One merger after another

Days after Netflix announced it would buy Warner Bros. Discovery’s film and streaming assets in a deal valued at nearly $83 billion, Paramount Skydance swooped in to offer a buyout worth $108 billion instead.

Warner Bros. Discovery owns valuable franchises like Harry Potter and DC Comics, and it’s also home to a host of storied brands like New Line Cinema, CNN, HBO, and the 102-year-old Warner Bros. Pictures. If Netflix is the winning bidder, cable channels such as CNN will not be included in the purchase, marking a split between Warner Bros. and Discovery. Paramount, on the other hand, is bidding for the whole company.

Like many of Hollywood’s largest studios, Warner Bros. Discovery has undergone several mergers and acquisitions since its inception. A forthcoming buyout would be the company’s third change of ownership since 2010.

Consolidation among media conglomerates has become normal today as companies try to expand their streaming libraries and remain competitive. While merging might be good for a media conglomerate’s bottom line, analysts say consolidation comes at the expense of creativity.

Here’s a run-down of several recent media mergers: In 2019, Disney finalized its acquisition of 21st Century Fox. Viacom and CBS joined forces that same year. In 2022, Amazon acquired MGM Studios. Also in 2022, Warner Media merged with Discovery to form Warner Bros. Discovery. This summer, Paramount Global and Skydance Media officially became a new entity—Paramount Skydance.

Gradually, Hollywood has morphed into just a handful of legacy studios including Universal, Paramount Skydance, the Walt Disney Co., Sony, and, for not much longer, Warner Bros. Discovery.

Government deregulation of Wall Street and the media sector has made the mergers and acquisitions between these multi-billion-dollar corporations possible, says J. Christopher Hamilton, an assistant professor at Syracuse University and a former employee at both Paramount and Warner Bros. Discovery. Hamilton pointed to the Telecommunications Act of 1996 as an example of deregulation. The law, among other things, paved the way for media conglomerates to subsume one another without breaching antitrust laws. As a result, “[there’s] little limitation being put on the various companies that have merged over the past few years,” Hamilton said.

The news of a possible Netflix-Warner Bros. deal has triggered some antitrust concerns. “This deal looks like an anti-monopoly nightmare,” Sen. Elizabeth Warren, D-Mass., said in a news release. “A Netflix-Warner Bros. would create one massive media giant with control of close to half of the streaming market.”

At the Kennedy Center Honors event on Sunday, President Donald Trump acknowledged some skepticism about the proposed merger. “It’s a lot of market share,” he said. “So, we’ll have to see what happens.”

If the deal doesn’t go through, the headache of finding a new buyer will begin again for Warner Bros. In the event the deal doesn’t get a regulatory green light from the Federal Communications Commission, Netflix has agreed to pay Warner Bros. Discovery a $5.8 billion break-up fee.

For both Netflix and Paramount, purchasing Warner Bros. would mean gaining both an impressive library of titles and Warner Bros.’ roughly 130 million global streaming subscribers.

Much of the consolidation in the media sector can be traced to the advent of streaming itself. For legacy outlets like Warner Bros. Discovery, cable used to be extremely lucrative. Streaming now makes up over 44% of TV viewership, while cable accounts for just 24%.

To keep pace with Netflix and make up for cable losses, legacy outlets raced to get in on the streaming market, explained Hamilton. Enter platforms like Disney+, Paramount+, and Warner Bros. Discovery’s HBO Max.

For streaming platforms to succeed, they need a diverse library of movie and TV titles. “The more market share and content they control, the more likely they will survive the new reset, which is the death of cable,” Hamilton said.

But achieving the kind of scale necessary to compete against Netflix in the streaming wars doesn’t come cheap. When Warner Media merged with Discovery in 2022, the leveraged buyout left the resulting Warner Bros. Discovery with more than $40 billion of debt. Finding a way to service the massive debt payment has likely motivated many of Warner Bros. Discovery’s business decisions.

Selling out might be a smart business move for Warner Bros. But some analysts worry it will cause a drop in theatrical releases, which often happens when two studios join forces. Before being bought by Disney, 21st Century Fox made about 14 movies yearly, but its output fell post-buyout.

Warner Bros. Discovery recently announced plans for up to 14 theatrical releases annually. Netflix assured the public in a statement it “expects” to maintain Warner Bros.’ theatrical output. Hamilton calls that a “campaign promise” that probably won’t dictate Netflix’s eventual business decisions.

In addition to putting fewer movies in theaters, major film studios tend to focus their attention on blockbuster hits. Increasingly, large studios are prioritizing franchises that will appeal to large domestic and international audiences. This year, approximately half of movies from six large film studios—Universal, Disney, Warner Bros., Paramount, Sony, and Lionsgate—were based on pre-existing franchises.

Some industry insiders don’t believe a Warner Bros. sale is necessarily a blow to originality. “I understand the fear that it’ll all be IP-driven movies,” said Paul Dergarabedian, senior media analyst at Comscore, referring to intellectual property. “Hopefully there are those within these studios who say, ‘We must have cinematic fine dining, not just cinematic fast food.’”

Hollywood’s creatives aren’t so optimistic. Fewer studios means fewer buyers for movie projects. The Writers Guild of America (WGA) has opposed at least five mergers and acquisitions in the last 15 years. In October, the WGA said in a statement that any merger between “Paramount or another major studio or streamer would be a disaster for writers, for consumers and for competition.” News that Netflix might take over Warner Bros. prompted the WGA to call for the merger to be blocked.

But large media corporations’ decisions largely depend on their shareholders, the largest ones usually being asset management firms. Vanguard Group and BlackRock own a combined 17% of shares in Warner Bros. Discovery. The decisions these large studios make become “less about creativity and less about brand messaging,” said Hamilton. “It’s more about, ‘What’s the profit margin, and does this fit into the larger business strategy of our asset portfolio?’”

As large studios merge and focus on franchises and streaming, smaller outfits may be able to fill in the gaps, argued Jackie Brenneman, former president of the Cinema Foundation.

Consider the rise of Angel Studios, which has taken on projects like Sound of Freedom, a film Hollywood’s larger studios snubbed: “The more consolidation there is on the studio level, the more opportunity there is for independent films to finally come in and compete,” Brenneman said.