California needs to better resist job-killing megamergers in entertainment

The architect of the recent Paramount-Warner Bros. megamerger, Gerry Cardinale, initially downplayed the possibility of layoffs once the two companies finished joining together. 

Not long afterward, the CEOs of the merged company, Skydance, sent emails announcing “difficult decisions that affect our workforce” — and later offered voluntary buyouts in anticipation of layoffs. 

Many of the job cuts will naturally affect California, where Skydance has its headquarters. Concerns over job losses was one reason California Attorney General Rob Bonta sued earlier this year to try to stop the merger. 

That lawsuit ultimately was settled out of court, and the merger is a done deal. But if we’re to protect jobs in California — to say nothing of one of our legacy industries — we need to resist these gigantic acquisitions from becoming the norm. 

Hollywood’s corporate consolidation trend threatens to yield fewer opportunities for workers and higher entertainment costs for consumers. 

The just-completed $22 billion purchase of Roku by Fox Corp. is in line with other mergers, where large media companies join forces with streaming services to build entertainment empires. 

Whereas Paramount-Warner received enormous attention in the press and among lawmakers, the Fox-Roku deal has relatively flown under the radar. That’s concerning given its implications for our state and for entertainment law. 

Fox Corp. employs more than 10,000 employees globally and has a major studio presence in Hollywood. Roku, meanwhile, is headquartered in San Jose and has other offices scattered across our state. 

That means the writing is likely on the wall for hundreds, if not thousands, of California jobs. Roku has already been laying off workers, slashing its workforce by 10% in 2023 alone. 

It couldn’t come at a worse time. California’s unemployment rate is 5.1%, a percentage point over the national average and among the nation’s highest. The state is stuck in a trap: its economic growth remains high but its job market doesn’t reflect that expansion.

This has some economists warning about a so-called K-shaped economy, where California’s rich get richer and its poor and middle class go the other way. 

If we want to arrest this trend, we need to do more than worry about AI taking jobs. We need to challenge the giant corporate mergers that portend more layoffs.

Even without the job losses, Fox-Roku could be a bad deal thanks to its naked conflict of interest. Most media deals where a content provider seeks to join with a content streamer carry this risk.

Streaming services such as Roku are supposed to be content-neutral, recommending channels and shows based on user preference and overall popularity, rather than on corporate or political bias. But Fox recently said it will continue carrying non-Fox content on Roku for at least three years and won’t discriminate against that content in its search results.

Afterward the incentive will likely be to prioritize Fox channels, such as Fox News and FS1 —  and to deprioritize their competitors. Fox News’s ratings have been sinking in recent months, but with Roku that might become less of a problem. 

Worse, the merger could destroy the precedent of TV provider neutrality, leading other media companies to place their thumbs on the scales. 

Ultimately the question behind these megamergers is what kind of entertainment industry do we want for California: A dynamic job-creator where competition ensures viewers have plenty of thrilling and smart shows to choose from, or a handful of lumbering corporate behemoths that produce too much slop and not enough well-paying job opportunities?