Deal allowing Paramount-Warner Bros. merger may not cure Hollywood’s troubles

In sheer economic terms, Southern California’s movie and television production industry is not terribly important, generating scarcely 1% of the state’s $4 trillion-plus annual economic output.

However, Hollywood is California’s signature icon and a cultural powerhouse with global impact. Therefore its actors, directors, executives and unions wield disproportionate political clout.

Thus, when the industry began experiencing an outflow of production to other states and other nations a few decades ago, it turned to Sacramento for help and got it.

Beginning during the governorship of actor Arnold Schwarzenegger two decades ago, governors and legislators have granted it steadily increasing subsidies, topped just a few days ago with Gov. Gavin Newsom’s signature on Senate Bill 186, expanding the tax credits in-state productions can claim to offset their costs.

So far, however, the many millions of dollars the industry has exacted from a state budget that continues to leak red ink have failed to stem the outflow of production. Variety, which has covered show business for decades, reported recently the industry has lost 73,000 production jobs since 2022, two-thirds of them in Southern California.

Runaway production is one factor. Other states have lured productions, using higher subsidies, lower costs and more helpful local officials. The rise of computer-generated images and other technical changes also have contributed to the decline.

Amidst the industry’s growing angst, one of its most prominent companies, Paramount Skydance, negotiated the acquisition of another icon, Warner Bros. Discovery, raising the specter of more employment losses.

Local officials and industry unions urged Attorney General Rob Bonta to block the merger as monopolistic. He, in concert with attorneys general in other states, went to court.

But when Paramount, owned by Larry Ellison’s technology empire, threatened to pull Paramount operations out of California if the merger was blocked, Bonta was besieged with demands that he make a deal.

This week, the deal was struck. In return for approval of the Warner Discovery acquisition, Paramount boss David Ellison agreed to produce a quota of new movies and TV shows over the next five years, honor union contracts and otherwise invest in the industry.

“The film and television industry was built by generations of California workers, and this settlement ensures it stays here,” Bonta declared. “We took Paramount to court once. We will do it again. This is what this office is for: standing up to power and delivering for the people of California.”

That may be true in the short run, but not necessarily in the long term. The conditions that Ellison must meet only apply for five years, and they don’t have to be satisfied in California.

The only direct mention of the Southern California industry in the agreement relates to the two companies’ current production studios. They must be kept open for the five-year “commitment period,” and Ellison must make “commercially reasonable efforts” to operate them.

That’s thin gruel, at best, for those in the Southern California industry. The combined companies could still fulfill virtually all of their production obligations elsewhere.

The merged company will be an industry powerhouse, not only for the output of new movies and TV shows, but for its control of CBS and CNN, the leading broadcast news outlet.

Those on the left have worried aloud that the Ellison empire will have a right-of-center orientation. Under the agreement, it must have an editorial independence board to monitor its journalistic output. But Ellison will choose its members.

All in all, this is a big win for Ellison, with just token concessions for Southern California — notwithstanding Bonta’s boasts.