No Mercy / No Malice: The Streaming Wars and Affordability

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Speaker 4 I'm Scott Galloway, and this is No Mercy, No Malice. The fate of Warner Brothers is unclear.
What's clear is that consolidation and concentration are bad for consumers and affordability.

Speaker 4 Streaming wars and affordability, as read by George Hahn.

Speaker 4 Netflix's $83 billion deal to buy most of Warner Bros. would unite Stranger Things and K-pop Demon Hunters with Game of Thrones and the White Lotus.
creating a streaming powerhouse.

Speaker 4 With Netflix's Ted Sarandos and Greg Peters at the helm, the combined company would also be led by the smartest team in the entertainment industry. I know Ted and, like most who meet him, admire him.

Speaker 4 I don't know David Ellison, and I find kids of billionaires trying to reshape the culture with a 12-figure jackhammer a bit gross.

Speaker 4 But the paramount boss, who's trying to thwart Netflix with a hostile $108 billion bid for Warner Bros., is right.

Speaker 4 A Netflix takeover would likely be bad news for consumers at a time when many are facing an affordability crunch.

Speaker 4 The fight over the century-old studio is also a great example of the cronyism and head-up-your-ass economics of the Trump administration that adds fuel to the crisis.

Speaker 4 Ellison argued on CNBC that allowing two of the biggest streaming services to join forces is anti-competitive.

Speaker 4 As the son of Larry Ellison, the world's third richest person, Paramount CEO has close ties to Donald Trump and access to a seemingly bottomless pool of capital.

Speaker 4 It's obnoxious listening to a guy raised in a gravity-free financial environment warning others about the dangers of market distortion.

Speaker 4 After giving that interview, did he go into the kitchen of the restaurant and lecture the line cooks on the dignity of minimum wage?

Speaker 4 I digress.

Speaker 4 After giving the elder Ellison a significant role in his plan to transfer TikTok's U.S.

Speaker 4 operations to a group of American investors, Trump is pledging to get involved in the regulatory fate of a Warner Brothers takeover.

Speaker 4 This is straight-up socialism, the state controlling the means of production.

Speaker 4 Everyone knows we're sliding into a stew of autocracy kleptocracy.

Speaker 4 So Sarandos also wooed Trump in the lead-up to announcing his agreement on December 5th, securing a secret White House meeting with the president.

Speaker 4 But before unveiling his rival offer two days later, Ellison reminded his adversary who has the political edge. The Silicon Valley Scion was spotted beside Trump at a ceremony in D.C.

Speaker 4 Who the president or podcasters believe is the rightful owner shouldn't matter. It's simple.
It should be whoever shows up with the biggest check and passes regulatory reviews.

Speaker 4 Concentration of power in streaming might corrupt the market, similar to the corruption the country endures when a few people can reshape media, tech, and Washington. Anyway, back to streaming.

Speaker 4 With more than 300 million subscribers, Netflix already has a leading position. Netflix, Amazon Prime, and Disney control over 60% of the market.
Acquiring Warner Bros.

Speaker 4 would give it even more power with one of the largest libraries of premium scripted content and some of the most valuable entertainment franchises.

Speaker 4 Combining HBO, the gold standard of television, with Netflix, the streaming superstore, is like fusing LVMH and Walmart.

Speaker 4 If Netflix captures HBO Max, the streaming war, ad-free original content, is

Speaker 4 over.

Speaker 4 The upshot, despite Netflix's assurances that the combo will create greater value for consumers, is fewer choices. At some point, as concentration intensifies, all the company's stocks will fall.

Speaker 4 as there are fewer people who can afford to buy their stuff.

Speaker 4 This trend is well underway, with the top 10% already accounting for 50% of consumer spending, making the economy more fragile. One-tenth of the population can crash the train.

Speaker 4 A Paramount deal also raises competition concerns, given the two companies have rival film studios with theatrical releases and overlapping streaming services.

Speaker 4 But there's a reason Paramount would probably face an easier regulatory regulatory path, and that's not just the support it would receive from Trump. It boils down to market share.

Speaker 4 Streaming prices are climbing, along with the cost of groceries, gas, and housing, as the industry consolidates. The average subscription price for the top 10 U.S.
platforms has risen 12%

Speaker 4 this year, far outpacing inflation, following double-digit increases since 2022.

Speaker 4 U.S. households spend an average of $70 a month on streaming services, a significant sum for people whose grocery bills have climbed 30% over the past five years.

Speaker 4 The companies say they have to raise prices to pay for the premium content they provide. But what the increases really signal is a transfer of capital from consumers and labor to shareholders.

Speaker 4 Adding the studio and streaming assets of Warner Bros. would give Netflix even more leverage.

Speaker 4 If Netflix wins, the most critical question will be whether it's competing with premium streaming platforms or virtually all digital video content vying for attention.

Speaker 4 Netflix isn't nearly as dominant if you factor in Alphabet's YouTube and ByteDance's TikTok, as Kara Swisher, my pivot co-host, points out. But regulators should adopt the narrower market definition.

Speaker 4 Otherwise, it's akin to chicken producers defending their control of the market by suggesting their competition extends to cattle ranchers and pistachio farmers. Also,

Speaker 4 consolidation won't stop with Netflix or Paramount and Warner Bros.

Speaker 4 The deal will only put more pressure on rivals, including Comcast, to follow with their own transactions to scale their streaming platforms.

Speaker 4 Streaming subscriptions are just one part of a wider debate. Everyone from Donald Trump to New York Mayor-elect Zoron Mamdani is talking about affordability.

Speaker 4 However, the country is long on indignation and short on ideas or programs to actually bring prices down.

Speaker 4 The president has insisted that tariffs will boost the economy when in fact they're pushing prices higher and fueling concerns over the cost of living.

Speaker 4 Trump, who once vowed to make America affordable again, now calls concerns about increasing prices a hoax perpetrated by the Democrats. Americans know this is bullshit.

Speaker 4 The use of buy now pay later services is rising to record levels this holiday season.

Speaker 4 Yet they're also not buying the message from Democrats who highlight the need to curb health, housing, food, and energy costs, but resort to stoking outrage and throwing money at people versus implementing concrete structural change.

Speaker 4 Here are four ideas that aren't sexy, i.e., they will take work.

Speaker 4 Number one, build baby build.

Speaker 4 Housing should be at the top of the agenda, as it's the primary culprit driving the lack of affordability. Half of renter households in the U.S.

Speaker 4 are cost-burdened, meaning they spend 30% or more of their income on shelter.

Speaker 4 Higher expenses curb labor mobility and productivity, deter families from seeking medical care, contribute to anxiety and depression, and fuel homelessness.

Speaker 4 While rent control is tempting, it suppresses development longer term, only adding to the problem.

Speaker 4 Higher costs of labor, building materials, and regulatory compliance exacerbate the housing shortfall.

Speaker 4 We should have tax credits to unleash private development to build 8 million to 10 million homes in the next decade.

Speaker 4 Yimby laws, yes, in my backyard, and cost-effective building are also part of the solution.

Speaker 4 Manufactured homes, built in factories and finished on-site, are 35% to 73% cheaper than homes built entirely on location.

Speaker 4 Number two,

Speaker 4 nationalize medicine.

Speaker 4 The U.S. healthcare system is broken for the bottom 90%.

Speaker 4 Many Americans are one medical expense away from sliding into debt.

Speaker 4 More than 30 million citizens, especially black and Hispanic adults, borrowed money to pay for health care last year, accumulating $74 billion in medical debt. Enough.

Speaker 4 Let's take Medicare and lower eligibility by two years every year for the next decade.

Speaker 4 That would bring the age of eligibility to 45 in 10 years.

Speaker 4 What is that called?

Speaker 4 Nationalized medicine.

Speaker 4 We can help younger people in other ways. They aren't the ones accounting for the vast majority of surging health costs.

Speaker 4 Number three,

Speaker 4 impose tuition caps.

Speaker 4 We also need tuition caps based on income. As a freshman at UCLA, I benefited from an annual tuition of just $1,350

Speaker 4 and an admissions rate of 74%.

Speaker 4 A degree from a prestigious school opens doors and potentially quadruples the income a person can expect to make. But the ROI has declined as costs have ballooned.

Speaker 4 If your family is middle class, the tuition should reflect that.

Speaker 4 Colby last year announced a program to cap the cost of tuition, room, and board at $10,000 a year for families who earn up to $100,000

Speaker 4 and $15,000 a year for those with incomes ranging from $100,000 to $150,000.

Speaker 4 That compares with a net price of of as much as $53,000 a year.

Speaker 4 If universities with endowments greater than $1 billion aren't increasing freshman enrollment faster than the population is growing, they should lose their tax-free status.

Speaker 4 They've decided they're Birkenbags, not public servants.

Speaker 4 And number four,

Speaker 4 trust busting.

Speaker 4 Concentration of power harms consumers and workers with the benefits flowing to shareholders. It's up to regulators to break up or block harmful oligopolies that stifle competition.

Speaker 4 The nation's regulators are supposed to enforce antitrust law based on guidelines about market share and other standards, but giving the president the ability to engage in post hoc manipulation undermines the rule of law, as Herbert Hovenkamp, an antitrust scholar, told the New York Times.

Speaker 4 The pursuit of Warner Brothers is more than just a transaction.

Speaker 4 It's a microcosm of a wider emergency.

Speaker 4 We can't complain about surging costs while ignoring the factors behind them.

Speaker 4 We need to have an adult conversation, saying no to harmful deals and yes to policies that spur competition and rein in health, housing, and and education costs.

Speaker 4 It's telling that the loudest objection to this nascent monopoly comes from a Hollywood mogul who's never lived outside one.

Speaker 4 But we should listen to him.

Speaker 4 Consolidation is a tax on the young and the poor, levied to protect the old and the rich.

Speaker 4 Affordability begins with a simple idea:

Speaker 4 more firms, more competition,

Speaker 4 more oxygen.

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