It’s been almost a year since the news came out that Paramount was gearing up to acquire Warner Bros. Discovery (WBD).
In that time, the companies have laid out their plans to merge their studios, streaming services, and extensive TV and cable channels into a more formidable media entity capable of competing with giants like Netflix, Amazon, and Disney. The merger, valued at $111 billion, has passed through various regulatory checks in Washington, Brussels, and other regions, potentially closing as soon as this month.
Opposition to the merger has primarily come from an open letter signed by some left-leaning actors and a warning from California Attorney General Rob Bonta, stating that the deal raises “red flags everywhere.” However, it’s unclear what these red flags entail or how they would justify blocking the merger based on antitrust laws.
One notable dissent came from last month’s comment letter directed at the U.K. Competition and Markets Authority by the Democracy Defenders Fund (DDF), a legal advocacy group known for challenging the Trump administration. While the authors expressed their concerns in writing, a closer look shows that they didn’t actually present a solid legal ground for halting the merger.
Let’s start with the consumer impact. The Supreme Court has consistently stated that price competition is the primary focus of antitrust law. This might give critics pause, especially since many have fixated less on competition and more on the fact that Paramount CEO David Ellison is the son of Oracle founder Larry Ellison. Regardless of the Ellisons’ viewpoints, antitrust concerns should focus on the impact of corporate behaviors on consumers, not the affiliations of the individuals steering the companies.
The DDF claims that the merger will drive up streaming costs. Yet, prices are already on the rise. For instance, Netflix, the leading streaming platform, just increased its prices again, marking the second hike in a little over a year, which Variety attributed to the company’s increasing “pricing power.”
A key counter to this pricing power is increased competition. In the streaming sector, that means fostering another major player in a marketplace where Netflix, Disney, and Amazon dominate nearly two-thirds of U.S. viewership. After an eight-month inquiry, the Justice Department concluded that the Paramount-WBD merger would create a “more robust” competitive option than what the individual companies could offer alone.
There were some reports suggesting that certain DOJ staff members wanted to delve deeper into the transaction. Still, their concerns seemed to revolve around whether the merged entity could successfully enhance its film production, with no indications of disagreement regarding the main finding that the merger would indeed boost competition.
The DDF also raises doubts about Paramount’s promise to release at least 30 films a year, suggesting that such a pace might lead to fierce competition for audiences among movies. On the other hand, theater operators seem to view this differently. AMC CEO Adam Aron has expressed great optimism about the box office’s future, noting that he hasn’t felt this positive since pre-pandemic times, particularly because of the anticipated investment in big theatrical releases like the enormous success of “Top Gun: Maverick,” which raked in nearly $1.5 billion globally.
This optimism seems justified. Paramount has pledged a 45-day exclusive theatrical release window, an increase from the previously common 25 to 35 days. This means that, at any given moment, only about two films would be running in theaters—certainly not enough to overwhelm audiences. Movies rarely go head-to-head; for instance, romantic comedies don’t usually compete with science fiction films, and family movies are not substitutes for horror flicks. The “Barbenheimer” phenomenon even showed how different genres could actually complement each other by drawing in more moviegoers.
The DDF also warns of potential job losses due to Paramount’s plans to cut redundancies. However, this perspective doesn’t follow the appropriate logic.
Blocking mergers in highly competitive sectors often results in more job losses than it saves. Just ask the approximately 15,000 Spirit Airlines employees who lost their positions when the airline went under after regulators stopped its merger with JetBlue. AG Bonta celebrated the decision to thwart that merger as a “big win for consumers,” but families and middle-income travelers might disagree now that they have one fewer discount airline option.
Stopping this merger won’t reverse Hollywood’s job decline. The surge in streaming has led to a significant drop in movie ticket sales, limiting opportunities for various film professionals, including actors, writers, and cinematographers.
Economist Jeff Ferry has estimated that Paramount’s commitment to releasing 30 films annually could create around 40,000 jobs, while researchers from the University of Wisconsin–Whitewater suggest the number could be as high as 45,000.
Before sending its comment letter, the DDF arranged a meeting with Bonta and a group of Hollywood celebrities urging California to legally challenge the merger. If that occurs, they will need a more compelling case than what has been presented so far.
