In a recent development, Paramount Skydance has doubled down on its argument that the proposed merger with Warner Bros. Discovery (WBD) will bring new competitive energy to the entertainment industry, rather than stifling it. This comes as California Attorney General Rob Bonta and other state attorneys general scrutinize the deal for potential antitrust issues, raising concerns about higher prices, lower wages, and reduced competition. Paramount's Chief Legal Officer, Makan Delrahim, sent a letter to Bonta, emphasizing the potential benefits of the merger for movie theaters and audiences, as well as the combined streaming services' ability to compete with industry giants like Netflix, Disney+, Hulu, and Amazon Prime Video.
Delrahim's letter highlights a key point: Paramount+ and HBO Max, separately, lack the scale to effectively compete with the leading subscription video-on-demand (SVOD) services. Paramount+ and HBO Max together account for only 5.8% of U.S. subscription VOD viewership, while the top three streaming platforms—Netflix, Disney+, and Amazon Prime Video—capture 65% of the market. This disparity underscores the need for a merger to create a more formidable competitor in the streaming arena.
However, Delrahim downplays the market power of the combined movie studios, arguing that Paramount's relationship with theater operators will remain unchanged post-merger. He points out that the combined company would only represent about 25% of the domestic box office, with several other distributors competing for theater screenings. This perspective, however, overlooks the potential for the merged entity to exert greater influence over the market, given its increased scale and resources.
One of the most intriguing aspects of this merger is Paramount's commitment to increasing theatrical releases. Delrahim notes that Paramount has already increased its theatrical releases and plans to distribute 30+ feature films post-merger. This is in stark contrast to Disney's acquisition of 21st Century Fox, where the company reduced its theatrical releases even before the acquisition. Delrahim argues that Paramount's motivation is to maximize output across the entertainment ecosystem, including theatrical release, to compete more effectively with larger streaming competitors.
Despite this, the article highlights a critical point: more films in theaters don't necessarily translate to higher revenue. Paramount's Q1 2026 earnings report indicates a significant drop in theatrical revenue year-over-year, partly due to the challenging comparison with the success of 'Mission: Impossible – The Final Reckoning' in 2025. This suggests that simply increasing the number of releases may not be a panacea for financial success in the theatrical market.
The deal has received shareholder approval from Warner Bros. Discovery, but it still awaits European regulatory approval. The Justice Department's antitrust division has also expressed concerns, with acting head Omeed Assefi stating that the deal will not be fast-tracked due to political considerations, particularly in light of the Ellison family's ties to former President Trump. This political angle adds a layer of complexity to the merger, suggesting that the final outcome may be influenced by broader political considerations rather than purely economic factors.
