On February 3, 2026, Netflix Co-CEO Ted Sarandos sat in Room 226 of the Dirksen Senate Office Building and told the Senate Antitrust Subcommittee that buying Warner Bros. Discovery for $82.7 billion was good for competition.
The statement contradicts the structural reality of the merger. While Sarandos accurately cited the all-cash terms at $27.75 per share and the lack of immediate price hikes, the long-term implications mirror a monopolistic consolidation not seen in nearly a century.
For the last decade, the entertainment industry has navigated the “Streaming Wars.” That conflict has effectively ended with Netflix as the decisive victor. The consolidation of Warner Bros. Discovery—and with it, HBO—grants the ability to rebuild the exact same monopolistic “Studio System” structure that the Supreme Court dismantled in the 1948 United States v. Paramount Pictures decision.
The newly formed entity will not merely be a large media conglomerate. It is poised to become the single gatekeeper for premium video entertainment, controlling roughly 40% of the global market. Screenwriters, directors, and viewers who value mid-budget cinema face a landscape where independent options are structurally eliminated.
The Resurrection of Louis B. Mayer
To understand the stakes of 2026, historical context from 1948 is necessary.
Before the landmark United States v. Paramount Pictures decision, Hollywood operated under the “Studio System.” Five major studios (Paramount, MGM, Warner Bros, Fox, RKO) owned the entire supply chain vertically. They owned the cameras, they owned the actors (under restrictive seven-year contracts), and crucially, they owned the movie theaters.
Independent filmmakers could not screen their movies because the studios locked them out of the exhibition layer. The studios practiced “Block Booking,” a coercive tactic forcing theaters to purchase blocks of lower-quality films to gain access to a single hit. It was a closed economic loop. The government correctly identified this as an illegal trust and forced the divestiture of theater chains.
Fast forward 78 years. Netflix now occupies all three tiers of this vertical integration.
- Production: It is a studio producing original content.
- Distribution: It is a global platform.
- Exhibition: It is the “theater” (the app on the Smart TV).
By acquiring Warner Bros. Discovery, Netflix closes the loop. The company secures ownership of the most prestigious content library in history (HBO) and the delivery mechanism to the living room. There is no independent theater chain to sell a movie to. The recommendation algorithm acts as the theater manager, and its incentives favor mass-market efficiency over diverse programming.
The Monopsony Trap: Why Labor Loses
Press coverage typically focuses on “Monopoly” (harm to consumers). The more acute danger in this transaction is “Monopsony” (harm to workers).
A monopoly exists when there is only one seller. A monopsony exists when there is only one buyer.
In 2019, a writer pitching a prestige drama script had options. If Netflix passed, HBO was a viable alternative. If HBO passed, FX, AMC, or Apple were potential buyers.
In 2026, if the combined Netflix-HBO entity passes on a script, the project likely ceases to exist.
During the Senate hearing, Sarandos emphasized “tripling jobs” compared to Paramount’s slash-and-burn approach. This framing ignores the power dynamic. When one entity controls 40% of the buying power for premium content, it dictates the price. The “Backend Points” (the royalties that sustain actors and writers during gaps in work) are rapidly disappearing, replaced by flat fees for “Buyouts.”
The industry is witnessing the “Uber-ization” of Hollywood creative labor: high volume, low security, and zero ownership of the underlying IP.
The Death of the “Mid-Budget” Movie
The 1948 break-up led directly to the “New Hollywood” of the 1970s—an era defined by directors like Scorsese, Coppola, and Spielberg. This occurred because independent theaters were desperate for product that stood out from the studio assembly line.
The Netflix algorithm optimizes for “Retention Time,” not artistic merit. Data analysis shows it favors two distinct categories:
- Mass Appeal Spectacles: $200 million action franchises (e.g., Red Notice).
- Ultra-Cheap Reality TV: Unscripted formats like Is It Cake? that cost pennies to produce.
The casualty is the “middle.” The $40 million legal thriller, the character-driven romantic comedy, and the experimental sci-fi film unconnected to a Marvel universe are becoming statistical anomalies.
Warner Bros. was the last bastion of the “Director-Driven” studio, financing risky projects like Dune and Barbie. Under the Netflix efficiency model, such variance is an inefficiency to be eliminated. While total content spend may not decrease immediately, the diversity of that spend is collapsing into a barbell shape: massive spectacles on one end and cheap filler on the other.
The Gray Area: The “Boring” Truth
If the consolidation is so damaging, why is it proceeding?
The “Boring Hypothesis” is financial gravity. Warner Bros. Discovery was burdened by $40 billion of debt from the previous Discovery-Warner merger. Paramount faces significant cash flow challenges. The traditional cable bundle that funded these companies for 40 years has collapsed, and streaming profits have not scaled sufficiently to replace that lost revenue.
Netflix is acquiring HBO not to destroy it, but to stabilize it.
Wall Street favors this deal because it imposes order on a chaotic industry. It halts the “race to the bottom” on subscription prices (analysts expect the standard $17/month plan to reach $25 by year-end). It transforms a volatile, cash-burning creative industry into a predictable, optimized utility.
However, this stability comes at a cost. The fierce competition that drove the “Peak TV” era was fueled by unsustainable spending. As that spending normalizes, the volume and risk-tolerance of content will inevitably decline.
The Structural Threat to Independent Film
The most overlooked aspect of this merger is its impact on the independent film ecosystem.
Historically, independent films relied on a tiered distribution model: a theatrical run, followed by a Pay-1 TV deal (usually HBO or Showtime), followed by home video. The Pay-1 deal was the financial anchor that allowed independent financiers to greenlight risky movies.
If Netflix owns HBO, that Pay-1 market evaporates. Netflix rarely buys independent films for the prices HBO used to pay. Instead, they license them cheaply or ignore them entirely. Without that guaranteed backend revenue, the financing model for independent film collapses.
This is not speculation; it is math. The pre-sales model that funds movies at Cannes and Sundance depends on estimates of future television revenue. If the largest buyer (HBO) is removed from the auction, the estimates fall, and the loans are not issued.
Conclusion: The Algorithm is the New Mogul
In 1948, the Supreme Court ruled that cinema was too important to be treated like steel or oil. The court forced friction into the system to protect independence and market access.
For the last decade, the market has removed that friction in the name of “Convenience.” Consumers wanted everything, all at once, on one app.
The market has delivered that convenience in the form of a restored Studio System. But instead of a studio mogul deciding what audiences watch, it is a black box of code optimizing for engagement metrics.
The Senate has a historical imperative to scrutinize this deal. Efficiency is often the enemy of art. When one company owns the camera, the star, and the theater, the cultural landscape narrows. The “Golden Age of Television” was built on competition. Its end is being built on consolidation.
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