The Case Against State Involvement in a Warner Bros. Deal
The threat to the modern media landscape isn’t Netflix or Paramount — it’s regulation that protects incumbents and strangles competition.
This article originally appeared in National Review Online on January 5, 2026.
The potential Netflix acquisition of Warner Bros. Discovery has been making headlines, with the streaming giant attempting to buy both its studio and digital assets, including HBO Max, at a deal valued at around $83 billion. In response, Paramount presented shareholders with a “hostile takeover” bid of $108 billion for the entire c
ompany, including cable networks like CNN that were not included in Netflix’s deal. Discussions among Warner Bros. shareholders over what to do are ongoing, with Paramount’s all-cash offer valuing the company at $30 per share, compared to Netflix’s offer of $27.75 per share involving a 16 percent equity “collar” to protect stockholders from price fluctuations.
No matter which suitor ends up acquiring Warner Bros. Discovery, there will almost certainly be heavy-handed government involvement in the deal and the imposition of conditions that will hurt the merger’s potential economic upside.
As free markets come under fire from the political right as well as the left, it has become fashionable in Washington to be suspicious of mergers that could reduce competition, thereby leading to higher prices, fewer options for consumers, and weaker incentives to innovate. In the media sector, it is argued that vertical integration — unified control of content’s production and distribution — risks creating barriers to entry for smaller studios or streaming platforms. This would allow dominant firms to dictate terms to filmmakers, theaters, or talent agencies. Critics also argue that large, oligopolistic media firms would be risk-averse, relying on existing franchises instead of backing new creators. Even if they do innovate, it may be more defensive or incremental relative to the disruptive creativity of newer entrants.
The problem with such criticisms is that, for the most part, they assume that the media market is static and unchanging. That is an assumption that overlooks how quickly the marketplace can change, an odd thing to disregard given how rapidly the rise of streaming services like Netflix disrupted traditional entertainment media. The same dynamism that restructured the entire media landscape over the course of 15 years can also uproot a large corporation’s market share, even after an acquisition that makes it appear “too big to fail.”
The Austrian political economist Joseph Schumpeter famously argued that one of the components of an effectively functioning capitalist system is capitalism as creative destruction, the process by which a new product or service — or even a whole way of business — can disrupt an entire industry based only on what best meets the consumer’s needs. It is a common phenomenon, as markets are reorganized through waves of disruption, old business models collapse, and new industrial configurations emerge. The rise of streaming and the associated decline of legacy television, cable, and moviegoing are the result of technological innovations that consumers preferred over their predecessors.
Mergers are typically the response to such market changes, not the cause of them. Preventing consolidation could freeze industries rather than allowing them to transform, while the strengthened market power or even “temporary monopoly” that mergers create can encourage innovation from challengers, not the reverse. As Schumpeter points out, “In capitalist reality as distinguished from its textbook picture, it is not the large firms that hamper progress. . . . On the contrary, they are the most powerful engine of progress . . . because they are in a position to finance innovation on a large scale and because they have something to lose: the gains from temporary monopoly.”
A firm like Netflix, boosted by the acquisition of a large studio’s assets, might be even better positioned to take risks, invest in expensive new formats, or adopt bold technological changes, such as real-time special effects, personalized content delivery, and new global distribution models. Moreover, if the merged firm becomes inefficient or lags, another wave of creative destruction will replace it. Before Netflix, remember, there was Blockbuster.
Schumpeter’s greatest fear was not the dominance of large firms, but the loss of entrepreneurial energy and cultural dynamism. Governments should thus worry less about firm size and more about whether market entry is open and free, something they can assist in by preventing regulatory capture. This is best achieved by maintaining a stable, limited rules-based regime, not a prescriptive thicket. Overregulation benefits larger firms by favoring companies with the best-placed lobbyists and raises the barrier to entry for smaller firms by increasing costs. Politicians claim to worry about corporate power, yet the greatest barriers to competition in the media sector (and in a wide variety of other industries) are caused not by markets but by regulation — broadcast licensing regimes, content mandates, spectrum rules, and other compliance costs that only larger firms can afford.
Critics may worry that a deal between Warner Bros. and another big media company will reduce competition and concentrate market power, but pure market power cannot, in the end, withstand the demands of the consumer and disruptive innovation. The reality is that large firms are often necessary to fund technological innovation, temporary monopoly power rewards entrepreneurial breakthroughs, and consolidation is part of capitalism’s natural rhythm of creative destruction. The true test of whether the merged entity thrives is whether it continues to innovate or ossifies instead.
If we want a dynamic media landscape, we should fear bureaucratic paralysis more than corporate scale. The true threat to consumers is not Netflix or Paramount; it’s a regulatory state that wants to freeze the economy in place.