Trump Sounds Alarm: The Future of Media Consolidation and Streaming Competition

The U.S. media industry is currently undergoing a wave of restructuring on an unprecedented scale. At the center of this is the $83 billion (approximately ¥12 trillion) merger plan between cable television giants Discovery and WarnerMedia. However, an unexpected and powerful warning has been sounded regarding this massive M&A deal. It comes in the form of a statement by former President Donald Trump that "Netflix's market share could become a problem."This statement goes beyond a mere political comment, highlighting the future of the media industry and the strictness of competition law reviews in M&A.

As an international financial journalist, I believe this statement carries significant meaning. This is because it raises fundamental questions not only about the success or failure of a single M&A deal, but also about the definition of the market in today's increasingly digital world, the monopoly power of giant platforms, and the nature of government regulation.This article will use Mr. Trump's remarks as a starting point to deeply analyze the fiercely competitive streaming market environment, the competition law risks inherent in M&A, and the future of global media consolidation.

Behind the Scenes of Shifting Media Industry Consolidation: The Ripple Effects of Trump's Comments

Entering 2024, the U.S. media and entertainment industry remains dominated by talk of large-scale M&A. Particularly in the spotlight is the proposed merger between WarnerMedia (owned by AT&T) and Discovery. This $83 billion deal aims to create a media conglomerate capable of handling everything from content production to distribution.The goal is clear: to build a new entertainment powerhouse that can compete with streaming giants like Netflix and Disney+ in terms of content and scale. However, an unexpected obstacle has emerged that could put this grand plan on hold.

Former President Donald Trump pointed out that "Netflix's market share could be an issue" regarding this deal. Although he is no longer president, his influence remains significant, and his remarks can be interpreted as representing the conservative stance on antitrust law enforcement. Underlying his concern is "fair competition in the streaming market." Specifically,

• Content oligopoly: Will further consolidation among giant media companies concentrate high-quality content on specific platforms, narrowing consumer choice?
• Increased market dominance: Could the combined new company, alongside existing giants like Netflix, further expand its market share, making it harder for new entrants?
• Impact on price competition: With competition restricted, is there a risk of unfairly inflated subscription fees for consumers?

These are the key points. U.S. antitrust authorities (the Department of Justice and the Federal Trade Commission, FTC) rigorously scrutinize market definition, the substantive impact on competition, and consumer benefits during M&A reviews. In the past, media M&A deals, such as AT&T's acquisition of Time Warner, have frequently faced political intervention, resulting in stringent conditions or prolonged legal battles.Mr. Trump's remarks suggest this transaction could transcend a mere business deal and become a subject of political and social debate, making it an element that cannot be ignored when formulating M&A strategies in international financial markets. International investors are watching with bated breath to see how these comments will influence the upcoming review process.

The Streaming Warring States Era: The Battle for Content Supremacy and the Regulatory Perspective

Today's media industry is embroiled in fierce competition, truly deserving the title "Streaming Warring States Era." Following Netflix's pioneering entry into this market, players like Disney+, Max (formerly HBO Max), Amazon Prime Video, and Apple TV+—all possessing massive capital and content libraries—have rapidly entered the fray, waging a battle for content supremacy.Each company invests billions of dollars annually, fiercely competing to produce original content and acquire popular IP (intellectual property).

Within this competitive landscape, Netflix still boasts an overwhelming market share. Its vast content library and global user base remain unmatched. However, precisely because of this dominance, antitrust authorities are scrutinizing it more closely. The "Netflix market share" issue highlighted by President Trump focuses precisely on this point.

Key points regulators particularly emphasize when reviewing M&A deals include:

• Definition of the relevant market: Is streaming defined as a "standalone market" distinct from traditional cable TV and movie theaters? Or is it considered part of a broader "entertainment market"? This definition significantly impacts how each company's market share is assessed.
• Vertical Integration of Content: Does the integration of production companies and distribution platforms give control over both content supply and distribution channels, potentially hindering access for competitors or limiting creators' choices?
• Bundling and Pricing: Could "bundling" multiple services together distort consumer choice and hinder competition? Furthermore, is there a risk that reduced competition could lead to unfairly high prices?
• Impact on Innovation: Could reduced competition hinder the emergence of new services and technological innovations?

Historically, numerous M&A deals in cable TV and telecommunications faced rigorous regulatory scrutiny, frequently resulting in corrective measures like asset divestitures or business spin-offs. While the streaming market is a relatively new domain, its influence and economic scale are immense. Consequently, authorities are carefully constructing the definition of "monopoly" and the competitive assessment framework for this new market.The Warner Discovery merger holds the potential to become a litmus test for this new rule-making in the streaming warring states period. The regulators' decision will significantly reshape the future power map of the media industry.

The Fate of the Warner Discovery M&A: Competition Law Risks and Market Reaction

The WarnerMedia and Discovery merger signifies more than just two companies becoming one. This M&A aims for vertical integration of content and accelerated global expansion.WarnerMedia possesses powerful IP like "Game of Thrones" and the DC Universe, while Discovery holds global strengths in reality TV and documentaries. Integrating these aims to build an enormous content library and strengthen streaming services centered on Max (formerly HBO Max).

However, President Trump's "Netflix problem" remarks have introduced new and significant antitrust risks to this M&A deal. While his comments may not directly influence the review process, they effectively signal to antitrust regulators that "this transaction raises national concerns." This creates the following potential risk scenarios:

• Prolonged Review: Authorities may conduct more detailed investigations, potentially extending the approval process beyond expectations. This increases M&A costs and heightens market uncertainty.
• Requirement for Remedies: Conditions for approval could include the sale of specific assets, the separation of business divisions, or obligations to provide access to content. This risks partially nullifying the synergies the M&A aimed to achieve.
• Worst-case Scenario: Cancellation: If authorities determine the deal "significantly impedes competition," the M&A itself may not be approved, or the companies may voluntarily abandon it. This most undesirable scenario cannot be ruled out.
• Increased Political Influence: Political pressure on M&A reviews means outcomes may be influenced not only by pure economic rationality but also by political considerations.

Market reactions are also sensitive. While stock prices tend to rise immediately after an M&A announcement due to expectations, they decline when competition law concerns emerge, heightening uncertainty about the deal's completion.Investors constantly monitor regulatory developments and political statements, factoring in risk premiums when making investment decisions. Whether this deal is approved will not only significantly reshape the competitive landscape of the media industry but also serve as a pivotal case redefining the authority and role of regulators in mega-M&A. Particularly in rapidly evolving markets like streaming services, the question of how to evaluate and regulate "competition" demands an answer.

Global Media Consolidation Trends: Strategic Perspectives Japanese Companies Should Learn

The mega-M&A occurring in the U.S. media industry and the accompanying antitrust debates are not merely distant fires. They symbolize structural changes facing the entire global content industry and hold important strategic implications, particularly for Japanese companies considering expansion into overseas markets.

First, the intensification of M&A activity in the U.S. market is accelerating due to the following factors:

• Accelerated Digitalization: The shift to streaming services has disrupted traditional revenue models, demanding new economies of scale.
• Intensifying global competition: Companies like Netflix and Disney+ targeting global audiences are expanding the scale of content investment.
• Entry of tech giants: Major IT companies like Amazon and Apple are entering the media market, forcing existing players to scale up to compete.

In this environment, Japanese companies must adopt several strategic perspectives to maintain competitiveness and pursue growth in the global market.

1. Strengthening and Diversifying Content Investment: It is essential to continue strategic investment in content where Japan holds strengths—such as anime, games, and dramas—ensuring quality and quantity that meet global standards. Simultaneously, developing content that addresses the diverse needs of target markets is crucial.
2. Scale Expansion and Technology Acquisition through M&A: Growth solely through internal efforts has its limits. Companies should aim to expand their content libraries, enhance technological capabilities, and acquire global distribution networks through M&A with leading overseas production companies and distribution platforms.
3. Competition Law Compliance and Risk Management: When considering major M&A, it is crucial to deeply understand the antitrust laws of the target country and thoroughly assess potential competition law risks during pre-acquisition due diligence. Constant attention must be paid to political factors and regulatory authority trends, requiring flexible strategies capable of responding to potential corrective measures.
4. Building Diverse Partnerships: Beyond M&A, strategic alliances and joint ventures are also effective for enhancing presence in overseas markets. Particularly, collaborations with strong local companies enable smoother market penetration.

In the streaming era, content is king, and the key to success lies in how efficiently and globally that content can be delivered. The trends in U.S. media consolidation are rich with lessons for surviving in this complex and dynamic market.Japanese companies must now deeply understand this trend and seize new global market opportunities with bold yet prudent strategies. Which company will dominate the future entertainment industry? The answer hinges on the outcome of today's M&A activity and the decisions of regulatory authorities.