ADRIAN MA, HOST:
A corporate merger can be a little like a controversial marriage. Everyone has an opinion when the engagement is announced, and the parties getting hitched have to defend it. That is kind of what's happening with Paramount Skydance's deal to acquire Warner Bros. Discovery. Here's what Paramount CEO David Ellison told CNBC last week about merging these two media giants.
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DAVID ELLISON: You know, I believe this deal is basically - you know, it's pro competitive, it's pro consumer. It's good for the overall creative economy. And, you know, we really believe in the value of what we're going to be able to create here.
MA: Our next guest argues the reality would be pretty much the opposite. Tim Wu is a professor at Columbia Law School. He's written several books on the history of the communications industry, and he served as an advisor on antitrust policy for the Biden administration. Tim, thanks for taking the time.
TIM WU: Thanks for having me.
MA: Back in December, you wrote an op-ed for The New York Times in which you said, Paramount's acquisition for Warner Bros. would be illegal. And not only that, you argue it would be bad for consumers. So taking those one at a time, let's start with, why would it be illegal?
WU: The Paramount-Warner Bros. merger reduces competition too much in too many markets in violation of federal law and probably of state - in this case, California - other laws. So I think just by the statutes that Congress and legislatures have passed, it breaks the thresholds.
MA: It's really kind of up to antitrust regulators to make the determination of whether this is illegal 'cause otherwise, the deal really can't go all the way through. What are you expecting in terms of how federal or state regulators might handle this?
WU: All mergers need to go through the federal government, and the state governments can, if they want to, decide to act to block a merger or to undo a merger. So the federal government - you know, it has started its process. There's a lot of speculation that the federal government looks favorably on this deal, and I, you know - we don't know, but that's been out there.
But I think that the thing to watch is the states and particularly California. California has the authority by itself to try and challenge this deal, and California would be the area that's most affected, particularly if the competition for workers in the TV and film industry is greatly reduced. So they're the most directly affected, and I think you could see California leading the charge to try and block this.
MA: Just to build on that, were you saying that if we combine these studios, in a sense, the number of companies hiring people to work in the industry has been reduced, and therefore, they have more negotiating power over the labor side of the industry?
WU: Yeah. Let me try and make that argument clear 'cause I think it's sort of new. Most people are just thinking about, you know, the consumer side. The labor side of it looks like this. So, you know, when it comes to a new film production or it comes to putting something together, there's a limited number of big hiring employees, contractors. And, you know, bidding on a film or TV project - it'll typically be, you know, Time Warner against Paramount, let's say, trying to buy a film or trying to hire people. And the point is, if you reduce the number of big entities that are actually in a position to hire people, it will result in a depression of wages, maybe a lot less employment. And those are harms that over the last 10 years or so, the antitrust has started to take very seriously. So I think that's probably, depending on the numbers, the most obvious way that the Attorney General of California, Rob Bonta, would tackle this.
MA: And as you were sort of alluding to, some people say it might have to come down to the state regulators because the Trump administration has sort of a close relationship with the Paramount CEO's father, Larry Ellison.
WU: Yeah, I don't want to, like, you know, presume that it's a wash or, you know, that it's already in the tank. You know, I always like to presume that federal officials will do their job. But, you know, there's - let's just say, let's not be entirely naive. I mean, I think we have a record already where the Justice Department has shown itself, let's say, open to listening to people who are friends of the president. So look, I don't want to, like, call it and say it's not going to happen at all, but I - there's some reason to be concerned about the fairness of that review.
MA: So you've talked about the effect on workers. Let's talk about how you argue a merger might be bad for consumers. How so?
WU: I mean, typically, reduction in competition is bad for consumers because, you know, there's less competition to make good movies and good TV shows. Now, you know, there's still a decent number of people left in the market. So I don't want to say this is, you know, merging to some monopoly of movies. But, you know, film studios - fewer film studios tends to mean less movies getting made. And, you know, we're already at a stage where not a lot of movies are made. There's not a particular large amount of creativity. Warner Bros. historically has been a studio that's taken a lot of chances over the years and done a lot of interesting stuff. And I just think, you know, the fewer major film studios you have, the less interesting movies get made.
MA: I think what David Ellison would say is that this merger is necessary so the company can actually compete in the sort of current media environment with the likes of Netflix and Disney. What do you say to that?
WU: I mean, that's what everybody always says. A lot of the defense of this merger is, like, trust us, we're going to do a lot of good things. But, you know, I think the incentives will be for them to try to cut costs. You know, I'm - if you would promise that they're going to keep everything intact, maybe that'll be one thing. But also, those promises get pretty hard to enforce. So I think that we'll look back at this if this merger ends up getting through review and be like, gosh, that was really too bad.
MA: We should mention that this merger wouldn't just be combining movie studios or TV streamers. It would also be combining two companies that are separate news outlets right now, CBS and CNN. And I'm curious, as somebody who studied the relationship between the media business and the First Amendment, how do you look at that part of the deal?
WU: You know, sometimes the question is not about, you know, free speech or anything like that, but really about who controls the master switch. And I think if the experience of the last 10 years has taught us anything, particularly in social media, it's that we're in an age of sort of interested billionaires using media outlets to very straightforwardly promote the messages that they believe in who have not even a pretense of neutrality. So I think there's other reasons, which are not in the antitrust laws, to be concerned about the merger of some of the most important news outlets in the country into one control of -particularly with a very interested kind of person as opposed to, you know, PBS or - I don't know, like, some more neutral outlet.
MA: We've been speaking with Tim Wu, professor at Columbia Law School. Tim, thanks again for taking the time.
WU: It's been a great pleasure. Transcript provided by NPR, Copyright NPR.
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