The Justice Department is reportedly probing how a sale of Warner Bros. Discovery could impact moviegoers – and potentially lead to fewer new film releases — as Netflix pushes ahead with its winning bid after WBD restarted talks with rival Paramount Skydance.
As part of the investigation, federal antitrust lawyers have been holding private talks with some of the largest movie theater chains in the country, Bloomberg reported, citing sources familiar with the matter. It did not specify which companies have been involved in discussions.
The DOJ and Warner Bros. declined to comment.
A review of the potential impact on customers is a standard part of the DOJ’s merger approval process.
Since Netflix in December agreed to pay $72 billion to acquire WBD’s studios and its streamer HBO Max, the question of whether a Netflix-HBO Max merger would create a monopoly over the streaming industry has emerged as a key concern.
But movie theater chains and industry advocates have been warning that the deal could also slam Hollywood, since Netflix rarely releases its original films in theaters.
Warner Bros. earlier this week agreed to restart talks with rival bidder Paramount Skydance after it sweetened its offer for the entirety of WBD, including its cable assets.
Even if Paramount beats out Netflix, it could still raise concerns for the film industry — the sale would leave Paramount with a heavy debt load that could force it to slash film production, Bloomberg noted.
Paramount has argued that it is providing the superior deal and that a sale to Netflix “would not advance competition, but rather extinguish it,” according to a Feb. 11 letter to US Senator Cory Booker signed by Paramount CEO David Ellison.
In November, James Cameron – known for directing Paramount’s “Titanic” – sided with Paramount as he warned that a deal with Netflix would be “a disaster” for cinemas.
Netflix, meanwhile, has blasted Paramount’s “antics,” calling the company’s bids an “ongoing distraction” to WBD shareholders.
It has argued that Paramount would not have enough money left over after spending so much on Warner Bros. to fund as many new film releases.
Netflix CEO Ted Sarandos – who as recently as last year blasted moviegoing as an “outdated concept” – has been trying to assuage industry concerns by promising to put all WBD films in theaters exclusively for 45 days.
The Netflix deal is “better for theaters” because Netflix will be able to put its original films in cinemas through Warner’s distribution business, Sarandos told Bloomberg TV on Thursday.
“It is likely you will have even more of an outcome of high-quality films for the theaters if this deal goes through,” he added.
He also met with some movie theater chain executives in Los Angeles last week, Bloomberg reported.
Cinema United – a US trade group that includes chains like AMC Entertainment Holdings and Regal Cineworld Group – has called a Netflix deal “culturally catastrophic,” while also warning a Paramount merger would be “no less serious.”
But during a call hosted by international trade group Global Cinema Federation, some executives argued in favor of Paramount’s deal due to its long history of cinema releases, according to Bloomberg.
On a call with investors Wednesday, Cinemark Holdings CEO Sean Gamble said he’s still “a bit apprehensive” about Netflix’s pledge to release films in theaters, adding that the industry wants “much firmer assurances that are longstanding.”
Earlier this week, WBD said it would restart talks with Paramount – though it said it still favors the Netflix deal.
But confidence is growing inside Paramount that WBD will ultimately jettison the Netflix deal over concerns it will face insurmountable regulatory scrutiny, The Post reported earlier this week.
Meanwhile, activist investor Ancora Holdings – which has built a nearly $200 million stake in Warner Bros. – plans to oppose the Netflix deal, arguing the board did not sufficiently engage with Paramount, according to a Wall Street Journal report.
