Justice Department Investigates Warner Bros. Sale’s Theatre Impact
The US Justice Department has called upon several of the nation’s largest theater chains for private discussions regarding the potential implications of a sale of Warner Bros. Discovery Inc., as reported by sources. Government antitrust lawyers are investigating how a sale might affect the movie-going public and whether it could lead to a reduction in the number of films released in theaters, according to sources. The primary emphasis of the review is expected to center on Netflix Inc.’s supremacy in the streaming sector; however, the theatrical release of Warner Bros. films has also raised concerns. Netflix has traditionally released a limited selection of films in specific theaters for brief engagements. Rival suitor Paramount Skydance Corp. will bear a significant debt burden if it emerges victorious, potentially constraining its film production capabilities. Engaging with customers and industry participants is a standard procedure during merger reviews, as outlined by Justice Department guidelines. A spokesperson for the department refrained from providing a comment.
Warner Bros. has reached an agreement to sell its studio and HBO Max streaming business to Netflix; however, earlier this week, the company indicated it would resume discussions regarding a potential acquisition by Paramount. Paramount has asserted that its proposal is more advantageous than Netflix’s, presenting a more favorable outcome for consumers, and has committed to increasing film production. In November, filmmaker James Cameron, known for directing Paramount’s Titanic, publicly endorsed the company’s takeover of Warner Bros. He stated that a sale to Netflix would be “a disaster” for the cinema industry. In a letter dated February 11 to US Senator Cory Booker, Paramount Chief Executive Officer David Ellison stated that a Netflix acquisition of Warner Bros. “would not advance competition, but rather extinguish it.” Netflix Co-CEO Ted Sarandos has addressed concerns regarding the company’s strategy by committing to a 45-day exclusive theatrical release for Warner Bros. films. He has also expressed criticism regarding Paramount’s acquisition of Warner Bros., stating that a highly leveraged company will struggle to allocate sufficient funds for movie production. Sarandos met with several cinema chain CEOs in Los Angeles last week to discuss potential opposition to the deal, according to sources.
On Tuesday, Netflix released a statement indicating that a merger between Paramount and Warner Bros. would unite two of the five largest Hollywood studios along with their distribution operations. “Netflix and Warner Bros. will deliver more choice and greater value to audiences worldwide with expanded access to exceptional films and series – both at home and in theaters,” the company stated. Cinema United, the US trade group representing chains including AMC Entertainment Holdings Inc. and Regal Cineworld Group, has stated that an acquisition of Warner Bros. by Netflix would be “culturally catastrophic,” while a deal with Paramount would be “no less serious.” As a sale to one of them appears increasingly unavoidable, numerous theater executives now feel compelled to choose a side. During a recent private call organized by the Global Cinema Federation, which comprises the world’s 12 largest theater chains and trade associations, several CEOs expressed support for Paramount’s acquisition of Warner Bros., according to sources.
According to sources, the rationale stemmed from Paramount’s long-standing, century-old connection with cinemas, coupled with CEO Ellison’s public commitment to release a total of 30 films each year in theaters from both Paramount and Warner Bros. should an acquisition take place. In April, Netflix’s Sarandos remarked that the movie theater model was “an outdated concept.” Sean Gamble expressed during a conference call with investors on Wednesday that he remains “a bit apprehensive” regarding Netflix’s commitment to the 45-day “window” for films in theaters. “I think we’re all looking for much firmer assurances that are longstanding for not only a window, but levels of continued investment and also sustained marketing, which is a critical component of this, too, versus just verbal comments and promises,” Gamble said.
