Eric Fruits on the Legal Fight Over the Paramount-Warner Bros. Discovery Merger
ICLE Director of Economic Research Eric Fruits was quoted in a Straight Arrow News article on the proposed $111 billion Paramount–Warner Bros. Discovery merger. The article examines the lawsuits seeking to block the deal and its potential effects on competition, consumers, and the future of the entertainment industry. Read the full article here.
The situation requires Paramount to “mount several defenses,” Eric Fruits, the director of economic research at the International Center for Law & Economics, told Straight Arrow. Still, he said, the company has “a fairly good case to allow the merger to go through.”
“They’re going to have to fight a lot harder in the courts on this because there are so many different means of attacking,” Fruits said. “They have to address all of them because the plaintiffs only need to win one and Paramount Skydance has to win all of them.”
Is the merger the best path for Warner Bros.?
Fruits, with the International Center for Law & Economics, is skeptical the merger would have a detrimental harm on consumers and, he told Straight Arrow, could be beneficial. While the lawsuit filed by the dozen states has received the most attention and “is probably the strongest,” Fruits said, he’s skeptical of claims that the merger would lead to major changes for consumers, including fears the deal would lead to higher admission prices to movie theaters.
Given widespread disruptions to the industry, including changes in consumer habits and competition from technology companies, the merger could be key to business sustainability. Paramount, which currently has some $38 billion in debt from two previous mergers, is a “company searching for scale and a cleaner balance sheet, not one so dominant that it can afford to starve Hollywood of work,” he wrote last month.
Hollywood’s “big five” studios would be reduced to four under the deal, making it the second-largest film distributor after Disney and falling shy of being a “highly concentrated” market, Fruits wrote. As Paramount seeks to compete with Netflix and other digital startups, the company will need to produce more — not less — content.
For example, Fruits noted, Cable TV subscriptions have been on the decline for decades, and most young people “don’t even know what an antenna is.”
“The question is, if this merger doesn’t go through, what would happen to Warner Bros. Discovery?” Fruits said. “Because it shouldn’t be assumed that Warner Bros. could survive very long on its own.”