Senator Mike Lee, chair of the Senate Judiciary Subcommittee on Competition Policy, Antitrust and Consumer Rights, sent a February 10 letter to the Federal Trade Commission expressing concern that Netflix’s proposed acquisition of Warner Bros. Discovery could harm competition even if the deal were never completed. Lee cites internal Warner documents estimating the combined entity would control over 40% of the U.S. streaming market by 2027 and points to potential foreclosure of rival services through exclusive licensing of high-value franchises such as Harry Potter and Game of Thrones. He urges the FTC to evaluate whether Netflix’s recent content licensing agreements—signed in lock-step with the Warner announcement—already create barriers for smaller competitors.

In its January 20 fourth-quarter release, Netflix reported global membership topping 325 million, up 8% year-over-year, surpassing both Amazon Prime Video and Disney+. Ad-tier revenue more than doubled in 2025 to $1.5 billion, representing 3.3% of total revenue, and management forecasts ad revenues will double again in 2026. Gross margin expanded to 48.5% for the quarter, driven by improving content amortization efficiencies and higher-margin advertising sales. Free cash flow turned positive for the first time in two years, at $1.2 billion, reflecting disciplined content spending and subscriber growth in key European and Latin American markets.

Netflix’s proposed $82 billion acquisition of Warner Bros. Discovery promises immediate scale gains—combining Warner’s library of over 2,000 titles with Netflix’s original slate—and could add $500 million in incremental ad inventory by 2027. However, regulatory approval is uncertain given DOJ pre-merger filings citing potential market concentration. On valuation, Netflix traded at a forward P/E of 26.6 based on consensus 2026 EPS of $3.12, implying a 24% upside to maintain its current P/E of 33. Management’s guidance for double-digit revenue growth and continued margin expansion supports bullish scenarios, while regulatory delays or divestiture requirements would introduce downside volatility for investors.