Last week, Hollywood’s ongoing trend of corporate mergers hit a new and alarming level of largess when Netflix announced it had made a deal to purchase Warner Bros. The news has consumed the discourse in the film world and it has crossed over into general news and political commentary. As it should. If the Warner Bros. sale succeeds it may be a death sentence for the American film industry.
Here’s a quick recap of what’s happened. In 2022, Warner Bros. merged with Discovery to create a new super media conglomerate. The company most obviously contained the Discovery cable channel and the Warner Bros. film company which is one of Hollywood’s legacy studios with decades of movies in its catalog. Warner Bros. owns DC Comics, New Line Cinema, and Warner Bros. Animation, known for the Looney Tunes and Hanna-Barbera characters. Warner Bros. Discovery also owns the cable channels HBO, TLC, Animal Planet, the Oprah Winfrey Network, Food Network, TBS, TNT, Turner Classic Movies, and CNN and the streaming service HBO Max.
Over the past year, Skydance bought Paramount, also a legacy Hollywood studio. Skydance is owned by the Ellison family and Skydance had co-produced a number of popular films with Paramount such as J.J. Abrams’ Star Trek trilogy and Top Gun: Maverick. In acquiring Paramount, Skydance also got Nickelodeon, MTV, Comedy Central, Showtime, BET, the broadcast network CBS, a significant share of Miramax, and the Paramount+ streaming service.
Almost as soon as the Paramount deal was done, Skydance started making offers to merge with Warner Bros. Discovery. Those initial offers were rejected but the leadership of Warner Bros. Discovery did make it known that they would accept bids to buy all or part of the company. Skydance made another offer as did Comcast, which owns NBCUniversal, and the Netflix streaming service.
On December 5, Netflix announced it was acquiring Warner Bros. In this deal, Netflix would only buy the Warner Bros. film studio and HBO. The other television networks would be spun off into a separate company. Skydance did not take the news well. David Ellison announced that Skydance would mount a hostile takeover of Warner Bros. Unlike Netflix, Skydance is pursuing the entire Warner Bros. Discovery company including all of its television assets.
The reaction to the news of a Netflix-Warner Bros. merger has been resoundingly negative from nearly everyone in the film and entertainment industry, the theatrical industry, and film critics and anyone else who loves cinema. Variety reports that a group of Hollywood producers sent a letter to Congress protesting the deal and asking representatives to speak out against it. The letter was sent anonymously. Allegedly, the authors feared reprisals from these media companies. Several of the entertainment unions have come out against the Netflix-Warner Bros. merger. The Writers Guild of America said that such a merger “would be a disaster for writers, for consumers and for competition.” The Teamsters, the Producers Guild, the Directors Guild, and the actors union SAG-AFTRA have raised alarm about the deal.
Movie theaters have also protested the Netflix-Warner Bros. merger. According to The Wrap, Cinema United, which represents 30,000 movie screens across the country, called the deal “an unprecedented threat to the global exhibition business.”
With nearly everyone opposed to this merger and its obvious existential threat to the United States film industry, why would it go forward? The simple answer is money. The executives and shareholders of Warner Bros. Discovery stand to make a windfall from this merger. And the corporate leadership of Warner Bros. Discovery have a legal obligation to do what is in the best financial interest of the shareholders, even if that choice would degrade or destroy the film industry.
There are two things I should make clear. First, we should not prefer one merger over another. Some of the online discussion has debated whether Paramount or Netflix would make a better steward. This is a false choice. Warner Bros. being purchased by Paramount or Netflix or Comcast or some other major media conglomerate are all bad outcomes. All of these mega media mergers should be opposed. Second, Warner Bros. is not in financial trouble. Mergers sometimes happen because a company is struggling or overleveraged. Warner Bros. is doing fine. There is no compelling reason to sell.
There have been a number of high-profile media mergers over the years but none of them caused the kind of alarm we’ve seen over the Warner Bros. deal. That’s because this deal is unique. Skydance’s acquisition of Paramount was not such a concern because Skydance was not previously a major studio. The same is true of Amazon’s purchase of MGM, which has an impressive back catalog of titles but MGM wasn’t producing a lot of new films. And when Disney bought Lucasfilm they only got the Star Wars and Indiana Jones franchises.
A few years ago, Disney acquired 20th Century Fox. I did not speak out against the sale at the time in part because I was in denial that it would actually happen. But it did happen and it shouldn’t have.
Mergers, especially of mega sized companies, are bad for nearly everyone. For those working in the film industry, a Netflix-Warner Bros. merger means fewer job opportunities. A merger of this sort will likely yield fewer movies getting greenlit. Layoffs inevitably follow and there are not enough companies to absorb the unemployed. Fewer studios also weaken the power of workers to negotiate for wages and working conditions.
There is also a political angle to the merger issue. Storytellers and documentarians who make films about challenging and controversial topics will have fewer options to get their projects financed or distributed. And as corporate control of mass media consolidates into fewer and fewer hands, films that rankle the owners or express ideas that are contrary to corporate interests or just have the inference of difficulty may be shut out. This is not hypothetical. It’s already happening in the independent film market.
Media mergers are also bad for those of us who love movies. Creativity requires risk but every business owner is trying to reduce their risk, especially if their company is public. Innovation, whether it is in storytelling or technology, is driven by competition. A monopolistic market does not require innovation. It can get by reworking the same old products and formulas. It is not a coincidence that the trend toward remakes and sequels coincided with the consolidation of the entertainment industry. If that consolidation continues, get ready for a flood of AI produced IP slop. And that lack of variety is going to drive away audiences.
The streaming market is an important part of this discussion. Nearly all of the major media corporations have their own streaming service. If these companies merge, it makes no sense to maintain multiple platforms. They’ll roll everything into one. When Disney acquired Fox, they also got majority control of Hulu. Disney is now in the process of shutting down Hulu and consolidating all the content into Disney+. The same will happen with HBO Max. And when that happens, independent filmmakers will have one less company to which they can sell or license their products and have reduced leverage in doing so. Consumers will suffer from reduced competition between streaming services. There will be no competitive check on subscription costs.
The streaming issue is tied to the theatrical issue. If Netflix acquires Warner Bros. or another major studio, it will almost certainly reduce the theatrical window to a couple of weeks, if Netflix even keeps that window at all. Netflix is not in the theatrical business and their CEO has openly expressed hostility toward it, calling movie theaters “outdated.”
The theatrical industry is in a precarious state. There are a variety of reasons for that and there are steps the exhibition industry could take to improve their business but theaters are at the mercy of Hollywood studios. These media conglomerates are so powerful that theaters, especially small or independent showhouses, have no leverage to negotiate. But the studios and the theaters are codependent. The fact is that each year a couple of films make a billion dollars at the box office and a few dozen more will sell hundreds of millions of dollars worth of admissions. A streaming release will not generate this kind of revenue.
If the Netflix-Warner Bros. merger goes through, the United States theatrical industry will probably die. And if the theaters die, the American film industry will go with it.
What’s happened to the music industry is instructive. About twenty-five years ago the music industry pivoted from physical releases to streaming. Physical sales have made something of a comeback in recent years but music is primarily a streaming business with a handful of major platforms running the industry. And the major consequence of streaming is that almost no one can make a living through music. A few superstars do well but their money is primarily made in live performances and merchandise. It’s the mid-level bands that suffer. And the transition to streaming and the erosion of record labels affects the rest of the music industry such as recording facilities who hire studio musicians and technicians.
If theaters go away and we’re left with streaming-only exhibition, it will become nearly impossible to make a living in the film business. This will incite an industrial collapse that will hollow out the industry. And this will happen very quickly. For instance, take Italy’s film industry. After World War II and for the next four decades, Italy had a thriving film industry that produced talents such as Federico Fellini and Roberto Rossellini and Sergio Leone. In the 1980s Italian filmmakers produced some all-time great pictures such as The Last Emperor, Cinema Paradiso, and Once Upon a Time in America. By the end of the 1990s, the Italian film industry had collapsed. It happened that fast. And it can happen here.
For those of us who live outside of California or New York, this might not seem like our problem. I assure you it is. Anyone who watches movies will be impacted by this deal and the imminent collapse of American cinema. Movies and television are so ubiquitous that it’s hard to imagine a world in which this isn’t a thriving industry. But it could go away or at least be crippled into obsolescence. There’s also an economic angle. Films are shot all over the world and location shoots are a major economic boon to the communities that attract them. And movies hire more than just crew people. Film productions require the services of all manner of businesses.
There is also a political and cultural concern. Cinema is the most powerful propaganda force in the world. The ascendancy of the United States as a global superpower occurred in tandem with the rise of Hollywood. We can debate the merit of the messages filmmakers have communicated about our country and our culture but the fact is that for a century Hollywood broadcast a vision of the United States to a global audience. It was a key component of soft power and American influence around the world. It’s no coincidence that other countries, namely China and India, have robust national film industries that serve propaganda purposes. Losing that tool would be a strategic disaster for the United States.
So what can we do about this? The good news is that the Netflix-Warner Bros merger is not yet a done deal. A merger of this size requires approval by the federal government which will probably take 12 to 18 months, so there’s time.
Anyone who is part of a filmmaking union should support their leadership and encourage the union to continue protesting this merger.
Consumers have to appeal to the government. First, contact your congressional legislators and your senators and tell them to oppose the merger. Second, contact the United States Department of Justice and the Federal Trade Commission and tell them to oppose the merger. Lastly, contact the President of the United States and tell him that you oppose the merger.
And when you do reach out to these politicians, be concise, impassioned, and respectful. You might be writing to politicians you didn’t vote for and may not even like. Repress that party allegiance or personal animosity and stay focused on what matters. And make it clear that regulators shouldn’t favor one buyer or another. The merger itself—any merger of this size—must be stopped.
Make no mistake. We are down to the line. What’s at stake is the future of the American movie industry and everything associated with it. It’s up to us—we who love cinema—to save Hollywood from itself.