Movies may soon get more boring

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The Paramount-Warner Bros. merger puts Hollywood in the hands of just five massive companies.

The Trumpy tech billionaire Larry Ellison has wrapped his tentacles around the US branch of TikTok, an entire Hawaiian island — and now, officially, a very large share of the world’s news and entertainment production.

On Tuesday, the media behemoth Paramount — which is headed by Ellison’s son — completed its $110 billion mega-merger with Warner Bros. Discovery, in a controversial and hard-fought deal backed by the elder Ellison.

The merger combines a sprawling collection of brands, including HBO, CBS, and Paramount Pictures under one rebranded umbrella. It also concentrates much of the US film and television business in the hands of just five companies. Unions, theater owners, media watchdogs, and several state attorneys general were accordingly concerned: Combining two major competitors in any industry inherently concentrates power over what gets made, what consumers pay, and what workers earn.

Critics of this deal argued that, in the media industry, the fallout could be particularly intense. In addition to layoffs, opponents warned the new company could produce fewer, more boring movies, raise subscription prices for its combined streaming services, and inject political bias into news programs on CBS and CNN. (We’ll review the evidence for some of these claims in a minute.)

The new company agreed to address some of these concerns in a September 21 settlement agreement with 12 state attorneys general, which let the merger proceed. A group of consumers also launched a last-minute bid to block the deal, but the Supreme Court declined their emergency request on Monday.

One of the conditions of that September AG settlement was a minimum film guarantee: The merged company agreed to release at least 30 films a year for the first two years after the merger, then 32 films a year for three years after that. The requirement was designed to address one of the major fears around the deal: namely, that mergers can result in fewer films.

Recent history, and the basic economics of acquisitions, help explain the concern. Debt-financed acquisitions, like this one, can leave companies under pressure to cut costs. There are a few ways to do that, such as producing fewer new films or cancelling unreleased films that they don’t want to promote. According to Cinema United, a theater industry group, Disney and 21st Century Fox put out about half as many theatrical releases after their 2019 merger as they did before it, excluding 2020 and 2021.

But that doesn’t mean the new Paramount/Warner Brothers (formally rebranded Skydance) would do the same thing. Disney, for instance, makes a lot of its money from properties and products that aren’t movies. When the European Commission took up the question of whether this new merger would reduce output earlier this year, it concluded that Paramount and Warner were comparatively more dependent on film revenue. In other words, cutting back the number of movies they make post-merger “would not make economic sense” the way it did for Disney after its acquisition.