to keep a little bit of deference to market forces and
interested parties in your mind as you look at these deals.
Mr. Harris. Are there any specific mistakes that you might
reference that regulators made in 2005 that regulators today
should avoid.
Ms. Melugin. Not looking at the bigger picture in terms of
what technologies are going to come online that sort of
overthrow the whole system. Right. We all used--I sadly am old
enough to remember renting DVDs at Blockbuster and Hollywood
Video. Then, when things got really fancy there were those
boxes at the grocery store. Amazing innovation. Netflix came
along and we couldn't believe they were doing it through the
mail. That was wild and we loved that, too.
There are other factors outside the narrow band of the data
regulators are going to look at in this that are happening
outside, but, nevertheless, might be impactful. You have to
make sure that by intervening in these market deals you're not
preventing some of that beneficial innovation unknowingly.
Mr. Harris. Thank you. I yield back, Mr. Chair.
Mr. Fitzgerald. The gentleman yields back. I now recognize
the gentleman from California.
Mr. Correa. Thank you, Mr. Chair. I want to welcome our
speakers today and our witnesses.
I represent Orange County, California, Southern California.
My biggest employer in my district is Disney Land with 40,000
jobs, plus. You can understand the multiplier effect there.
Tremendous economic activity.
Southern California, California, the entertainment
industry, film industry, big sector, and the 4th and 5th
largest economy in the world. That's our bread-and-butter in
California, entertainment. Yet, all of you know COVID, AI,
other factors have really hurt our job picture in the
entertainment industry. Hollywood especially. Losing a lot of
jobs.
A lot of graduates from the local best film schools in the
country, UCLA, USC, and the other schools, a lot of those
graduates can't find jobs today. You heard my colleagues today
presenting letters of concern, opposition to these mergers from
labor groups. These folks are concerned about their jobs,
bread-and-butter.
I love to hear your academics today, your analysis today.
Great stuff. Back home people are concerned about their jobs.
Where are they going to feed their families tomorrow. A lot of
uncertainty.
I'm going to ask each of every one of you, however you can
answer, are these mergers going to create jobs? Are they going
to stem from the current loss of jobs that are happening? Mr.
Wood.
Mr. Wood. Thank you, Congressman. We would certainly expect
them not to stem that loss of jobs and to increase it. I think
recent--
Mr. Correa. Dr. Yun.
Mr. Wood. Have shown that.
Mr. Yun. I genuinely don't know.
Mr. Correa. Ms. Melugin?
Ms. Melugin. I think there is a chance that some jobs will
be lost, and that some jobs we can't articulate at the
beginning will be created as well.
Mr. Correa. Dr. Ezrielev? Please excuse me for
mispronouncing your name.
Mr. Ezrielev. I don't know if they will create jobs or lose
jobs.
Mr. Correa. You have two of you that are uncertain, for
sure loss of jobs, and possibly loss of jobs.
Hollywood, best films in the world. Best entertainment in
the world. Arguably, yes. Maybe. I don't know. Those
blockbusters out there, a lot of my constituents worked on
them.
Let me ask you again specifically, Netflix, if Netflix wins
this bidding competition, are they going to create jobs? Mr.
Wood.
Mr. Wood. Again, it's hard to predict the future, but when
they say synergies they mean job cuts. They mean other kinds of
reductions in spending.
Mr. Correa. Job cuts. Dr. Yun?
Mr. Yun. I don't have a prediction.
Mr. Correa. Ms. Melugin.
Ms. Melugin. I cannot say for certain.
Mr. Correa. Dr. Ezrielev.
Mr. Ezrielev. I don't know if they will create jobs. If
there is growth in the industry, if there is growth in
streaming and more content that will create jobs.
Mr. Correa. In California? In the U.S.? Somewhere else?
Mr. Ezrielev. I don't know where.
Mr. Correa. If Paramount wins this bidding competition,
creating jobs, Mr. Wood?
Mr. Wood. That's a more classic horizontal merger in the
studio space, and so, no, again, I would think it would
decrease jobs.
Mr. Correa. Dr. Yun?
Mr. Yun. I don't have a prediction on that, either.
Mr. Correa. Ms. Melugin.
Ms. Melugin. It would be my same answer, I'm unsure.
Mr. Correa. Dr. Ezrielev.
Mr. Ezrielev. I don't know.
Mr. Correa. Here we are as Members of Congress debating
M&A, economic activity in this country, job creation, bread-
and-butter, and we're still not quite sure what the effects
will be of this M&A activity, is that what I am hearing today,
or we're hearing it will create job losses, is that--
Mr. Wood. Again, Congressman, we can only look to the past,
we can't predict the future. Mergers are designed to save the
company's money, and those efficiencies might be real for the
shareholders, but they--
Mr. Correa. You begin to understand why we have concerns by
workers in this area when we don't have answers, and it sounds
like maybe this is not going to be good.
Let me turn very quickly, my last 30 seconds, are these
mergers going to lower the ticket, the amount I will pay
monthly for entertainment at home? Mr. Wood?
Mr. Wood. No, again, I don't think so. We've seen that
prices have gone up historically.
Mr. Correa. Dr. Yun?
Mr. Yun. For some users, yes. For some users, maybe not.
Mr. Correa. Ms. Melugin?
Ms. Melugin. I agree, it will be probably mixed results.
Mr. Correa. Mixed. Dr. Ezrielev?
Mr. Ezrielev. I don't know.
Mr. Correa. Here we go, we don't know, probably job losses.
Now, we understand why people on Main Street are concerned.
Thank you very much. Mr. Chair, I yield.
Mr. Nadler. Mr. Chair.
Mr. Fitzgerald. The gentleman yields back.
Mr. Nadler. I have three UC requests.
Mr. Fitzgerald. Before I would like to say that I did not
know that Mr. Correa represented Disney Land, that sounds like
a future field hearing for this Committee.
Mr. Correa. Offer accepted, sir.
Mr. Fitzgerald. Mr. Nadler is recognized.
Mr. Nadler. Thank you. I ask unanimous consent for a
statement for the record of the American Economic Liberties
Project; for an article in Planet Money titled, ``The Warner
Bros. Curse;'' for an article in the Verge titled, ``There are
no good outcomes for the Warner Bros. Sale.'' I have one more.
Finally, I offer a unanimous consent request for an article in
the Free Press titled, ``A More Perfect Media, Saving America's
Fourth Estate from Billionaires, Broligarchy and Trump.''
Mr. Fitzgerald. Without objection. The gentlewoman from
Wyoming is now recognized for 5 minutes.
Ms. Hageman. Thank you, Mr. Chair. I want to talk a little
bit about some definitions before I get into my questions, just
so that I can understand what your testimony is.
Streaming services send video data through broadband
internet to televisions, computers, phones, tablets, and other
devices.
Linear streaming services deliver live channels over the
internet, and are commonly considered as alternatives to cable,
that would be your YouTube TV, Hulu, Live TV, Sling TV, et
cetera.
Then, on-demand streaming services generally provide a
catalog of shows and movies for consumers to watch without
waiting for downloads, scheduled air times, or physical copies,
like DVDs, and that would include Netflix, HBO Max, and Amazon
Prime.
Warner Brothers Discovery, the company that owns HBO Max
streaming services, Warner Brothers Movie and Television
Production Studios, and linear cable television networks,
including CNN, is currently up for sale, and at least two
companies, Netflix and Paramount, are actively competing to buy
it, looking at a sale of upwards of $100 billion.
Profession Yun, I would like to start with you, and that
is, as you noticed in your testimony, an initial challenge that
antitrust official will need to overcome is how we actually
define the relevant market in this new streaming world we live
in.
Now, can you explain to us why some parties might want this
definition to more broadly include linear TV and social media
platforms, and why other parties would want a narrower
definition, a list just on the streaming?
Mr. Yun. Yes, it's the classic struggle in antitrust cases.
Narrow definitions obviously mean higher market shares for the
merging parties, and that usually is what the challengers of a
merger want. The agencies will probably challenge this merger
if they find sufficient evidence that the market is just
streaming and then they'll go forward.
The party's incentives clearly is to dilute their market
share, their influence based off the competitors. They're going
to want to have a broader market to include, as you mentioned,
YouTube, YouTube TV, cable television, and satellite. The
inclusion of YouTube onto the market will probably destroy any
opportunity for this merger to be blocked because that will
then mean that consumers have a viable option to move their
attention to YouTube. If the data is there, then I don't think
this will be challenged. That is everything in terms of this
debate.
Ms. Hageman. OK. Do either the narrower definition or the
broader definition, which would be better for the consumers?
Mr. Yun. For me, the consumers care about their options and
choices, so I would hope that the market definition adopted by
either the agencies or the parties map to truly what the
consumers have options over.
If the data does show that consumers, when they see a
higher price for Netflix, people leave Netflix. Data
consistently shows that. Where do they go? Do they go to HBO
Max, do they go to Amazon Prime Video, or do they move to
YouTube, social media and other platforms? If the data shows
that they move to the latter, that to me is a great deal of
evidence that the merger does not consolidate market power
because the consumers haven't given them that power.
Ms. Hageman. OK. Well, then, consolidation of streaming
services may appeal to consumers who are frustrated with the
fragmentation of the current market across multiple absent
platforms requiring different subscriptions.
Netflix is the original streaming service, and still today
considered one of the premium on-demand streaming services. It
is also one of the few that is actually profitable, so far.
While other platforms are trying to grow and turn profits,
what are the potential negative effects for consumers by
allowing the top premium service to acquire another? Mr. Yun?
Mr. Yun. What are the potential negative consequences.
Ms. Hageman. Yes.
Mr. Yun. If I had to predict the negative consequence, it's
most likely going to be those consumers who have no value for
HBO Max, yet Netflix will most likely increase the price to
those consumers to access the platform because it's going to
integrate that content.
The winners are most likely HBO Max users today who also
subscribe to Netflix. I would predict their bundle price would
be lower. That's what I meant earlier that it will be a mixed
bag, and it will depend on who's the bigger consumer base.
Ms. Hageman. OK. Just one last question. Balance is
obviously needed between preserving competition and responding
to these fragmentation concerns. Does allowing the market's
biggest player to acquire another major player appropriately
strike this balance, or is there a better way? Mr. Yun.
Mr. Yun. Oh, gosh, it's a great question. I'm just so
limited to whether this deal violates the law or not, and
that's kind of my focus. There are counterfactuals that could
possibly be better.
Ms. Hageman. OK. Well, thank you. With that, I yield back.
Mr. Fitzgerald. The gentlewoman yields back. I now
recognize the gentleman from Illinois for 5 minutes.
Mr. Garcia. Thank you, Chair Fitzgerald. Everyone agrees
that the rise in on-demand digital streaming has transformed
and changed the media and entertainment industry. While the
industry has been transformed, our goal remains the same,
enforce antitrust laws, and ensure an open competitive market
that protects workers, consumers, allows new entrance, promotes
creativity, and free speech.
Mr. Wood, thank you for being here today. Netflix and
Warner Brothers argue that the industry has changed so much
that the relevant market includes other forms of digital media,
including social media. Are you skeptical of that definition?
Mr. Wood. I'm listening, but I am skeptical, yes. As Dr.
Yun was saying that is really the entire question here in the
entire ball game. The question is not just will people switch
to a different source, but will that behavior discipline the
ability of the merging entities to raise prices or reduce
output.
There's a couple different questions. There's lots of
different metrics. Asking about all those metrics is valid, and
that's really the job that we need the antitrust enforcers to
do very carefully.
Mr. Garcia. Thank you. Another important goal of antitrust
enforcement is protecting workers from anticompetitive and
abusive practices.
Of course, this deal is just the latest in a series of mega
mergers in the entertainment industry. Every time those
companies promise to protect workers and every time they betray
workers.
After Disney, for example, acquired Fox, 4,000 jobs were
lost. In the years after the AT&T Time Warner merger, 77,000
workers were laid off. Since merging with Skydance only months
ago, Paramount has already laid off 1,000 workers, and promise
to lay off 1,000 workers more in the coming months.
Mr. Wood, given this history, are you concerned that
additional consolidation in this industry will harm workers
through widespread layoffs, reduce compensation, and other
anticompetitive practices?
Mr. Wood. Yes. Thank you, Congressman. We are very
concerned. As you said, ``that's the track record,'' and that's
the design of these deals, is to reduce the head count. That's
how companies make a lot of the money that they can, in
addition to being able to raise prices when they face less
competition.
It was suggested earlier that antitrust should not be
concerned with labor issues. I don't think that's true. I don't
know that it historically has been enough, but there are courts
that agree that labor issues are very much the province of
antitrust law, and so we hope that the analysis will take that
into account as well. As it's not exactly the same as a typical
labor market, maybe, but the creators, the artists who are
putting these products out there, it's almost a shame to call
them products, because they are not employees of these
companies, but they also would face reduced opportunities for
places to find their work made and put on screen if these
mergers go through and if the number of films made continues to
dwindle.
Mr. Garcia. Thank you. My criticism of the Netflix deal is
not an endorsement of the offer by Paramount, a company that's
controlled by Right-wing oligarch Larry Ellison and his son
David. The Ellisons are already doing Trump's bidding at CBS by
installing Right-wing ideologues who are swaying the network's
content in favor of this administration in a very very clear
way. Now they're telling Trump that if Paramount buys Warner
Brothers, they'll turn CNN into a Trump news network.
Mr. Wood, are you concerned about the possibility of
viewpoint discrimination at CNN if Trump blocks the Netflix
deal and gives the green light to Paramount?
Mr. Wood. I think you said it well, Congressman. If the new
owners of CBS want to install a more Right-leaning newsroom and
change their viewpoint, that's their prerogative. The problem
is when they're doing that, not only at the President's
request, but with the threat that their merger won't be
approved unless they do so. That's the really chilling element
here.
Companies, of course, have a right to change their
politics, change their coverage, change their newsrooms, but
when it's not only at the government's request, but under a
threat from the government of withholding of benefits, or some
other regulatory action, we've seen this at the FCC many times,
investigations launch that sort of magically disappeared once
companies made concessions, and that's the kind of
interference, not only in the antitrust process, but with the
First Amendment that gravely concerns us.
Mr. Garcia. That's the warning about greater consolidation
in the industry. Thank you. I yield back, Mr. Chair.
Mr. Fitzgerald. The gentleman yields back. The gentleman
from New York is recognized for UC requests.
Mr. Nadler. Thank you, Mr. Chair. Mr. Chair, I ask
unanimous consent to enter into the record an article from the
Progressive News Wire entitled, ``Press Freedom Groups Tell
FCC: Media Consolidation Poses Grave Threat to Independent News
and Information in the United States.'' Also, ask for unanimous
consent to enter into the record a prepared statement for the
record of Cinema United.
Mr. Fitzgerald. Without objection.
Mr. Nadler. Thank you, Mr. Chair.
Mr. Fitzgerald. The Chair of the Full Committee is now
recognized for 5 minutes.
Chair Jordan. Thank you, Mr. Chair. Ms. Melugin, it's about
the consumer, right.
Ms. Melugin. One hopes so.
Chair Jordan. Earlier it was said it was an economic
analysis, it's a market analysis. That analysis is driven by
the welfare of the consumer. If you go to any other standard,
you start running into problems. You start saying, oh, it's
about the content producers, it's about the unions, it's about
the workers, it's about--if you go anywhere else, you're
getting problems. Here is the good thing, when you focus on the
consumer, in the long run it typically benefits the workers,
the businesses, it benefits everyone, but you have to focus
there.
You get anywhere else--you can create a monopoly where they
hire a bunch more people, pay them huge salaries, but that's
not good in the long run for the consumer, or, frankly, for the
country, for the market, for everything else; is that right.
Ms. Melugin. Yes, I would say that antitrust can't serve
more than one master, and any time you replace any worthy and
understandably concerned group it's a special interest, and
that will displace protecting the interest of consumers.
There's only one person, and there's only one group that it can
be focused on, and the great thing about picking consumers is
that at some point in the economy we're all--
Chair Jordan. We're all consumers. That's a beauty that's
standard. When you deviate from that standard, start playing
games, start picking things, start basing it on anything else,
I think you run into problems.
How is this going to shake out? We don't have to predict
everything, but what's--I heard Dr. Yun talk about how the
marketplace is going to be defined and all that. How are you
guys--give us your sense. That's what we all want to know.
Maybe you said that already. I was in another Committee hearing
on this Minnesota fraud, so I apologize, but--
Ms. Melugin. It's a hardy, but a newy. Yes, listen, I agree
with what's been said here. Getting that market definition set
is going to be hugely important. That affects what market
shares we're talking about, and that sets either challengers or
these companies up for success depending.
Any deal that happens is going to be reviewed just because
of the size of it, it's going to be reviewed by U.S. antitrust
officials, regulators, and then you've heard it all here today,
what are they going to be looking at.
Chair Jordan. Who do you think is going to get the burden?
Again, depends on how they define the market, but who is going
to have the burden? Is it going to be on the companies, the
merging parties, is it going to be on the government to show
this is anticompetitive? That's sort of the fundamental step
that takes place relatively early on in this process.
Ms. Melugin. Who knows what will happen, but since I got to
testify today, I will make the prediction that hopefully we
have a more expansive market, relevant market definition that
takes into consideration the behavior of its consumers. Even if
you didn't--you're really only hitting that 30 percent, so
hopefully we have a broader view of how consumers actually--
Chair Jordan. Even under the narrow definition, you're
close to the threshold, the 30 percent criteria, but under the
broad definition, no problem. I see the Doctor shaking his
head. Do you want to weigh in as well.
Mr. Yun. That's 100 percent accurate.
Chair Jordan. OK. I get it. Anyone else want to--we're
going to let the Chair finish up here last, but anything else--
I'll even go to the Democrat witness, Mr. Wood.
Mr. Wood. How kind of you, sir. No, as you said, we want to
focus on the consumer, and whether we focus on other things as
well--
Chair Jordan. No, you didn't say--the last round of
questions you said you've got to focus on the worker.
Mr. Wood. Well, we talked a lot about the markets, too. I
said we can focus on the labor impacts as well, and I think
that--
Chair Jordan. That's a deviation. That's different. That's
changing, that's changing the process. In the end, in the long
run, I don't think that's beneficial. I want to focus on
workers and make sure they have jobs, too, but you can't do
that because in the long run it will end up skewing the market.
You said you weren't wedded to the welfare of the consumer
standard, I think that's the right standard.
Mr. Wood. Yes. Not solely to that, but I certainly
understand your viewpoint, too. What I was going to say, in
antitrust, too, it's always the government's burden to--
Chair Jordan. All I'm saying is your viewpoint is going to
get us in trouble, I believe, going forward. The viewpoint
focusing on the consumer, as Ms. Melugin pointed out, because
we're all consumers, is the safest, best, tried and true
process. OK. I said I'll let you talk, so I'll let you talk
now.
Mr. Wood. I was going to say, it's the government's burden,
but as Dr. Yun explained earlier, there is a presumption of
illegality when the concentration levels hit a certain level.
To answer your question, it's not going to be the company's
burden to get this through. It's the government's burden to
make that case.
Chair Jordan. That's my read.
Mr. Wood. How they make that case will depend greatly on
how we draw those market barriers, and we have concerns about
competition here, for sure, but that work is yet to be done.
Chair Jordan. Doctor, you get the last 33 seconds.
Mr. Ezrielev. That if we focus on the most narrowest
market, which is the subscription video on-demand market, the
concentration level there, even though it's likely more than 30
percent, the market concentration in that market is not
particularly high, anyway.
The 30 percent Philadelphia National Bank threshold has
zero basis in economics. It's more seen as a necessary
condition and as a sufficient condition. Even under that narrow
market definition, I don't know if this is a slam dunk, but
there are lots and lots of problems with that narrow market
definition.
By definition, it's a relevant market, so whoever defines
that market that says everything else is irrelevant, and that
would include YouTube, and that's just--and others, and that's
just not the case.
Chair Jordan. Chair, thank you for this important hearing,
and I yield back.
Mr. Fitzgerald. The Chair yields back. I just wanted to
wrap up, I guess I'll recognize myself for 5 minutes, but what
it comes down to is, and what we've heard a little bit today is
let's actually think about how real people actually make the
decisions on what they're going to use as their entertainment
value.
If somebody now says that--it seems like one of the hotter
shows right now is Landman, so if your neighbor or your friend
says, hey, have you seen the latest episode of Landman, the
first thing you're going to think is, I don't know because
what's it on, what's it being streamed on--and then the family
makes the decision as to, yes, we're going to sign up for
Paramount Plus because we don't have it right now, but I do
want to watch Landman. OK.
Then, you have the sports issue, which is you have NFL
teams right now that are on five different streaming venues, so
the level of frustration I hear from the constituents back in
the 5th District is why are the Packers on Peacock three times
this year.
I don't know if the mergers necessarily change that,
because no one is shopping for the actual network. What they're
doing is they're shopping for the content. Right.
From my perspective, the last administration really did not
look favorably on mergers. Right. Every merger was suspect
right out of the gate, and what we found was that's not always
a bad thing. It depends on the market, it depends on the
content, and it depends on how it's being delivered, and that
was underscored again today.
I just want to thank the witnesses for participating today.
We do have a couple of unanimous consents. An article published
in The Wall Street Journal authored by myself titled, ``A
Merger Could Bring Better Streaming.'' The Ranking Member
should have offered that one on my behalf. An article published
in Townhall titled, ``Netflix-Warner Bros. Deal is Free
Market.'' An article published in Townhall title, ``A Netflix-
Warner Bros. Deal Puts America First.'' Without objection,
those will be added.
We thank everybody for participating today, and certainly
want to wrap up with not only thanking everyone for being here,
but just hang on 1 second, without objection, all Members will
have five legislative days to submit additional written
questions for the witnesses, and additional materials for the
record. Without objection, the hearing is adjourned.
[Whereupon, at 11:56 a.m., the Subcommittee was adjourned.]
All materials submitted for the record by Members of the
Subcommittee on the Administrative State, Regulatory Reform,
and Antitrust can be found at: https://docs.house.gov/
Committee/Calendar/ByEvent.aspx?EventID=118797.
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