TORONTO, ON –

Netflix has agreed to acquire Warner Bros. Discover (WBD), including it's film and TV studios, HBO, and HBO Max, for a staggering enterprise value of $82.7 billion (approximately equity value of $72 billion), with the deal expected to close in 12 to 18 months, subject to regulatory review.

The deal announcement is more than just a headline — it’s a structural earthquake that concentrates unprecedented power.

At Diverge, we look past the press release to the legal and business realities. Here is our deep dive into the deal, the regulatory hurdles ahead, and why independent creators need to pay attention.

**Monopsony**
/məˈnäpsənē/ (n.)

`A market where there is only one major buyer for many sellers.`

AI disclaimer: Image created using Google Gemini

For years, we have discussed the Streaming Wars as a battle for subscribers. If this deal goes through, that war is officially over.

Enter the new phase of the digital economy: The Utility Era.

While the headlines focus on the price tag and the marriage of ‘Stranger Things’ with ‘Harry Potter’, the real story lies in what this consolidation means for the working class of Hollywood, Canadian creators, and the future of intellectual property rights.

To understand why this market consolidation is occurring, a quick look at the balance sheets of both corporate giants is needed.

The Financial Reality

Deal Motivations: Rescue Mission or Power Play?

Why WBD is Selling: The Debt Anchor

Despite holding some of the most valuable intellectual property on earth (DC Universe, HBO, Friends), Warner Bros. Discovery has been shackled by debt. As of late 2025 (Q3), WBD was carrying an estimated $33.38 billion in long-term debt. For WBD shareholders, this deal provides a clear financial escape hatch, allowing them to cash out at a premium.

Why Netflix is Buying: The Indispensable Library

Netflix has won the subscriber race, reaching over 301.6 million global subscribers as of Q3 2025. However, the company is now focused on profitability and retention amid high industry churn rates. To keep subscribers paying a premium, they need a library that feels indispensable.

By acquiring Heritage IP like ‘Batman’ and ‘Entourage’, Netflix moves from being a "nice-to-have" streamer to a "must-have" utility.

The Breakup Fee

Netflix's offer reportedly includes a substantial $5.8 billion breakup fee if the deal collapses due to regulatory failure. This signals massive confidence (or perhaps desperation) to lock down these assets, but also reflects the high regulatory risk involved and the expectation of a lengthy merger control battle.

Walled Garden: The Death of Residuals?

OLD MODEL

The consolidation of studio and streaming ownership directly threatens the established wealth-building model for creatives that relied on residuals.

Traditionally, a show is sold multiple times (Network → Cable → Streamer), and at every second sale or licensing deal, talent gets paid residuals.

NEW MODEL

Netflix owns the studio and the streamer. The show goes directly onto Netflix and stays there forever.

This creates a Walled Garden. Because the content never leaves the ecosystem, there is no licensing fee and no second sale, threatening to eliminate the residual checks that sustain working-class creators, replacing them with a one-time buyout fee.

Beyond the Balance Sheet

Moving passed the deal economics, this consolidation raises fundamental legal and cultural issues. These concerns include constitutional law aspects regarding threats to free speech and expression, and key areas of competition law relating to consumer rights, merger control, and the need for adequate regulatory safeguards.

1. The Power Shift: Market Ownership

This proposed acquisition is not merely a corporate transaction; it's a structural shift that concentrates unprecedented power and IP under one roof. This means fewer buyers, less competition, and increased leverage for the dominant player.

FEWER BUYERS, LESS LEVERAGE:

If Netflix absorbs WBD, one of the world's largest purchasers of scripts and production services disappears. At the same time, Netflix, the world's largest streaming company, swallows one of its biggest competitors (HBO Max), and eliminates a major buyer for new content. When there is nowhere else to sell your show, the buyer sets the price.

With fewer studios bidding for your project, you have less leverage to negotiate higher fees or better rights. This market consolidation reduces the number of entities creators can pitch their shows or films to, directly impacting your ability to negotiate favourable terms, compensation, and ownership.

THE IP ANCHOR:

Netflix gains legendary, franchise-ready IP and HBO's library (Game of Thrones, Succession, The Sopranos). This vast, pre-existing library becomes an anchor that keeps subscribers locked in.

THE INVISIBLE SQUEEZE ON TALENT:

When a single entity controls both the production (WBD studios) and the primary distribution platform (Netflix), it creates a choke point. This level of control over the content and the distribution pipeline affects who gets funding, who gets greenlit, and what content reaches the public, potentially creating another barrier to entry for up-and-coming talent by lessening Netflix's need to take creative risks on new, original, or diverse voices.

THREAT TO CONSTITUTIONAL RIGHTS:

The most compelling arguments against the merger, going beyond the financial ramifications, involve the concept of media consolidation harming expressive rights. Major figures and unions argue that consolidation at this scale is catastrophic for an industry built on free expression. It is feared that combining these two major studios infringe on the collective expressive rights of creators and the public's right to diverse viewpoints.

2. Competition & Anti-Trust: Why the Lawyers Are Circling

The sheer scale of this merger has drawn immediate and intense antitrust scrutiny from U.S. lawmakers and international regulators. The legality of the deal hinges on the argument that the merger will substantially lessen competition under anti-trust legislation (like the U.S. Clayton Antitrust Act).

This is tested through two key legal lenses: (i) Horizontal Consolidation, and (ii) Vertical Integration.

i. Horizontal Consolidation (Streaming Market)

This refers to merging direct competitors.

THE REGULATORY THRESHOLD:

Netflix (the No. 1 streamer) acquiring HBO Max (the No. 3 streamer) creates a formidable player. This immediately triggered intense scrutiny under anti-trust and competition law because the combined entity could take up over 30% of the streaming market. If so, this would surpass the 30% benchmark used by regulators to challenge mergers. US senators are already framing this as an anti-trust nightmare that creates unfair market concentration. The entire process is a high-stakes merger control battle. If the merger fails this review due to its anti-competitive nature, the transaction may be blocked.

CONSUMER HARM:

This concentration is challenged on the grounds that it will lead to higher prices for consumers and fewer choices over what they watch. The legal arguments point to this concentration as a textbook horizontal Antitrust problem.

US Senator Elizabeth Warren called the deal an "anti-monopoly nightmare", expressing concern that a single massive media giant controlling close to half the streaming market will lead to higher prices for consumers and fewer choices.

ii. Vertical Integration (Production & Distribution)

This refers to merging different stages of the supply chain.

THE MONOPSONY THREAT:

The merger would combine WBD's content production (studios and IP libraries) with Netflix's distribution platform. As a result, most anti-trust conversations focus on Monopolies (one seller controlling prices for consumers).

But for independent creators, the terrifying word is Monopsony: a market where there is only one major buyer for labour. Critics argue that this grants the new behemoth full vertical control of the content and distribution pipeline. It incentivizes the company to prioritize its own productions (WBD) and reduce its licensing and acquisition of outside content, foreclosing the market to independent producers and creating a monopsony threat for talent.

The Regulatory Test Case
This deal will likely serve as a significant test of whether modern Anti-Trust enforcement, particularly in the U.S., will adhere to stricter merger guidelines that consider qualitative harm (like content diversity and labour impact) in addition to just consumer pricing.

3. Impact on the Collective Creative Industries

The legal and economic arguments coalesce into tangible threats for the collective creative industry.

CONTRACTS & CHANGE-OF-CONTROL CLAUSES:

Major media mergers, or M&A (Mergers & Acquisitions), have immediate and lasting ripple effects on content creation contracts. Deals like this often trigger change-of-control provisions buried in existing talent and production agreements. If you have an active deal with Warner Bros. or HBO Max, your contract terms could be subject to renegotiation or even termination under new ownership, forcing you to restructure royalty formulas and IP entitlements.

WORKING CONDITIONS:

Major players and industry guilds have forcefully condemned the deal, arguing that this consolidation is precisely what antitrust laws were designed to prevent.

The Writers Guild of America (WGA) has protested the deal, stating that the outcome would eliminate jobs, push down wages, worsen conditions for entertainment workers, and reduce the volume and diversity of content.
The Directors Guild of America (DGA) and the Producers Guild of America (PGA) have also expressed significant concerns and are seeking meetings with Netflix to understand the impact on their members' livelihoods and creative rights.
The Producers Guild of America (PGA) articulated this issue by stating the deal must pass a test in order to receive regulatory approval:

(i) it must protect producers' livelihoods, theatrical distribution, and

(ii) foster creativity, promote opportunities for workers and artists, empower consumers with choices, and uphold freedom of speech.

This test explicitly links the economic outcome of merger control to the fundamental constitutional value of free expression.

REDUCED THEATRICAL DISTRIBUTION:

Theatre owners, a collective industry body, view the deal as an "unprecedented threat". They fear Netflix's historic preference for streaming releases will remove WBD’s Box Office presence from the equation, thereby reducing the number of films released for broad theatrical exhibition, harming their livelihoods.

4. The Canadian Impact: Bill C-11 and ACTRA

For Canadian creators in Ontario and across Canada, the timing of this merger is critical, as we navigate the implementation of the Online Streaming Act (formerly Bill C-11).

CENTRALIZATION OF DECISION-MAKING:

If Netflix swallows WBD's Canadian operations, we risk further centralization of decision-making, giving the consolidated giant significantly more bargaining power to push back against our cultural obligations.

SERVICE VS. IP:

Organizations like ACTRA (the union representing Canadian performers) fight to ensure foreign streamers don't just treat Canada as a “service production" hub (cheap locations and crews) but actually invest in Canadian IP and stories. This merger makes that fight significantly harder.

A WARNING FOR CANADA:

While the specific antitrust battle is US-focused, Canada's Competition Bureau has its own guidelines for reviewing significant acquisitions. Any global consolidation that reduces the number of buyers for Canadian-produced content inevitably impacts the Canadian creator economy.

THE VALUE OF

OWNERSHIP

This merger signals the end of the Growth Era of streaming. We are entering an era of consolidation, cost-cutting, and Utility dominance.

For the independent creator, the lesson is stark: Your leverage lies in ownership.

As seen in the Taylor Swift story, IP is treated as a fungible, revenue-generating asset in these deals. The entire value of the WBD deal hinges on the control of its content libraries and contracts.

This underscores the indispensable lesson that every creator must learn: own your IP. If you sign away broad licenses or outright ownership, you are giving away the very asset that will be bought, sold, and leveraged for billions by corporate giants.

Your creative work is the multi-billion-dollar asset these companies are trading. So, be proactive. Do not sign away your IP "in perpetuity".

*** * ***

Actionable Strategy for Today’s Creators

While the immediate anti-trust battle is U.S.-focused, the reduction in global buyers inevitably impacts the Canadian creator economy. Canadian director Sasha Leigh Henry noted that this consolidation creates concern that there will be fewer options and fewer voices coming from different perspectives.

The only defence against this kind of market consolidation is a proactive legal and business strategy:

AUDIT YOUR IP RIGHTS: Know exactly what IP you own and what you have licensed or transferred in every contract you've signed. The value of your business is tied to the strength and enforceability of your rights.
CONTRACT PRECISION: Never accept "in perpetuity," "all media now known or later developed," or overly broad usage rights for a single, fixed fee. Negotiate for limited timeframes and specific, defined media uses.
DEMAND IP DILIGENCE: If you are a founder or an established creator in an M&A deal, the buyer's legal team will perform IP diligence. You need your own counsel to ensure your IP is valued correctly and protected post-sale.
THE DIVERGE ADVANTAGE: In a market facing monopsony and competition law challenges, your only defence is professional, legally-led representation. Diverge audits your contracts to block IP lockouts, secure revenue, and ensure your rights survive a corporate takeover. When billions hang in the balance, you need an advisor bound by fiduciary duty AKA ethically and legally obligated to act only in your best interest. This is the Diverge Advantage against traditional representation (where loyalties can be divided).

*** * ***

Your creative work is your leverage.

In a world of consolidating giants, legal foresight is your only protection against becoming a small, easily absorbed asset.

Disclaimer: Not legal advice. The Netflix/Warner Bros. acquisition discussed is a developing story, and regulatory outcomes are subject to change.

Need help understanding the intricate contracts that govern your creative work, or want to build a strategy for IP protection? Diverge Legal is here to help.

If you’re ready for representation that understands the difference between a data point and your dream, contact Diverge today.

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