Commentary: Big Tent Ideas

Whining Actors Aside, There’s No Real Antitrust Reason To Block Paramount Merger

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Nearly a year has passed since news broke that Paramount was preparing to acquire Warner Bros. Discovery (WBD).

Since then, the companies have finalized plans to combine their studios, streaming services and extensive portfolio of television and cable channels into a single media company better positioned to compete with Netflix, Amazon and Disney. The $111 billion merger has cleared regulatory hurdles in Washington, Brussels and elsewhere, and could close as early as this month.

The opposition to the merger, by contrast, has largely consisted of an open letter signed by left-leaning actors and California AG Rob Bonta’s warning that the deal raises “red flags everywhere.” Yet neither Bonta nor other skeptics have explained what those red flags are, much less how they would justify blocking the transaction under antitrust law. 

The notable exception is last month’s comment letter submitted to the U.K. Competition and Markets Authority by the Democracy Defenders Fund (DDF), a nonprofit legal advocacy group known for its lawsuits against the Trump administration. Credit the authors for putting their objections in writing. A careful reading, however, reveals the opposite of what they intended: the memo never identifies a viable legal basis for stopping the merger.

Start with the consumer impact. As the Supreme Court has repeatedly emphasized, price competition remains antitrust law’s “central concern.” That standard should give pause to many of the deal’s loudest critics, who have focused less on competition than on the fact that Paramount CEO David Ellison is the son of Oracle founder Larry Ellison. Whatever one thinks of the Ellisons’ politics, antitrust law turns on the effects of corporate conduct on consumers, not the surnames or political views of the people running the companies.

The DDF argues the merger will raise streaming prices. Yet prices are already rising. Netflix, the world’s largest streaming service, recently raised prices for the second time in just over a year, a move that Variety attributed to the company’s growing “pricing power.”

The obvious check on pricing power is more competition. In streaming, that means creating another scaled competitor in a market where Netflix, Disney and Amazon account for nearly two-thirds of U.S. viewing. After an eight-month investigation, the Justice Department concluded that the combined Paramount-WBD would provide a “more robust” competitive alternative than the companies could offer on their own.

Reports later surfaced that some DOJ staff wanted to continue investigating the transaction. But according to those same accounts, their concerns centered on whether the combined company could successfully expand its theatrical film production. Nothing suggested disagreement with the department’s central conclusion that the merger would strengthen competition.

The DDF also questions Paramount’s commitment to release at least 30 films annually, arguing the pace would force movies to compete against one another for audiences. Theater operators see the opposite. AMC CEO Adam Aron has said he hasn’t been this optimistic about the box office business since before the pandemic, citing confidence that David Ellison will continue investing in major theatrical releases like the Paramount mega hit “Top Gun: Maverick,” which grossed nearly $1.5 billion worldwide.

That optimism isn’t misplaced. Paramount has promised a 45-day exclusive theatrical window, up from the 25-to-35-day standard that had become common.

That means only about two films would be in theaters at any given time — hardly enough to saturate audiences. Movies rarely compete head-to-head: rom-coms don’t crowd out science fiction, family films aren’t substitutes for horror, and the “Barbenheimer” phenomenon showed that different genres can even reinforce one another by bringing more moviegoers back to theaters.

The DDF also warns the merger will cost jobs because Paramount expects to eliminate redundancies. But that gets the sequence backward.

Blocking mergers between smaller competitors in highly competitive industries often destroys more jobs than it saves. Just ask the roughly 15,000 Spirit Airlines employees who lost their jobs when the airline collapsed after regulators blocked its merger with JetBlue. AG Bonta joined the Conga line of progressives who celebrated the decision to kill the airline deal as “a big win for consumers,” but now with one less discount carrier, families and middle-income travelers would likely disagree.

Stopping this merger will do nothing to reverse Hollywood’s employment slump. The rise of streaming has contributed to a steep decline in movie ticket sales, shrinking opportunities for actors, writers, set designers, camera operators and countless other film professionals.

Economist Jeff Ferry estimates that Paramount’s commitment to release 30 films annually could create roughly 40,000 jobs, while researchers affiliated with the University of Wisconsin–Whitewater calculate the total could reach 45,000.

Just before submitting its comment letter, the DDF organized a meeting between Bonta and Hollywood celebrities urging California to challenge the merger in court. If it does, it’ll need a stronger case than this.

Michael Toth is director of research at the Civitas Institute at the University of Texas.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.