Democrat AGs settle with Paramount, clearing way for merger

The long-anticipated merger between Paramount and Warner Bros. is finally happening after Paramount reached a settlement with the dozen states whose Democrat attorneys general had sued to stop the deal.

The settlement, announced on Monday, also included the Writers Guild of America, the union representing screenwriters. With this case put to rest, the merger will proceed as planned.

The settlement is an admission of defeat by ringleader Rob Bonta, the California attorney general whose overzealous antitrust crusade ended with Paramount looking to reincorporate in Tennessee. In addition to a friendlier business climate and burgeoning talent pool in Nashville, Tennessee has no state income tax. California has the highest effective personal income tax in the nation at 14.4%. California’s corporate income tax is 8.84% on net profits while Tennessee’s business tax is 6.5%.

Paramount CEO David Ellison had previously floated both Georgia and Texas as potential destinations. Like Tennessee, Texas has no state income tax while Georgia has a flat 5.19% rate on all incomes, far below California’s. The Atlanta metropolitan area also boasts an established film production ecosystem that increasingly rivals Hollywood with its much lower business and labor costs.

If Paramount leaves California, the Golden State stands to lose between $10 and $20 billion in economic output and up to 58,000 full-time jobs, according to an analysis by the Los Angeles County Economic Development Corporation. Tens of billions of dollars would instead be invested in the states of the booming southeastern region, creating tens of thousands of high-paying jobs.

Bonta and his fellow travelers nearly chased all of this wealth creation to the other side of the country on the misbegotten notion that all mergers are bad.

In fact, this merger would likely benefit consumers. If any industry is ripe for consolidation, it is the highly competitive streaming market. Disney and its subsidiary Hulu currently stands on top with a 23% market share, followed closely by Amazon Prime at 22% and Netflix at 21%. Warner’s HBO Max streaming service is in fourth place while Paramount+ ranks sixth; combined, they would tie Amazon for second place behind Disney. Far from a monopoly, this merger would put Paramount and Warner Bros. on par with the largest players in an oversaturated market.

Nor should streaming even be considered its own closed market because it competes with cable and broadcast TV. The merger would also consolidate the cable market, which is currently bleeding subscribers to streaming. This indicates that the two television formats are in direct competition with one another and that the shrinking cable market is due for consolidation as well.

Combining the assets of two major Hollywood studios is also something that frequently happens in the fiercely competitive, capital-intensive movie-making industry. This merger would leave four major studios each controlling about one-fifth of the distribution market, with dozens of smaller competitors accounting for the remaining fifth.

And that does not account for the fact that anyone can upload a movie they make to YouTube or their own website, either with ads or behind a paywall, and make money from their art. Amazon frequently offer distribution deals to movies that do well under this arrangement, such as The Daily Wire’s Pendragon Cycle series or the hilarious indie comedy Hundreds of Beavers. At the end of it all, Attorney General Bonta only succeeding in risking tens of thousands of California jobs and billions in California productivity to try and prevent a merger that did no harm to consumer welfare, simply to punish a studio mogul whose politics he dislikes. Politicized antitrust does California, and America, no favors.