A new merger could revitalize California’s economy.
The California Policy Center has a new report analyzing what’s going on in Hollywood and how it can affect the California economy. In “Lights, Camera, Growth,” they see signs for optimism in a proposed merger, calling it a “bold, audacious attempt to meet the structural changes and challenges reshaping the filmed entertainment industry.”
Paramount Skydance and Warner Bros. Discovery (WBD) have reached a merger agreement, where Paramount will acquire WBD for $110 billion at $31 per share in cash. (The final terms of the deal have yet to be approved by the DOJ and the FCC.)
But assuming it goes ahead, report author Jeff Ferry suggests: “At a time when the industry is struggling, the proposed merger of Paramount Global and Warner Bros. Discovery stands out as the most significant opportunity for renewed growth in years.”
The merger will create Hollywood’s largest studio, churning out 30 movies a year, and their analysis finds that if this commitment is fulfilled, it could add almost $1 billion to Hollywood’s annual investment in movie production within Los Angeles. As the report notes:
This deal would create a new Hollywood mega-studio with some $69 billion in annual revenue. The combined company would bring together two major film studios, Paramount Pictures and Warner Bros., along with dozens of cable channels and five streaming platforms led by HBO Max. It would also control major sports rights, including NFL and Big Ten football through CBS Sports, as well as leading news outlets like CBS News and CNN. And perhaps most valuable, it would include a vast film library featuring titles such as The Godfather and Titanic, along with major franchises like Transformers, Mission: Impossible, and Harry Potter.
Paramount CEO David Ellison is promising great things will come from bringing all this under one big tent. The combined company will swing for the fences with a heavy production calendar, and a guaranteed 45-day theatrical window for movies, to encourage audiences to see them in the theater rather than just wait for them to show up on streaming. If Ellison succeeds, this would deliver the first sustained increase in major studio output since the 2008 recession.
This could be the change the industry needs. Hollywood, already on the ropes against the streaming industry, suffered the body blows of Covid (which both stalled productions and kept theatergoers at home), then long-term artist strikes, which led to productions being canceled, delayed, or shifted abroad. All of which hit the West Coast economy hard.
So the proposed merger is obviously a big deal for California, as much of the economic impact will be felt there. This should add jobs to the area and provide a significant boost to the city in LA County. More broadly, Ferry suggests that a national impact of this could help the movie theater industry across the US, which represents more than 325,000 jobs nationwide.
However, it is also a global industry. As Ferry explains:
Disney is currently producing the latest Avengers movie in the U.K., partly to reduce production costs. After shooting all eight Harry Potter movies there, Warner Brothers went a step further and purchased the Leavesden studio, signaling their long-term commitment to U.K.-based production.
Paramount and Warner’s combined force will be producing content for global audiences, as well as seeking international investors.
Ellison will have an uphill battle to achieve his goals, not least the regulatory and tax situation of California. But if he can get Hollywood back on its feet, this would be a major boost for the Golden State, and moviegoers everywhere.
