Theater lobbying group Cinema United has come out against a potential merger of Warner Bros. and Paramount after Netflix dropped from the months-long bidding war.
“We have been clear from the outset about our concerns around consolidation, and nothing that has occurred within the past 36 hours has changed that,” President and CEO Michael O’Leary said. “Studio consolidation historically leads to fewer movies being made, and at this juncture, there is no reason to believe the outcome here will be any different. We continue to urge regulators to heed the lessons of the past.”
O’Leary is referencing letters sent by Cinema United to Congressional antitrust committees last month after Netflix and its $82.7 billion offer had been selected as the winning bid, saying that “if Paramount or another major studio ends up displacing Netflix as the buyer, our concerns are no less serious.”
Since losing the initial bidding war and failing with a hostile takeover attempt, Paramount Skydance has turned to multiple new funding sources to make a new $111 billion offer that Warner Bros. Discovery deemed “superior” this past week and which Netflix declined to match. Included in that offer is a $45.7 billion equity commitment guaranteed by Paramount Skydance CEO David Ellison’s father, Oracle CEO Larry Ellison, and a guaranteed payment of $7 billion to WBD should regulators block the merger.
Prior to the pivot by WBD, Netflix had come under increased bipartisan scrutiny over the attempted acquisition, including from state attorneys general and from members of the Senate Judiciary Antitrust Committee. The chair of that committee, Republican Sen. Mike Lee, had scheduled a hearing for next week to further probe Netflix’s bid, but cancelled it after the streamer dropped out of the race.
“Netflix’s proposed acquisition of Warner Brothers raised serious antitrust concerns. When a massive streaming platform consolidates even more TV shows and movies behind a single paywall, American families lose. Walking away from this deal is a win for consumers,” Lee said in a statement Friday.
But it is not clear whether similar scrutiny will be held towards Paramount Skydance given the Ellisons’ longtime support of President Trump. While Lee has not indicated whether a new hearing will be scheduled to probe Paramount’s bid, ranking Democrat Cory Booker has called for more oversight.
“The circumstances surrounding this Administration’s antitrust enforcement, and the apparent political favoritism that has colored this, have cast a shadow over every transaction now moving through the approval process. Congress has a responsibility to ensure the Department of Justice and Federal Trade Commission are not clearing megamergers for the benefit of the Administration’s allies,” he wrote in a statement Thursday.
For movie theaters, the consolidation of two legacy studios would cripple its attempts to recover its business as the box office has been hit by a combination of the COVID-19 pandemic, the 2023 Hollywood strikes, fewer films as a result of industry consolidation and contraction and changing audience habits.
In 2019, Disney’s acquisition of 20th Century Fox went largely unchallenged by regulators, and in the years since, the Disney-owned 20th Century Studios has never released more than five films in theaters in a single year compared to the 12-18 films it released annually as 20th Century Fox in the 2010s.
During its bidding war with Netflix, Paramount fashioned itself as the studio that would preserve Warner Bros.’ presence in the theatrical space, vowing to release as many as 30 films combined between the two studios.
But movie theater owners have anonymously expressed deep skepticism of this claim to TheWrap, noting that the debt that Paramount Skydance would take on from the acquisition, plus the layoffs of thousands of studio employees that would result from it, would not leave Paramount in a place to match the theatrical output that would come from Warner Bros. remaining its own independent studio.
