This will probably be my last extended commentary on the merger, at least for the immediate future. As regular Sounds of Cinema listeners well know, I have covered this story nearly every week on the radio show for the past ten months.
Over the past year, Paramount has pursued a merger with Warner Bros. Discovery. The deal has been contentious within the film and media industry and it was opposed by several unions. However, the only major obstacle remaining to the merger was an antitrust lawsuit brought by a coalition of twelve state attorneys general, led by Rob Bonta of California. The antitrust trial had been set for March 2027.
That trial is no longer happening. In the past week, the state attorneys general settled the lawsuit. This isn’t the definitive end of the issue. Deadline reports that the activist group Block the Merger filed an amicus brief asking the court to reject the settlement. It’s a legal Hail Mary move that the judge in the case is now considering.
But it does look like the Paramount-Warner Bros. Discovery merger will go forward.
News of the settlement was a shocker to some given the unpopularity of the merger, the passion of the merger’s opponents, the willingness of thousands of film industry workers to sign a petition against it, and the bluster of California attorney general Rob Bonta. Details of what happened behind the scenes will probably trickle out but it looks as though political pressure got the better of the antitrust coalition. Los Angeles mayor Karen Bass, California governor Gavin Newsom, and Democratic candidate for governor of California Xavier Becerra all came out in favor of a settlement.
The filmmaking unions were divided. The Writers Guild, the Teamsters, and the actors union SAG-AFTRA opposed the Paramount-Warner Bros. Discovery merger but the Directors Guild and the International Alliance of Theatrical Stage Employees conditionally supported the merger if Paramount met certain concessions. Cinema United, a lobbying organization that represents theater owners, initially endorsed the antitrust lawsuit until the three largest theater chains—AMC Theatres, Regal Cinemas, and Cinemark—forced Cinema United to change its position.
Reading between the lines, it doesn’t seem as though the politicians, the unions, or the theaters actually thought the merger was a good idea. My perception is that the unions and the theaters made a political calculation that it was better to be on Paramount’s side in case they won. Paramount had also threatened to leave California if the antitrust case wasn’t settled. That was probably a bluff but the possibility of losing Paramount to another state caused some panic in California.
It also seems the politicians, unions, and theaters got skittish about the six month delay until the trial. There was a consensus that the delay would create economic uncertainty that would paralyze an industry that has been through a volatile six years due to the pandemic and the labor strikes.
What’s extraordinary about the settlement is that the antitrust coalition got nothing. Paramount did agree to certain terms but the settlement has almost no mechanisms forcing Paramount to comply. In an appearance on Breaking Points, former FTC commissioner Alvaro Bedoya laid out the toothlessness of the settlement. Paramount gave assurances they would stay in California but nothing in the agreement keeps them from moving. Paramount agreed to release thirty movies a year post-merger but the settlement allows Paramount to produce just fifteen films a year and then acquire the remaining fifteen films from other sources. There’s no requirement that the fifteen produced films be shot in the United States and there is there are no conditions for marketing the remaining acquired titles. If Paramount fails to release thirty films a year, they have to pay a $30 million fee per film but there’s no reason to believe that money will go to film and television industry workers. The settlement did not require Paramount to make any divestitures from its subsidiary companies. As reported by Deadline, if Paramount fails to release thirty films a year the studio may be required to divest from Miramax but Miramax is a small piece of Paramount’s business empire. Moreover, as reported by The Lever, the concessions in the settlement will expire in five years and the agreement includes force majeure loopholes that give Paramount a free pass in the cases of labor strikes or an economic recession.
Over these past months, I repeatedly laid out a case against the merger. Jobs in the motion picture and television industry will be lost. Fewer movies will be made. Competition between streaming services will be eliminated. Filmmakers will have fewer places to pitch and sell their work. Theaters will have reduced leverage to make exhibition deals. Foreign countries, several of them adversarial to freedom of speech, now have a major ownership stake in American media.
Most alarming is the risk of industry wide collapse. A merged Paramount and Warner Bros. Discovery will be over $79 billion in debt which is estimated to be seven times the company’s earnings. With that debt ratio, the combined Paramount and Warner Bros. Discovery is unlikely to survive. And if the merged company collapses, there won’t be enough movies being made to support the workforce and not enough films to supply the theaters. This merger could bring down the whole American motion picture industry.
I know that’s a doomsday forecast but I stand by it. And I hope that I’m wrong. I really do. But I’m probably not.
Before we put this story behind us, I need to call out a few groups of people. First, attorney general Rob Bonta of California and the other state attorneys general. They had a case and they blew it. But even more egregiously, they betrayed all the media industry workers who came forward and publicly protested the merger. Thousands of industry workers put their name on a petition opposing the merger. Hollywood is an industry built on relationships and those people took a considerable risk by speaking out. What Bonta and the rest have done is going to have repercussions not only in the film and media industry but for workers throughout the economy who will think twice about speaking against corporate consolidation.
Second, I have ire for the people who politicized this issue. Yes, economics has an inherent political dimension and yes, the Ellison family are tight with President Donald Trump, and yes, the Ellisons may reshape editorial priorities at CNN in their favor. But this is a side show. The handwringing over CNN was especially stupid. That network is mostly irrelevant. Turning the merger debate into a left versus right, Democrat versus Republican partisan fight was a terrible choice that poisoned the discussion and distracted from the central issue which always was and should have been the survival of the overall media and cinema industry.
I also need to call out all of the people who fancy themselves film commentators but said nothing about the Paramount-Warner Bros. Discovery merger. I’m talking about film critics, especially those with major publications, as well as film societies and festival organizers. You all should have taken a bigger and more vocal role in this debate. I’m also talking about the film opinionators on YouTube and social media especially those with thousands of followers. The Paramount-Warner Bros. Discovery merger was the most important news story in the American film industry in a decade—maybe the biggest since the Paramount Decree in 1948—and you sat back and ignored it. I guess a lot of you were too busy agonizing over the casting choices in The Odyssey to take notice.
With that off my chest, I also want to say thank you. First, thank you to the Sounds of Cinema listeners for your patience. I’ve been on this story nearly every week for the better part of a year and I imagine some of you got exhausted hearing me talk about it. But I think the story was important.
These past months I’ve asked all of you to contact your representatives, your state film commissions, and your state attorney general and ask them to oppose the merger. If you wrote a letter, made a phone call, talked about it with your friends, or (heaven help you) posted about the merger on social media, thank you.
I know this didn’t turn out the way I and many others wanted. That’s life. For those of us who love movies and want to see the American film industry succeed, we have to wait and see. It’s likely that the future of the American film industry will not look like the past. The collapse that I and others have forecast may very well happen. But this merger may only be the death rattle of an industrial model that was already on its way out and will give way to something new that offers fresh opportunities for creators and consumers. As cinema lovers, our job is to keep engaging with the movies and supporting filmmakers however we can. Those of you who are aspiring filmmakers, keep at it. The industry has been through major changes in the past twenty years and it’s likely to go through more changes before it stabilizes. The audience still wants to watch movies so keep rolling.
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