In Hollywood, Mergers Are Just a Band-Aid

In the fall of 1929, the Paramount Famous Lasky Corporation, then the most successful film company in America, seemed poised to buy Warner Brothers Pictures Inc. The latter was smaller and newer, but it had already become a lucrative commodity, having recently bought Vitagraph, an even tinier studio that operated cutting-edge sound technology. But in October came the stock-market crash, and with it a world of potential complication; among other hurdles, the executives involved were left waiting around for the Federal Trade Commission to approve the deal. “The merger is definitely off,” Albert Warner, a co-founder of Warner Bros., said at the time, “and will not be resumed again.”Almost a century later, the companies now known as Paramount Skydance and Warner Bros. Discovery are engaged in yet another potential merger. But unlike in the 1920s, when consolidations swept Hollywood during a boom in production, the companies today appear to be treating the move as something of a last resort—a consequence of an uncertain decade marked by the coronavirus pandemic, multiple industry strikes, a drop in casual theatergoing, and the looming threat of AI. The business is “collapsing,” Jonathan Kuntz, a film historian, told me. “The classic Hollywood model of making high-quality feature films that show around the world in movie houses—that model is definitely in a decline.”Yet the possible consequences of the merger remain just as murky. About three months ago, Netflix seemed poised to purchase Warner Bros. Discovery but then withdrew its offer. Now regulatory concerns regarding investments in the Paramount–Warner Bros. merger by three sovereign wealth funds, and worries about the transaction’s potentially monopolistic size, could lead to lawsuits that might block the merger entirely. (California Attorney General Rob Bonta has said that his state’s Department of Justice will be “vigorous” in its review of the companies’ plans.) I asked Kuntz to help put the pending deal into per