And continued focus is extraordinary, and I'm grateful to serve in between both of these individuals and just feel very grateful today. I want to thank Mr. Sarandos and Mr. Campbell for coming here. It is not fun often to testify before Congress. Sometimes I wonder if it ranks higher than a visit to the proctologist or to the dentist. I'm not sure. But it means a lot that you all are here.
Proctologists and dentists everywhere are outraged by that statement.
I am sure I will get letters. I'm sure I will get letters. We're going to examine a lot of the specific facts of this proposed Warner Brothers-Netflix merger, but I do want to say very specifically that I believe that this sale of Warner Brothers to any competitor could have serious consequences for consumers and for the television and film industry. And the absence of not having Paramount Skydance here, who has made a hostile takeover, is frustrating. I invited David Ellison, Chair and CEO of Paramount Skydance, to appear today. Mr. Ellison declined, stating that Paramount, quote, "does not believe it would be useful or helpful for them to participate as a witness because their offer had been rejected."
I'd like to just ask for unanimous consent for this letter to be submitted into the record. I do want to thank Mr. Ellison, though, for meeting with me, and I know other senators in person, to answer our questions. It was actually a very fruitful conversation. It's unfortunate it wasn't in public. Paramount is still a player here. They have made a hostile bid of $108 billion, and for that very reason, I again just want to state that their participation would be really relevant to this hearing, and it would, in fact, be helpful for Congress to question them about this effort, especially given the serious concerns that I have regarding President Trump's involvement in the deal and the allegations of political favoritism.
We're in an unprecedented time where we're seeing executive power being exercised in a way that Congress should be checking. We have seen allegations that Paramount has promised the president to make sweeping changes to CNN after Trump said that he thinks, quote, "the people that have run CNN for the last long period of time are a disgrace. I think that it's imperative that CNN be sold," end quote. Days after the Netflix-Warner Brothers deal was announced, President Trump purchased $2 million in stocks and bonds in both Netflix and Warner Brothers. I think it's outrageous for any senator, any House member, or for the president or vice president, for that matter, to be trading in individual stocks when they have extraordinary insider information and influence over policies that move corporate power.
This is again another example of the corruption that is cancerously attacking our democracy. President Trump is using government power to reward allies, punish perceived enemies, and enable private enrichment at rates we have not seen before. While ordinary Americans are left paying higher prices, consumers are suffering and money is siphoned off to the top, leaving families and workers worse off. And aside from the concerns of this administration's exploitation of antitrust enforcement, the acquisition of Warner Bros. Discovery by either Netflix or Paramount or any other competitor would result in concerning consolidation of a sector of our economy that has already been putting a squeeze on consumers and artists.
Let's be clear: the sale of Warner Brothers to either Netflix or Paramount would have a significant impact on tens of thousands of Americans that work in the entertainment industry and American consumers. I've been hearing from people throughout this industry: concerns, fears, worries, legitimate folks that don't have a political ax to grind, who are very concerned about the matters we're discussing today and how they're going to impact their lives. So, this is not an either/or situation. With either merger, another corporation will gain significant control over what we see, what we hear, and the news we consume.
The acquisition of Warner Bros. Discovery by either Netflix or Paramount or any other competitor would result in consolidation of a sector of our economy that is already seeing significant consolidation. It's something that we should be talking about, and we should be asking the serious questions. With either merger, another corporation will have that control, increased control over what we see, what we hear, and what news we consume.
Now, let's be clear. I was born in 1969. My father made me sit down and watch Star Trek and watch Nichelle Nichols, one of the first African-American women to star in a show like that. Made me watch movies like In the Heat of the Night. So much of our culture was shaped by extraordinary artists who showed diverse voices, who dreamed and saw a future that seemed almost impossible, that in fact there'd be a Black senator sitting right here right now as a ranking member of this kind of committee. Art matters. Art is vital. With a merger like this, it has real concerns about art, about culture, about the voices of Americans, about the moral imagination of a nation.
For years, workers, creators, and consumers have been told that consolidation of media and streaming would mean more choice, more unique stories, lower prices. I don't think we've seen that. What we have seen with each merger is higher subscription costs, fewer streaming options, shrinking creative opportunities. I've heard them from artists that I know personally. They speak of lower pay and growing instability for workers across the industry. Many voices that felt that just a decade ago they had chances to bring their art to life now worry that those options are dwindling.
Even now, pre-merger, a small number of streaming companies control a lot from content production to distribution and to the actual platforms through which consumers access entertainment. We are seeing a lot of vertical integration. We know Netflix's power. I am a subscriber. I watch Netflix with probably hours I don't want to confess here in an open hearing and put on the record, but it is the dominant streaming platform of my household as well as in our nation. And that's just domestically. It has an extraordinary global scale and reach worldwide. They have over 325 million consumers, with their closest competitor, Disney+, with half of that at 130 million subscribers worldwide.
Warner Brothers controls one of the most valuable and largest content libraries in the world, including HBO, Harry Potter, CNN, and for me, one of my favorite platforms is DC Comics. And the fact is that the Netflix-Warner Brothers transaction would consolidate the largest distribution platforms with one of the largest content producers, and that should raise questions that Americans should have answered.
I have concerns about Netflix getting more power over consumers and leaving fewer alternatives and streaming platforms. I have concerns about startups and competition and, of course, as I've already stated, about the impact on artists and artistry in our country. I am angry about our antitrust laws, which have been ignored by Democrats and Republicans in the White House. I believe that we are now seeing consolidation that is screwing Americans from our farms to pharma. We are in a crisis in America. Our antitrust laws are designed to ensure that independent studios, smaller streaming services, and new entrants are not shut out and left unable to compete with companies that control both content and distribution.
The concern that so many Americans have is not just about their jobs and the prices they're paying, but as my father, should he be alive right now, would be concerned about less movies and less original storytelling. We have such a vibrant entertainment industry. We have an entertainment industry that's the envy of the world and in fact shapes the world. I want to make sure that everything we're doing is protecting what is so profoundly American: freedom, the fact that workers are treated fairly, that consumers have choice, that competition exists.
I urge federal enforcers to review this merger fairly and without political bias, without a president bringing his personality and his political opportunism to bear. I think what the American people deserve is to see our laws, as conceived by previous generations, enforced justly and thoroughly. I look forward to hearing from the witnesses, and again I thank them for being here.
Thank you, Ranking Member Booker, and what you offered will be admitted to the record without objection. The Senate Antitrust Subcommittee is, of course, a subcommittee of the Senate Judiciary Committee. We're grateful to have the chairman of the full Senate Judiciary Committee, Senator Grassley, here with us, and we'll now turn to him for his opening statement.
Thank you. Every seat in this hearing room is filled, which speaks to the great interest in this issue and it also speaks to maybe some of the controversy with the issue. This committee is interested in this because we want to make sure the Department of Justice and the Federal Trade Commission does its job of oversight on antitrust. So, I thank Chairman Lee and Ranking Member Booker for holding today's hearing on this proposed Netflix-Warner Brothers transaction.
We all know that America pioneered the film industry from Hollywood musicals to John Wayne westerns and the rise of modern television. Families still enjoy watching shows together, and it remains a very important part of our culture. But how people watch these productions has changed quickly. The proposed transaction this committee will focus on today would combine Netflix, a leading subscription streaming platform, with Warner Brothers studio assets and HBO Max, another streaming service. This proposed merger could affect prices and choices. Congress enacted the antitrust laws to protect competition and consumers. The Department of Justice and the Federal Trade Commission must apply those laws using a neutral, evidence-based approach, and Congress has an oversight role to play, and that's why we're here today.
Opponents warn that this deal could reduce head-to-head competition in subscription streaming and lead to higher prices or less innovation. Families in my state of Iowa and across the country already juggle multiple subscriptions, and they deserve real competition that keeps prices in check. Opponents also caution that a combined firm could limit access to popular content, limit licensing options, and make it harder for rivals to emerge and compete. Theater owners worry about shorter release windows and fewer wide theatrical releases, which could harm neighborhood cinemas, those they employ, and affect local economies.
Competition in this sector doesn't only depend on who has the most subscribers. High-quality franchises and libraries can shape competition by affecting what rivals are able to license and also affects what choices consumers ultimately have. Control of both a large platform and a deep library of films and shows can affect the bargaining power across the industry. So I say regulators ought to examine those dynamics very carefully. The companies will of course argue this transaction will improve quality, expand distribution, and create efficiencies that help them invest more in content. Those claims deserve fair scrutiny. Any claimed benefit must result from the merger itself, be verifiable, and likely make content available to more families.
Further and importantly, merger review shouldn't be used as a strategy to keep a company from moving forward for years by limiting its ability to pursue lawful alternatives while market conditions continue to change. So, I encourage our antitrust regulators to carefully scrutinize this transaction to ensure that competition is not undermined and to make sure that consumers are protected. So, I thank all the witnesses today for the testimony, and I look forward to the discussion. Thank you, Mr. Chairman.
Thanks so much, Mr. Chairman. Ranking Member Durbin, the ranking member on the Judiciary Committee, has a conflict and will be here later, so we'll be able to hear from him in due course when he arrives. Now, I'm going to introduce our two witnesses for today. We've got Mr. Ted Sarandos, who's the co-CEO of Netflix, and we've got Mr. Bruce Campbell, the Chief Revenue and Strategy Officer at Warner Bros. Discovery.
If the two witnesses will please rise and raise your right hand to be sworn in. Do you swear or affirm that the testimony you're about to give to the subcommittee will be the truth, the whole truth, and nothing but the truth, so help you God?
Thank you. Let the record reflect that all witnesses answered in the affirmative, and thanks again for being here today. We'll now hear your opening statements. Mr. Sarandos, we'll start with you. Please begin with your opening statement.
Thank you, Chairman Lee, Ranking Member Booker, members of the subcommittee. Really my honor to be here today. A combined Netflix and Warner Brothers will strengthen the American entertainment industry, preserve choice and value for consumers, and create opportunities for creators. I'm happy to answer all the questions about this deal. I thought it might be a little helpful to spend a few minutes to talk a bit about myself and about the company.
I grew up in Phoenix, Arizona. I was a son of a union electrician and a stay-at-home mom. They were too young to have five kids, but they did, and the house was crazy. So, I found a lot of comfort in front of screens, either ducking into the theater to get out of the Arizona heat or parking myself in front of a TV, which I did for an embarrassing amount of time. As a teenager, one of my first jobs was working in a local video store, and it was behind that counter that I learned so much about the importance of stories. I watched people roam around the store reading the backs of boxes, desperately asking strangers for reviews, trying to figure out what to watch. And I figured out that I had a pretty good memory for these movies and these titles and these directors, and I could help people find movies they otherwise would have missed, and it felt great to help them.
Home entertainment and the video store gave consumers value, choice, and control, but you had to do the distribution by yourself. You had to drive back and forth to the store. That experience started a chain of events for me that led me to Netflix, which at the time had a couple hundred employees, and was stuffing envelopes and using the U.S. mail to send DVDs around the country. It solved the distribution burden for consumers, broadened choice, and deepened value. No matter where you lived, you had access to nearly every TV show and every movie ever made, but you had to stand around waiting by the mailbox to rent them and return them.
So in the late 1990s, we saw how the internet was about to change entertainment as we know it today. So we built the technology to stream shows and films. Finally, fans had access to thousands of choices with total control of how and when to watch them, and at a tremendous value relative to TV.
Over a decade ago, we began our own programming like House of Cards and Stranger Things and The Crown, and movies like The Irishman and Marriage Story, Red Notice. Netflix productions have already created more than 155,000 American jobs, contributed $225 billion to the U.S. economy. We have filmed in all 50 states. While other media companies have been cutting back their content spending, we have increased ours.
If you're wondering if we're in this for the long haul, we're spending $1 billion right now to transform the old Fort Monmouth military base in New Jersey into a state-of-the-art production facility, revitalizing the local economy there. We also export American stories to the world. About the only place you won't find Netflix is China because they censor us and block us.
With Warner Brothers, we're going to create more economic growth and create more value for consumers. Warner Brothers' assets are very different from ours. They have a century of iconic IP, they have a world-class theatrical distribution business, and their studios produce and license TV shows to other networks and other streamers. We plan to operate those businesses largely as they are today. Netflix and Warner Brothers both have streaming services, but they are very complementary. In fact, 80% of HBO Max subscribers also subscribe to Netflix. We will give consumers more content for less.
So this is not a typical media merger where you end up with what's called the Noah's Ark problem, two of everything. We're buying a company that has assets that we do not, and we will keep investing in Warner Brothers. We will preserve one of the five major studios in Hollywood. We'll support theaters by releasing those movies with traditional 45-day windows, and we'll keep growing the American entertainment industry.
Let's be clear: TV and film have never been more competitive than they are today, and this deal will not change that. Our goal is to win the moment of truth. That's when Americans sit on their couch, pick up their remote control, and decide what to watch. That's where we compete. Today, consumers can easily choose between broadcast and cable like CBS and so many other networks, and streamers like Netflix, Disney+, HBO Max, Peacock, Paramount+, Tubi. And that also includes deep-pocketed tech companies who are trying to run away with the television business, companies like Google's YouTube, Amazon Prime Video, and Apple.
If you look at streaming alone, YouTube is the number one platform for viewing time. They have NFL football, they have an exclusive deal for the Oscars, they have a deal with the BBC to produce original programming. Some of their creators have bigger budgets than typical Hollywood television shows. YouTube is not just cat videos anymore. YouTube is TV.
This explains why Netflix, with all of our success, is only about 9% of TV viewing time in the U.S. With Warner Brothers, we'll be about 10%. This deal keeps one of the most iconic Hollywood studios healthy and competitive. Warner and Netflix together will create value for consumers, more opportunities for the creative community, and more American jobs. Thank you so much, and I do look forward to your questions.
Thank you, Mr. Sarandos. We'll turn now to Mr. Campbell.
Chairman Lee, Ranking Member Booker, and members of the subcommittee, thank you for the opportunity to appear before you today to discuss Warner Bros. Discovery and our decision to accept an offer to merge our studios and streaming business with Netflix while continuing our previously planned separation of our news and sports television networks into a new company, Discovery Global.
The iconic Warner Brothers studios have created some of the country's most recognizable television and film productions, from Citizen Kane to Minecraft. Just last month, our films received 30 Academy Award nominations, tying our own record for the most nominations set two decades ago. Discovery grew largely from the cable revolution of the 1980s, delivering a variety of content on cable networks such as the Discovery Channel, Animal Planet, Food Network, and HGTV. As the media landscape evolved over the past several decades, Discovery expanded its focus on digital media, delivering high-quality content across a range of platforms in addition to cable.
In 2022, Discovery merged with WarnerMedia, which was then being spun off from AT&T to create Warner Bros. Discovery. This history exemplifies the dramatic and dynamic changes we have experienced in the entertainment landscape over the past 100 years. Today, those changes are only accelerating as consumers access video content through numerous paid and ad-supported services. Consumers are experiencing a flood of options, including expanded social media platforms, digital and interactive games, and dozens of other entertainment options that compete for consumers' interest and attention.
This increasingly complicated media landscape has also resulted in considerable consumer frustration. The abundance of streaming options has made it more challenging for consumers to find the content they want. Advertising revenue is also less stable due to marketplace changes such as the move to on-demand streaming services and the rise of social media. At Warner Bros. Discovery, we have continuously sought to innovate and respond to the changing marketplace.
The 2022 merger gave us the ability to identify and align common business strategies. We found our alignment with our combined collection of sports, news, and other cable networks, and we saw a different collection of business opportunities with our studios and streaming business. We concluded that the company would be best served by separating the studios and streaming division from news, sports, and entertainment networks such as CNN, TBS, and HGTV.
Last summer, we announced plans to split into two companies: Warner Brothers and Discovery Global. The separation strategy was designed to position each company for long-term success by enhancing the strategic flexibility and sharpening the competitive focus of each entity. That decision prompted others in the industry to look anew at the company and our world-class collection of media franchises, brands, and properties. Last fall, we began to receive various outreach and offers, including most significantly from Paramount Skydance and Netflix.
Our board responded with a full review of the company's strategic options. Paramount Skydance, Netflix, and another company made a variety of offers that our board considered carefully and fully. Ultimately, after careful evaluation of the competing offers, our board unanimously determined that Netflix's offer was and remains the best opportunity for our company. In this proposal, we saw a compelling and unique opportunity to combine our existing separation strategy with the strengths of Netflix.
This vertical merger permits Netflix to expand its nascent movie and television production capabilities with the addition of the Warner Brothers studio assets. It gives our production capabilities access to Netflix's popular and consumer-friendly streaming and distribution platform. The merger also permits us to continue our planned separation of the global networks business, which we continue to believe is in the best long-term interest of the company. At the same time, the board continues to review and evaluate additional offers as they have been received to determine if any are superior to the Netflix offer, consistent with the board's obligations under law.
We are excited about the future of the combined company with Netflix, and we look forward to providing consumers with thrilling and entertaining content across all of our storied media properties for many years to come. Thank you, and I look forward to answering your questions.
Thank you so much. All right, we're now going to proceed to questions. Each senator will have five minutes to ask questions per round, and we'll alternate between Republicans and Democrats in the order of seniority, subject to the early bird rule. And as I mentioned earlier, Ranking Member Durbin has had a conflict, so when he arrives, we'll hope to hear his opening statement as well.
Mr. Sarandos, why don't we start with you if that's all right? Now, Netflix under current conditions, that is pre-merger status quo, Netflix produces and distributes its own scripted long-form full-length feature films, TV shows, documentaries, and series, correct?
Thank you, Senator Lee. Yes, that is correct. We do produce; it is a small portion of our entitlement.
It's part of your library.
Part of our library. Yes.
In fact, it plans to invest roughly $20 billion annually, separate and apart from the merger, in order to increase production, adding to its portfolio. Is that right?
Production and licensing. Correct, sir.
Yes. So if Netflix already produces content and plans to increase production, increase that investment on new production regardless of the merger, tell me why you want to make this acquisition with a competing content producer and a competing streaming platform.
Well, today Warner Brothers is both a competitor and a supplier. And our history—the reason I walked through that little history in the opening was that our history and my own professional history has been about adding more and more value to consumers, right?
And you do that by adding more choice?
And to do that it requires a great deal of volume of production and a volume of licensing, which we do today. I would say to—
By supplier, you're referring to the fact that through licensing arrangements, you already—
Correct, we license television series.
Well, you don't really air—you stream some of their content.
Correct, in movies in various windows, and in original series and licensed series as well.
Now, YouTube does not invest in producing original content, at least not in the same order of magnitude, not anywhere near what Netflix does. Is that right?
I can't speak to their specific economic impact. I know that they do not share the risk with the creators in doing that. They certainly step up, and we compete with them for things like that Academy Award deal, certainly for the NFL football games they recently did with the NFL game in Brazil. So yes, they do spend a great deal of money on content.
Now, YouTube does share advertising revenue with users, primarily I believe with users who do produce their own content. I assume you wouldn't disagree with that characterization. In other words, most of regular YouTube—let's differentiate for a minute YouTube from YouTube TV, which is a different thing altogether, that's a cable TV subscription. But YouTube, whether it's regular YouTube, streams free, doesn't require login credentials, doesn't require any subscription, unless you want to get YouTube Premium, which allows you to bypass the ads attached to the streaming device, in which case you've got to pay a fee and have subscriber login credentials for that.
They're not in the same business. They're not producing the same thing. Sure, they produce content, they share advertising revenue with creators, but these are more like sort of end-user creators producing shorter content, not full feature-length films typically. Isn't that right?
Well, Senator Lee, thank you. And I appreciate the complexity of all this, and I really can't speak to the inner workings of their model. It's not really that clear for folks; it's not that transparent.
But you would agree that YouTube content is free as a default matter and as a default matter it doesn't require either a paid subscription or login credentials, right?
Well, they are a subscription service that also has an ad-free and a subscription option. But it is the exact same content. And remember, when we talk about competition, we're competing for the same content, we're competing for the same viewers, we're competing often for the same ad dollars, and sometimes it's the exact same programming. And in the case of YouTube creators themselves, this past weekend, a YouTube creator had a movie called The Iron Lung that made $17 million at the box office.
Okay. And I don't doubt that they sometimes have feature-length films on there, but I'm struggling to fully understand what you're saying about how it's the exact same content. Is this content that is produced with, I don't know, the involvement of the Screenwriters Guild, content that is produced typically in a studio? Where does most of the content on regular YouTube come from? Again, regular YouTube, not to be confused with YouTube TV.
Correct. And I would point you to the comments of Neal, the CEO of YouTube, who just drove a point to the fact that YouTube creators are buying Hollywood studios and producing content at very competitive levels today, and he himself calls it TV. And I would say what people also miss is about 50% of the engagement on YouTube today happens in the living room on a TV, not on—I think people largely think of YouTube as a mobile device service, and it is 50% today and growing very fast on television.
And Netflix, a very small percentage of our content is ever watched on a mobile device; it's primarily on television. And on that screen, sir, it is a zero-sum game. So if you're watching YouTube, you're not watching HBO Max, you're not watching Netflix, you're not watching CBS. So that is why when we talk about competing for the moment of choice, competing for the viewers' attention, competing for the ad dollars, competing for the subscription dollars, it is all the same pool of content and all the same pool of viewers.
Look, my time's expired, but just very briefly before we go to the next senator, I want to make sure that I understand what you're saying. Sure, you're choosing between this and something else in the same sense that if I'm watching anything on a screen, whether it's a small screen or a big screen on the wall, I'm not watching something else or doing something else. It competes—the two compete in the same sense that they compete for what else one might do in one's day: reorganize one's sock drawer, think about the dormant Commerce Clause of the Constitution, or something else really fun like that. But it's not necessarily the same content.
In fact, YouTube, regular YouTube—not to be confused with YouTube TV, which is like a cable subscription thing—the lion's share, the overwhelming share of what one consumes on YouTube while watching YouTube is not full-length feature films written by screenwriters, produced by full studios, is it?
Are we okay on time for me to answer?
Well, yeah. Just answer quickly and then we'll go to Senator Schiff.
So, the exact splits of what type of programming is seen on YouTube is not—again, there's no transparent reporting of the viewing except for what shows up as a view count on YouTube, unlike the other counts. But I would tell you that it is increasingly the exact same programming. Meaning if you did not watch Saturday Night Live live on Saturday night, you probably watched it on Sunday morning on YouTube.
Okay. I may want to get back to that in a subsequent round. Senator Schiff.
Thank you, Chairman, and thank you gentlemen for being here. I appreciate the opportunity to hear from you. Mr. Campbell, let me start with you. A lot of my concerns, whether it's this merger or the proposed Paramount merger, have to do with impact on the workforce, impact on consumer choice and cost, among other things. Most of the media consolidation we have seen has not resulted in lower costs for consumers, but has resulted in a lot of layoffs and job losses. Do you think that will be the case here? That is, as a result of this merger, should we expect there'll be a round of layoffs, and how large? Should we expect consumer prices to go up? And if not, why should we think this will be the exception?
Thank you, Senator. No, I think the answer is no in both cases. One of the reasons that the Netflix offer appealed to us so much at Warner Bros. Discovery is, to Mr. Sarandos's point, that they don't have the type of film studio and film distribution infrastructure that we do today. They don't have the type of television studio that we do today. And we believe, based on our discussions with them in the negotiation process, that they're not only going to keep those operations intact; in fact, they're going to invest in those operations and invest in continued production, including on our lots in Burbank and elsewhere.
Similarly, on the consumer side, as Mr. Sarandos said, 80% of the HBO Max subscribers today already get Netflix. Now, with this transaction, Netflix will have the opportunity to offer those two services together at a discount. In addition, they'll have the opportunity to take our content and the HBO Max content and put it on the Netflix platform, which they've invested in over 20 years. It is the best technology platform available to consumers; it is superior to the platform we have. I think that too will be very pro-consumer.
And Mr. Sarandos, let me ask you about a couple of things, and I know we discussed part of this already, but—
Good to see you too. Share with us your thoughts on the impact on the theater industry. I happen to be one of those people who loves to go see movies in the theater and be surrounded by other people experiencing the same thing. There was a lot of concern that given the business model you've had to date, that theatrical exhibition will be cut down from 45 days or whatever is generally the industry standard down to a lot less, maybe 17. How long do you expect theatrical exhibition to be? How will that change or not change?
And also in terms of jobs, for many of the other studios, we've seen a growth since the pandemic in production at home. Netflix has been a bit of an outlier, though, where we've seen more production move overseas. Now, I know you're building a new facility in New Jersey, but what accounts for the greater production shift we see of Netflix to production overseas, and how do you think that'll be affected by this?
Well, thank you for asking, Senator, and let me work backwards on the question. We have some local-for-local production that happens overseas, meaning we have a service in South Korea and we produce some Korean content for the South Korean market in local language, local cast, local producers. That kind of producing happens separate. And aside from this, the vast majority of our content spend is produced in the United States.
There's been many studios, including Disney, just recently moved all the Avengers movies to London, by way of example. There's production incentives that draw production away. What I've been doing for the last several years is working with the state of New Jersey to create an incentive that competes with that UK incentive and brings production home. We're building the big studio in New Jersey for that. Since that incentive passed, we had 11 projects; seven of them were slated to go to the UK, pulled back into New Jersey. So, we are leading production in the United States and intend to keep growing it.
As Bruce said, the Warner Brothers slate of movies are still getting made. We're making them. We're going to operate Warner Brothers Studio largely as it is today, including releasing the movies in the theater with the traditional 45-day window. Now, I know I've earned some skepticism over the years on this because I was talking a lot about Netflix's business model, which was different from that. We didn't own a theatrical distributor before; we do now, and a great one. They did $4 billion in box office last year. So, that's all baked into the price of this company that we're looking at, and we want to keep that going and invest further in that. So, this will continue to push up those jobs that we talked about and push up that production primarily in the U.S. So this will keep the theater business intact. This will definitely keep production in the U.S. growing. I think what we've done in New Jersey is going to change the course of production in the U.S. completely, and I think other states will see the value of that as well.
Well, this gives me a perfect final opportunity to do a little self-promotion, Mr. Chairman. I have a bill that would provide a film tax credit analogous to what's been driving film production overseas that's offered in other countries, and would welcome anyone who would like to work together.
Greatly support you on that, Senator.
Thank you, Senator Schiff. Senator Hawley.
Thank you, Mr. Chairman, for calling this hearing. Welcome to the witnesses. Mr. Sarandos, if I could just start with you, let's continue to talk a little bit about the labor impacts here if we could. How many U.S.-based employees does Netflix currently employ, do you know?
Yeah. What about in production roles?
Well, over the last—it's a fluid number, but we've had about 155,000 production jobs.
On our originals at any given time. I don't know the number exactly. Sorry, I can follow back with your staff, though.
Warner Brothers, how many U.S. production jobs?
I don't have the exact number, but it would be, I would think, in the 8,000 range.
Okay. Here's my question. If this merger goes through, what's your projection about the amount of domestic production, say, two years from now? Is it going to be static? Is it going to decline?
Our production is going to increase.
Domestic production will increase. Most of our production is domestic, and it will continue to increase. We've recently forecast our content spend, independent of this deal, to grow to $20 billion. That's a combination of licensing and producing. Now, those licensing dollars compel production as well. That's why it's hard to get an exact number.
Let me show you the data here about US production recently. It's the red line here starting from 2021. You can see it is pretty much straight downward. There's been a massive shift in production, as I think Senator Schiff was alluding to just a moment ago—massive shift in production overseas to other foreign jurisdictions leaving the United States. So will you commit to increasing domestic United States production and domestic United States production jobs? Did I hear you just say you would?
Senator Hawley, absolutely. It's in our business plan; it's in our long-term operating DNA. I will point out, sir, respectfully, that chart is Los Angeles.
It is Los Angeles, but if you look at the data, it is reflective. This reflects all of US production. US production is not going up, right?
Some of these jobs have moved.
It's going down. These jobs have moved.
Yeah, but the overall numbers are going down. And this is exactly the concern of labor. And without objection, Mr. Chairman, I'd like to enter in a statement for the record from the Teamsters, who have major concerns about this deal, as does frankly pretty much every segment of labor, Mr. Sarandos. And what they all say is they're worried that you're going to cut residuals, which is effectively payments. You're going to cut production jobs. So, let's just go through a few commitments here. Will you commit to using union labor for all domestic shoots?
We do use union labor.
Will you commit to using it in the future for all of your domestic shoots if this deal goes through?
Senator Hawley, this is the most unionized industry in America, and we use union labor on all our productions.
And you're going forward? I'm looking for a commitment.
Will you commit to a 45-day or longer theatrical release window for major Warner Brothers films?
Senator Hawley, I just said that I would do that under oath. So, yes.
Good. And will you commit to fairly compensating your workers in the industry with residual payments?
Well, top-of-market payment has been Netflix's business philosophy since we started operating over 20 years ago.
Listen, you have been routinely accused of compressing and reducing residuals. It's one of the biggest objections of labor to this deal. So, let's see if you can lay that to rest today. Will you commit to full residuals?
Senator Hawley, I would like to tell you this is a very complicated answer because we prepay.
That's usually on the way to no. That's usually a way of saying no. So I'm looking for yes.
Senator, I understand that this is not a yes or no answer because—
It kind of isn't, because we were going to sit down with the unions—
Starting in the next few days, sir. We're sitting down with the unions for new contract talks that start actually in three days.
That's a complicated, long no. I would really hope it would be yes.
Okay. Are you asking me to commit to residuals in the traditional form? Because I don't think that applies in many cases. That's what I'm getting at.
All right. Well, I think you've got some work to do on that, Mr. Sarandos. And I would hope that you'd reconsider your position.
Before my time expires, I want to ask you about something else related to children. Why is it that so much of Netflix content for children promotes a transgender ideology? Almost half of your content for—I'm talking about minor children now, I'm not talking about teenagers—minor children promotes a transgender ideology agenda. I was just looking at the data here from your various series.
And what concerns me is just two days ago, a jury in New York awarded a former transitioner $2 million because she said that her psychologists and others pressured her, they pushed on her an ideology that proved to be extremely detrimental. I'm sure you know that in the UK, the National Health Service has said that they're not going to perform transgender surgeries or any longer so-called gender-affirming care for minors, including in counseling, because it is so incredibly detrimental. Our own HHS has come forward with similar findings this past year.
Yet, if you turn on Netflix, you'll find that an enormous amount—I say this as a parent with three young children—an enormous amount of your children's programming has this ideology and agenda in it. Is this an advocacy position for Netflix? Is this an ideological commitment you have? I mean, why is this?
Senator Hawley, Netflix has no political agenda of any kind. I would tell you that.
Well, then why is your children's programming so full of this highly sexualized, highly controversial agenda? I don't understand it. It seems strange to me.
Respectfully, sir, it's because it's inaccurate. We have millions of hours of children's programming.
You're saying it's not there? You don't feature trans characters, trans storylines, trans themes? I'm saying it's not in your programming.
I'm saying we feature a wide variety of stories and programs to meet a wide variety of people's tastes.
Why does almost half of your children's programming feature this highly controversial, highly sexualized material? That just seems strange to me. It can't possibly be a reflection of the population.
Senator, I don't have any idea where that number would come from or what that would be. I don't believe that's been your personal experience, but I can't speak to that.
Well, what do you mean you don't think it's been my personal experience? You don't think that I monitor what my children watch? I tell you what my personal experience is since you bring it up. My personal experience is that my three children, I can't let them watch anything they want on Netflix. I can't let them watch anything on Netflix unless I preview it because I don't have confidence in what's on your platform. I don't know what they're going to encounter. And I tell you what, I don't want my kids being pushed an agenda about their sexuality or gender identity when I have not had the opportunity first to discuss it with them and to form them in that.
And frankly, on behalf of parents around the country, it offends me that Netflix is pushing this content at parents in what seems to be a very coordinated, thought-through, planned-out agenda in a way that frankly I think undermines parents. Certainly undermines me and my wife. We have to watch every show beforehand before we can let our kids watch it. Now, that seems pretty concerning to me. I know you make a gob of money on it and maybe that's the answer, but it seems to me that it's a disservice to the parents of this country, particularly given what's happening with our youth on this subject.
Senator, if I may answer, like I said, we have millions of hours of content on Netflix at any given time. We have state-of-the-art tools for you to manage those choices for your children and to block any title that you might be offended by for any reason. We are parents at Netflix as well. We share all your concerns about raising kids and also the ability to raise them as you see fit in your household and anyone else's household as well.
My concern is that you don't share my values or those of many other American parents, and you want the United States government to allow you to become one of the largest, if not the largest, streaming monopolist in the world. I think we ought to be concerned about what content you're promoting. Thank you, Mr.
Thank you, Senator Hawley. Senator Booker would be next. He has deferred to Senator Welch's time.
Thank you, Mr. Chairman. Thank you, gentlemen. Appreciate you being here. Mr. Sarandos, when we met, I indicated to you the big concern I have is what's the impact on the creative community.
If this merger goes through, you'll be huge, and the folks that are creating content will have to come to you. It's hard to see how, with fewer outlets for a person or creators who have something special to present to the American people, if they have fewer options, it's going to suppress creative content. Can you address that?
Absolutely. The best way to keep giving opportunity to creators is to make more content, make more productions. Netflix is leading the way in doing that. And I would say that in this merger, we intend to keep these operating entities operating exactly like they are today with independent creative groups who do that buying.
Meaning—this is, by the way, rooted in something we started doing years ago at Netflix—creating competitive buying teams inside of Netflix. So, let's just say you're a writer. You bring a project to us. We have a family team, a comedy team, and a drama team. It's pretty unlikely that any project that comes in the door is absolutely any one of those three things. You can pitch it to all three teams, and one may pass and one may take it.
You explain that. But I'm a creator. I come to you. You've got these teams who want to get my content, but my options to go elsewhere after a merger diminish. And of course, there's been a wave of mergers in the entertainment industry preceding this proposed plan. You also have a business responsibility to Netflix to control cost. One of the ways you control cost is you pay me as a creator less. And me as a creator, if I have fewer places to go, there's less competition for you. Isn't that dynamic real and inevitable with this merger?
As I said, we're keeping every one of those buying entities open for business. Meaning that if you don't sell your show to Netflix, you can sell that show to HBO. If you don't sell it to Netflix for a feature film, you can sell it to Warner Brothers. And all four may want it. And it's very common in the business. I'm sure Bruce could talk to you about how CNN has bid against HBO for documentaries at Sundance Film Festival. Happens all the time. Everyone is focused on doing best by the consumer. And the way we win is to get the best product for the consumer.
Thank you. I'll ask Mr. Campbell. What I understand is that the Writers Guild of America, after the Warner Brothers Discovery merger in 2022, the merged firm canceled and wrote off about $2 billion in content. That's true, right?
After the merger, there was a significant write-off. That merger included a significant amount of debt being put on the combined company. So at least initially, we had some meaningful financial considerations. Since that time, we've invested significantly in content, and our content investment has grown every year.
This is really the question that I need to be answered. I think it's incredibly important that we have more content, not less. I think it's incredibly important that we have creators and writers and producers having an opportunity to get their story to us, to try to get the benefit of stories that are told to America about our own experience. And it's just hard for me to understand how, if there are fewer buyers where there is less opportunity for competition, it's going to result in more content. You're telling me I'm wrong?
No, we know as a successful studio, both on the television and film side, the way you're successful is by convincing the creative community that if you come to your studio, you're going to get a fair shake. And as Ted has—
There's something wonderful in the culture of a good company, right? And Warner Brothers has done extraordinary things, but it's really, as I understood it, been really committed to movies and creating incredible movies. Netflix is astonishing in what it's done out of nothing. It created streaming, which is very, very popular. All of us use it. But if you're going to be in charge of Warner Brothers, you'd like to say that nothing will change, but don't we usually hear that anytime there's a big merger, that nothing will change and it'll all be better? So prove it.
Senator Welch, I'd like to explain that because, like I said earlier today, most media mergers have fared poorly, mostly because of one of two reasons. Either you have the Noah's Ark problem: you bought a company that has the exact same sets of assets that you do, so all you do is cut everything in half and look for the profit, squeeze it out. That's not what we're doing. We don't have any of these assets that we're buying from Warner Brothers. The other problem usually is a company that doesn't have particular expertise in that business, and they wind up just sucking cash out instead of putting cash in.
We have a particular expertise in this business, and we have a strong, healthy balance sheet to keep investing in this business. Now, it is different from previous media mergers. I know that. But I will tell you, I've been in Netflix for over 25 years. Every year we've been successful by doing things differently. And this media merger will be different than any of the others because we actually need these people. We need those movies. We need those series. So, we're going to keep them all operating, and I want them to compete with one another just as if we didn't own them. And it's very common that the teams inside of Netflix compete today for the same project all the time.
Thank you, Mr. Chairman. I yield back.
Thank you, Senator Welch. Senator Schmitt.
Thank you, Mr. Chairman. Mr. Sarandos, you are currently the co-CEO of Netflix, is that correct?
Okay. And until recently, you were the chief content officer, is that correct?
It's been a couple years now, but yes.
Okay. Do you think Netflix is a powerful company?
We're a successful company.
Okay. I think it's pretty powerful. That's probably why we're here today, right? To judge whether or not it becomes anticompetitive in some particular way because of the power that it wields. You just said a moment ago that Netflix does not have a political agenda. Do you think Netflix is a politically biased company?
Okay. Would it surprise you if I told you what percentage of donations from Netflix employees and other folks affiliated with Netflix go to Republicans versus Democrats, you think?
I saw a number published a while ago. It's very high Democrat.
Yeah, that seems pretty high. Do you think that indicates any kind of bias by the company?
Sir, Netflix doesn't have a political giving arm. We don't have an active PAC. We don't influence our employees to do anything, and our employees can support issues and candidates at their will.
Okay. On June 20th, 2020, on its X page, Netflix posted a video titled, quote, "To my white friends: guilt, shame, embarrassment," end quote, and saying, quote, "We need to do everything in our power to amplify that message." Do you stand by that statement?
I have no recall of that statement at all.
Okay. I just read it to you. Do you have an opinion about it?
I don't have any idea what context it's in or anything else.
Okay. In the wake of the George Floyd riots on June 20th, Netflix posted on its page, "To my white friends: guilt, shame, embarrassment." What does that mean?
I think that is an uncharacteristic post that I deeply regret if that got posted that way.
Okay. Well, it did. Netflix also said on May 30th, "To be silent is to be complicit." I'm just reading you some things that Netflix posted at the time. So you don't stand by that statement then?
As I said, sir, we have no political agenda. Posting something like that would be quite political.
Yes, I would agree, and I would say I hope that that wouldn't happen again.
Okay. Netflix also said on June 10th, 2020, that to implement the BLM—the Black Lives Matter agenda—Netflix understood, quote, "that our commitment to true systemic change will take time." Do you still think that takes time? Are you still actively engaged in this effort?
Again, sir, we're not engaged in political efforts like that.
Okay. Any longer? You were, but you're not now?
Again, I can't think of a period of time. I think the time you're talking about was quite a volatile time for many companies.
I think a lot of people said things they regret then. I'm just trying to figure out if they actually regret it or not. I'm not going to get into your quotes on DEI, but it seems that both you and Netflix both have made a habit of promoting DEI and wokeness.
I'll just give a few examples. Netflix content is synonymous with the modern phenomenon of race-swapping both historical and real and fictional characters. Just a few examples: Netflix made Black Vikings. Netflix changed Cleopatra from Macedonian to Black. Achilles changed from Greek to Black. Netflix overtly sexualizes children in its Cuties film related to pre-teen girls. You mentioned earlier that you can block titles. I'm not sure blocking the word "Cuties" would shield kids from the oversexualized content in Cuties. So, I'm not sure that's sufficient enough.
Netflix continues to push sexual and gender theory on kids. And maybe this is what was being referred to earlier: 41% of G-rated kid-approved series contain LGBTQIA+ content. You are the co-CEO. You were the chief content officer until recently. Yes or no: does Netflix stand by its content production decisions?
Senator Schmitt, we have a great deal of programming on Netflix for all—left, right, and center. We have state-of-the-art tools for parents to manage what their kids see on Netflix. You could block anything. What you just described is exactly how it works: you block that title.
But why would I block Cuties? If a G-rated movie came out called Cuties, why would I have any belief as a parent that it would be related to oversexualized kids?
That film you're speaking of is an MA-rated adult movie for adults, not for kids. And the larger point, sir, is that of all the American values that we all share—and I understand parenthood is hard, I understand it's a difficult world that we all navigate—the one we value a lot is the First Amendment, and a lot of that is freedom of speech. What I want to do is give creators a place to tell their stories and parents a place to control—
I have no problem with a wide variety of content. That's not the issue, this is America. But I guess the point I'm making is that your company has made overtly political statements, has moved an agenda of DEI. You have Susan Rice on your board, the founder of sort of Barack Obama's DEI agenda. 99% of your employees contribute to Democrats to the tune of hundreds of millions of dollars. Your content's oversexualized for kids. You're engaged in this very woke programming overwhelmingly. You do have some other options, but overwhelmingly.
So the question before this committee, and you come before Congress: why in the world would we give a seal of approval or a thumbs up to make you the largest behemoth on the planet related to content? It seems as though you have engaged in creating not only a monopoly of content potentially, but the wokest content in the history of the world. So forgive me if I'm a little concerned, not only as a parent, but also that somebody believes that we ought to have a wide variety of content options. There are some, but the overwhelming majority of your stuff right now is overwhelmingly woke, and it's not reflective of what the American people want to see.
Respectfully, if you ask a Netflix member today or a consumer today generally how they view Netflix, I think a proof point that we might be doing the right thing is they talk about Netflix in the exact same terms as they talk about the country: about 40% conservative, about 40% liberal, and about 20% don't know. You can look for and you can search for a character, an image—
Those are not the statistics I gave you.
I don't know what those statistics are.
40% of your content for G-rated stuff has LGBTQIA themes.
Respectfully, I don't know how to—
We're happy to follow up, and I'd love to get a response. I'd love to engage with your staff and figure out how they'd love to continue the conversation.
Thank you, Senator Schmitt. Senator Booker, you're next.
I'm getting back to the subject of antitrust. Thank you. I just want to start with asking for unanimous consent. Maybe you and I can talk about it. I just want to enter into the record statements and letters from stakeholders in the entertainment industry, from a lot of respected groups that believe they'd be harmed by this merger. And they include Cinema United, the largest trade organization in the world representing exhibitors and the owners of movie theaters; a statement from the Future Film Coalition, a national alliance representing filmmakers, producers, distributors, and other impacted workers; a letter from the National Hispanic Media Coalition; Committee for the First Amendment; Writers Guild of America West and other orgs that are opposed to this Warner Brothers acquisition by either Netflix or Paramount; a letter from the International Documentary Association opposing any consolidation between major studios in Hollywood as well; and finally a letter from the American Economic Liberties Project urging the state attorneys general to block the proposed anticompetitive Netflix-Warner Brothers Discovery transaction. Chairman, can I introduce these to the record?
It'll be admitted to the record without objection.
And I guess my first question would be: why such a universal set of concerns, if not fears, that organizations who represent theater companies, who represent artists, who represent producers and directors—it seems pretty universal to me that people with a level of sophistication more than any senators about your industry seem to be really concerned. Could you shed some light on that?
Yeah, I would have to start, Senator, with the fact that the industry has been under attack for five years now: the pandemic, a prolonged strike, production downturn for companies trying to squeeze more profits out of their businesses. Now, we've not been doing that, and we got through the strikes, and we got through the pandemic, and keep producing, and keep growing. But anytime there's change, the parties that you just discussed get nervous, and rightfully so. They need to know that people are looking out for them, and we are looking out for them.
As I mentioned in the theaters, I have been asked to give a blood oath about the 45-day window. I think giving my testimony to you under oath is good enough.
And I've known you personally for a long time to be a person of integrity, but I've heard more companies come before this body and make promises pre-merger that so many of them don't follow up. So let me just add—
I would also add, Senator, if you don't mind, we have a long history of operating the way we do. So I think you could point to our track record of expansion and growth and adding more value to consumers.
If I may ask a direct question then: will this be a fully exclusive 45-day theatrical window?
Fully exclusive to theaters, yes.
And will this be self-enforced? In other words, if you fall short of that—
It is the industry standard for self-enforcement. However, routinely, movies that underperform, the window moves a little bit. Superman was a little shorter window and Sinners was a little longer window, but they still could refer to it as a 45-day window.
And so I guess the trend right now, though, is away from the theater experience. We are seeing a crisis of community in general in America. Theaters used to be, along with other great American institutional experiences, that brought people together across backgrounds, sitting in a theater. And you and I both grew up with that in a way that I think is a cherished reality.
Unfortunately, we're seeing market forces which control companies that are beholden to shareholder profits. We seem to have elevated that form of capitalism, when companies in the past used to have many different stakeholders, but you all are a company that's beholden to your shareholders. And doesn't that mean that the forces that are moving against theaters, why we're seeing so many closures of theaters, would be affecting your decisions as well?
Actually, no. In fact, now that we are in the theatrical business, we want to win in the theatrical business. We want to make movies that people care enough to go out and see. In fact, in the last couple of weeks, we've done things like put the finale of Stranger Things in theaters around the country the weekend it came on Netflix, and thousands of sold-out shows revitalized the theater business for what was otherwise going to be a soft weekend.
We've done it in the past with these events. We've released our movies with the independent theater owners over the years all the time. And I think now that this is going to be part of our business, we're going to treat it as importantly as every other part of our business and win. And you do that by making movies that people care about and go out to do. I think Warner Brothers did an exceptional job of that this year, and they did $4 billion at the box office, which is one of the reasons why this company costs so much to buy. So, we want to keep that going and actually improve and build on it.
One of the last things I want to ask in this round is that theater experience is something we're losing, this force of market forces that seem to be undermining the things that create community and connection. Another one is obviously sports.
This summer, the FIFA Men's World Cup will culminate in Jersey, which I'm really proud of, as you imagine. But next year, the Women's National Team, which is our most successful soccer in America—sorry, fellas, but it really is—they're going to head to Brazil to compete in the FIFA Women's World Cup. Their matches, however, will only be available to watch behind a digital paywall as Netflix acquired the exclusive US and Canadian broadcasting rights for the tournament. How are you going to ensure that households can really afford what to me is, in terms of my national pride, not to mention the universal power that sports has created in terms of just connecting Americans? It's so central to American culture. What can you do about that? What can you tell me about that?
Well, we don't control the rights to those, as you know. We compete with other folks, all those folks I talked about earlier, for those rights. And I do think Netflix is a very affordable option for households. You can see by our large household penetration that people can afford Netflix. We add a great deal of value to them.
I know we keep talking about price and price, but I think it's impossible to talk about price without value. A typical consumer watching Netflix spends 35 cents an hour to watch Netflix—35 cents an hour. Just to put that in perspective, Paramount+ is over 90 cents an hour. So I think when people talk about affordability, they're talking about what do I get for my money? And I think Netflix has done a great job of keeping that down for American consumers and for consumers around the world.
And so finally, and again, you're somebody I know has extraordinary integrity, but the reality is everybody that I talk to that are on the artist side are seeing these trends as a way that is moving against the artist. With your capacity for empathy, do you understand that point of view? Do you understand those fears?
I definitely understand those fears. Like you, I'm very friendly with most of the folks who create movies and television, not just for Netflix, but for others as well, and I hear about their fears. The one thing that I could tell you—the reason I told that narrative about my life—is I've made my life about getting those films made, getting those series seen. And it's very important to me. It's very important that we do it in a fair and equitable way.
It's a very competitive landscape. When you have your show, it's not like just the two of us are buying it. When you have your show, you have many places to take it to. It's not always perfect for everybody, but when it is, if you work at it and get it on the air, you will. Same thing with movies. Thousands and thousands of movies get submitted to Sundance every year. Only about 400 of them get seen in theaters. Thousands of them get seen because of streaming. So I do think it's important that all of these things work together, and the streaming window or the pay-TV window that Senator Lee talked about earlier—that's the value unlocked to consumers, and that helps fund. I'm very proud that we've created a model that will ensure the ongoing production and viewing of movies. That's what I'm most proud of.
Thanks, Senator Booker. Senator Moody, you're next.
Thank you, Chairman Lee, for holding this hearing, and thank you for our witnesses for being here today. When there was an aside comment like, "Let me get back to antitrust," as if the concerns that were raised because we will have fewer players in this market is not something that's related to antitrust—indeed, antitrust laws were created to ensure that there's meaningful competition to protect consumers. Correct?
