For months, the assumption in both political and media circles was that the Netflix-Warner Bros-Paramount throuple’s argument would end in a bidding war. Paramount made an offer for Warner Bros. Netflix retained the contractual right to match. Paramount nudged its bid up by another dollar per share this week. Netflix had every legal right — and more than enough cash — to respond.

But in the end, Netflix backed down, in a victory for antitrust policy that will be studied and cited for years, perhaps decades, to come.

Netflix has held more than $9 billion in cash for three consecutive years, so none of its retreat was about balance sheet capacity. Indeed, it was about a regulatory reality set in place by figures like the recently ousted Gail Slater, who pledged a Goldilocks approach to antitrust.

William Kovacic, former FTC chairman and antitrust guru, recently noted: “One of Gail Slater’s frequently recited mantras is, we are not Biden, we are not Bush. And she points to Bush and says, not active enough. Biden hyperactive.”

Under the Justice Department’s long-standing Philadelphia National Bank framework, a 30 percent market share marks the point at which serious antitrust concerns begin. A Netflix acquisition of HBO Max (owned by Warner Bros) would have produced a combined streaming entity controlling more than 45 percent of the market, even after accounting for subscriber overlap. Number one buying number three.

That represents a form of structural dominance that puts consumers not just on the back foot, but indeed on their knees.

Conversely, Paramount’s purported acquisition of Warner Bros presents an entirely different configuration. Paramount sits in fifth place in streaming and is seeking to combine with third. Ignoring duplicate subscribers, a merged Paramount–HBO platform would total roughly 220 million subscribers — still about 100 million fewer than Netflix alone. The leader remains Netflix. The market does not tip into one-firm command.

That distinction explains why Paramount was able to certify compliance with the DOJ’s standard request for information. Its path to clearance is far more straightforward than Netflix’s. Reports that the Justice Department was already examining aspects of Netflix’s market conduct only underscored the risk.

The bottom line is that Netflix bowed out because it understood it would not clear antitrust scrutiny.

This is what effective antitrust deterrence looks like in practice. Regulators did not even need to block the transaction. The mere prospect of rejection was enough to keep Netflix’s woke talons off brands like Superman, Harry Potter, Friends, Game of Thrones, and more, as Joel Thayer explained to me during this interview.

What emerges now is not market contraction but market recalibration. A Netflix–Warner combination would have entrenched the dominant streaming platform. A Paramount–Warner combination creates something else: two subordinate competitors combining to form a more viable challenger capable of standing alongside the top tier. The numbers bear this out beyond streaming.

In the theatrical production space, Netflix does not even operate a traditional movie studio. Paramount ranked fifth among major studios in 2024; Warner ranked third. Combined, Paramount and Warner would control roughly 24 percent of the box office market — broadly in line with Disney at 21 percent and Universal at 20 percent. That is competitive parity among established firms, not the creation of an unassailable behemoth.

Now, consumers stand to gain from a streaming market that features genuine rivalry. Netflix has raised subscription prices repeatedly during its period of dominance. A strengthened competitor with comparable content depth introduces discipline. Price increases become strategic decisions rather than assumptions.

Creative professionals can now gain leverage because when multiple buyers compete for compelling content, bargaining dynamics shift. Award-winning director James Cameron publicly argued for a more competitive landscape, fully aware that Netflix might not appreciate the sentiment. Within days, Netflix CEO Ted Sarandos responded by calling Cameron “disingenuous” and “completely untrue.” The sensitivity is quite revealing.

Warner has struggled as a standalone entity for years and was unlikely to reverse course organically. A buyer appears inevitable.

The policy question was whether regulators would permit the dominant streaming platform to swallow it whole or allow two mid-tier competitors to combine into a viable rival.

They made the correct calculation by making the first option implausible.

For once, the guardrails held, and the market adjusted accordingly. The ball is now in Paramount’s court.