Soon we’re all going to be living in the Netflix universe

Even by the standards of Hollywood, it was possibly a little over the top. According to the veteran actress Jane Fonda, Netflix’s $82 billion takeover of Warner Brothers is not only a “catastrophic business deal”, but it will also “destroy our creative industry” and could even “trigger a constitutional crisis”. In reality, the constitution of the United States has survived far graver threats over the last two hundred years than the merger of the producer of Stranger Things with the company that makes the Harry Potter films. Even so, the critics of the mega deal have a point. With this acquisition, Netflix will become far too powerful.There is no question that it is a huge deal. After seeing off its rivals with a knock-out bid, Netflix will take control of a company that owns the Harry Potter and Batman franchises, classics from Casablanca to Friends, as well as HBO Max, and of course its production arm, securing a regular flow of high-quality content. It will make the company by far the dominant force both in Hollywood, and the global entertainment industry. Even at such a hefty price tag, it is certainly worth the money it will have to pay. Streaming is a classic example of what the MBA text books refer to as a “winner takes all” business. The dynamics of the industry mean that one huge dominant player emerges. It has all the best shows, so everyone subscribes, which gives it a lot more money to play with, meaning it can roll out more and more blockbuster productions. We have seen that with Google in web search, with Microsoft in operating systems, with Apple in phones, and very soon we will see it with Netflix in entertainment. It will crush smaller rivals, buy up any emerging talent, and lock us all into its system. Music labels, sports leagues, or publishing houses? With the money it will be making, there will be few limits to what Netflix can buy next. Very soon we will all be living in the extended Netflix universe. Here’s the important question, however. Should it be allowed to become that powerful? In fairness, Netflix is a brilliantly run business. It is not as insufferably woke as Disney, nor is it as partisan as Rupert Murdoch’s News Corporation. It isn’t interested in buying political power, or imposing its world view on anyone. Indeed, the furious criticism from the likes of Fonda, and much of the liberal Hollywood elite, is that it is not sufficiently biased to the left. All it wants is for us all to pay our subs every month, and keep watching the slightly mediocre Ben Stiller drama or Jennifer Anniston romcom the algorithm serves up every week. There is nothing very sinister about that. It keeps the 300 million subscribers around the world hooked to the service. And yet, at a certain point, surely any company becomes too powerful. With Warner Bros wrapped into the service, Netflix will become untouchable. The rival streamers, such as Disney, Paramount, or, bless them, the Britbox service offered by the BBC and ITV, will be left in the dust. Even Apple, with a market value of $4 trillion, or Amazon, with a value of $2.4 trillion, will struggle to keep up. The Netflix juggernaut will simply roll over them as it steams forward. That is hardly healthy. A vibrant market depends on lots of competition, with room for new players, plenty of choice for consumers, and lots of different employers for the creative talent. A monopoly is bad for everyone. Over time, the product will become bland, and the prices will be relentlessly pushed up. In reality, a single dominant entertainment conglomerate will prove a catastrophe for the actors and directors, and it will ultimately for the viewers as well. The Trump Administration faces a tough choice on this deal. It doesn’t have any arguments with Netflix, in the way it has had with much of Hollywood, and it will want to encourage what is unquestionably a great American success story. But the blunt truth is this. Netflix will become too powerful. It may have to be broken up one day – and it would save a lot of trouble to block the deal now.