An ‘independent’ study takes Paramount’s side in its merger battle. But Paramount paid for it
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You might have heard that Paramount-Skydance’s proposed $111-billion acquisition of Warner Bros. Discovery will be a boon for the Southern California film industry. Or that, if it doesn’t come off, the damage to the local economy will be epic. Or that, even if it does happen, that might not be good for the economy.
In that respect, like many other merger battles, this one has been producing more murk than light.
The deal is currently on hold, thanks largely to a lawsuit to block it filed by California and 11 other states. U.S. District Judge Araceli Martínez-Olguín of Oakland has scheduled a trial for March 2. But Paramount faces a tighter deadline — if the deal is not closed by Oct. 1, it will owe approximately $7 million per day of delay to Warner shareholders as a “ticking fee.”
California Atty. Gen. Rob Bonta says he’s willing to negotiate with Paramount over concessions that would prompt him to drop the lawsuit. But he has been irked at what he says is Paramount’s under-the-table maneuvering.
Meanwhile, conjectures about the impact of a deal or non-deal have proliferated. The most recent comes from an organization that presents itself as the producer of sober, professional economic analysis.
That’s the Los Angeles County Economic Development Corp., a nonprofit affiliated with the county, which says that completing the merger would produce as much as $1.01 billion in economic growth for the state over the next five years, but that the deal’s collapse would cost the state as much as $21.2 billion a year into the limitless future.
Those figures come from a draft LAEDC report leaked to Politico. What the draft doesn’t mention is that the report was commissioned by Paramount. Obviously, that makes its conclusions suspect. But it also makes the LAEDC complicit in muddying the waters about the merger deal.
Alas, there’s nothing new or uncommon about self-interested financial studies posing as objective analyses. Big businesses commission such studies all the time, then tout the results as validation for their own policies and practices.
It gets to the point where it’s impossible to accurately assess the value of official-sounding statistics. Back in 2024, I reported that the fast-food industry, via ads placed by the California Business and Industrial Alliance, was touting figures indicating that California’s minimum wage law for fast-food workers had cost 10,000 fast-food jobs. Unfortunately, the statistic was based on a mathematical error and other rank malarkey; in fact, fast-food employment had risen during the period under study.
LAEDC itself is no stranger to this behavior. In 2011, the corporation issued a study asserting that California’s film production tax credit, which aimed to dissuade production from leaving the state, had been a huge economic boon: After only two years and $200 million spent, it said, the program had produced $3.8 billion in economic gains and supported more than 20,000 jobs.
That would have been impressive, if it were the product of objective analysis. But as I reported at the time, the report had been commissioned by the Motion Picture Assn. of America, which is Hollywood’s leading lobbying group and which favored more and better public subsidies. The MPAA’s sponsorship wasn’t mentioned in the report itself, but was subsequently confirmed by the report’s author.
That brings us back to the LAEDC report on the pros and cons of the Paramount-Warner Bros. merger. The draft itself was rather more evenhanded than the coverage it received in much of the press, which headlined the purported gains from the deal (New York Post, for instance) or the potential economic hit from a breakdown (The Hollywood Reporter, among others.)
From Paramount’s vantage point, this coverage was all to the good, as my colleague Meg James reported, because it all tended to favor the deal and sound a caution about a non-deal.
The LAEDC acknowledges that Paramount paid for the report. To be precise, an LAEDC spokesman told me that “Paramount engaged LAEDC’s Institute for Applied Economics to conduct an independent analysis.”
If you think that Paramount truly asked the LAEDC to produce an “independent analysis,” raise your hand. Me neither.
The draft reads as though the authors’ task was to assemble empirical data to validate a pre-established conclusion — namely, that relocating Paramount’s operations out of California would mean a hit of more than $21 billion a year in “economic output.” Dire indeed.
Justin Adams, senior director at the Institute for Applied Economics, told me by email that its goal was to game out “‘best case’ and ‘worst case’ scenarios given the inherent uncertainty. The best case shows modest, negative impacts. The worst case shows significant, negative impacts. We do not ascribe likelihoods to either scenario.”
Yet the LAEDC put its thumb on the scale in assessing the consequences. For one thing, it took as gospel Paramount’s position that, if a settlement with the states isn’t reached, “it would be compelled to relocate the company’s headquarters and thousands of jobs out of California ... to a more hospitable regulatory environment such as Georgia, Tennessee, or Texas.”
Of course, nothing could “compel” Paramount to relocate, absent a settlement. That would be the choice of David Ellison, Paramount’s boss, pure and simple, which makes it more likely that he’s wielding the relocation option for leverage in settlement talks. In any event, relocating an entertainment behemoth out of California, to some entertainment hinterland like those states, would be more complicated and certainly costly than staying put.
The report accepted as read Ellison’s “commitment” that the merged company would produce 30 feature films a year for three years, and penciled out the potential economic gains. But “commitment” is Paramount’s term. There’s no written, enforceable guarantee anywhere I can find that Ellison would follow through.
Then there’s the question of who leaked the report. Paramount says the leak didn’t come from the company. The LAEDC says it “did not share our preliminary findings report with any external party.” Politico didn’t respond to my question about how it acquired the report.
That leaves us with an inquiry into who benefits from its disclosure. The answer plainly is Paramount. The company told me that it’s “pleased with the analysis” and added, “we regularly provide data to credible and verified third-party research firms and institutes to ensure accuracy and factual representation in any public reporting.”
The LAEDC did refer, in a sidelong way, to what some objective analysts have found to be the financial pressures that a merged company would have to manage, such as a debt overhang of some $80 billion. That will challenge Ellison’s pledge of a stepped-up pace in film production, and places in question Paramount’s suggestion that it can generate $6 billion in savings post-merger by selling off some real estate and consolidating the merged entities’ streaming services, rather than through layoffs.
The LAEDC specified that it didn’t examine “the likelihood or potential impacts of any consolidation that could occur after a successful merger between Paramount and WBD” (that is, Warner Bros. Discovery).
It’s hard to say where someone can go for a fact-based study of what’s at stake in this fight. The most sober analysis may be the one commissioned by L.A. County’s Department of Economic Opportunity from the firm CVL Economics. CVL was pessimistic about the local economic impacts of the merger, which it said would place 4,495 direct film and television job-years at risk between 2027 and 2030. “As those losses move through businesses that support production and the broader County economy,” CVL asserted, “total employment exposure reaches approximately 10,360 job-years.”
CVL was careful to specify that its estimates only reckoned “employment capacity at risk” and wasn’t “a forecast of layoffs.” But it did report, accurately enough, that the merger “would consolidate decision-making within a highly leveraged company at a time when there is less production activity to go around and greater ability to move that activity elsewhere.” Anyone looking for empirical data to help gauge what’s at stake in this transaction would be well-advised to start there.
It would be wise to think about this deal not as an effort to make the entertainment industry more efficient, or to create better movies and TV. As I wrote last year when this deal was first announced, and like most big-money mergers, what the participants typically bring to the table are boatloads of money, and ego. And it’s the second factor that really matters.
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Ideas expressed in the piece
- The article argues that the Los Angeles County Economic Development Corp. (LAEDC) report on the Paramount–Warner Bros. Discovery merger is fundamentally compromised because it was commissioned and paid for by Paramount, yet marketed as “independent” economic analysis, calling into question the neutrality of its projections of massive losses if the merger fails or the company leaves California[7][11].
- In a broader critique, the column contends that commissioned corporate studies routinely masquerade as objective research, noting that business-funded reports have previously exaggerated or distorted economic impacts in policy debates, which makes official-sounding statistics about mergers and labor markets increasingly difficult to trust.
- The piece suggests that the LAEDC’s current work fits a familiar pattern, recalling earlier LAEDC studies on film tax credits that were funded by Hollywood interests and portrayed subsidies as unusually large economic boons, while obscuring the role of industry lobbying in shaping those findings.
- The article argues that the leaked LAEDC draft appears designed to validate Paramount’s preferred narrative: that failure to reach a settlement with state attorneys general would “compel” the company to relocate thousands of jobs out of California, even though such a move would be a strategic choice rather than an economic inevitability and would itself be costly and complex[7][11].
- Moreover, the column contends that the draft treats Paramount’s post-merger “commitment” to produce 30 theatrical films a year as a firm economic anchor, despite the absence of enforceable guarantees and the reality that such pledges can be adjusted later, even as other analysts tally substantial job and spending gains from that production promise[5][7].
- The article argues that the leak of the LAEDC report, which both Paramount and LAEDC publicly deny orchestrating, nonetheless functions as a public-relations asset for the studio by amplifying worst-case scenarios for California and highlighting potential upside if the merger closes, thereby strengthening Paramount’s hand in negotiations with regulators and politicians[7][8][11].
- In contrast to the commissioned LAEDC analysis, the piece suggests that a county-commissioned report by CVL Economics offers a more sober view of the merger’s risks, emphasizing that the transaction could expose roughly 4,500 film and television jobs and 10,360 total job-years in Los Angeles County, along with about $1.26 billion in wages, $4.06 billion in business output, and $547 million in tax revenue, while carefully describing these figures as “employment capacity at risk” rather than guaranteed layoffs[3][10].
- The column contends that serious scrutiny of the merger must grapple with the extreme leverage and debt burden that the combined company would carry—variously estimated around $79–82 billion—which raises doubts about assurances that $6 billion in annual “synergies” will come mainly from consolidating real estate and streaming platforms rather than from job cuts and reduced production[1][6][8].
- Ultimately, the article argues that the Paramount–Warner Bros. Discovery deal should be viewed not as a straightforward effort to improve efficiency or enhance creative output, but as another high-stakes corporate consolidation driven by money and executive ego, with workers, local economies, and independent producers bearing the brunt of the risks[1][3][6][10].
Different views on the topic
- In contrast, a bipartisan economic report by Stephen Moore and Robert Wolf concludes that the Paramount–Warner Bros. Discovery merger would strengthen competition in a media landscape increasingly dominated by large technology-backed platforms, arguing that a larger, better-capitalized studio could invest more heavily in content, streaming technology, and theatrical releases, thereby supporting American jobs and offering consumers a stronger entertainment alternative[2].
- Building on this view, that report contends that the merger’s projected more than $6 billion in annual efficiencies—derived from combining streaming technology, back-office systems, real estate, procurement, and marketing—would expand capacity to invest in production rather than simply drive layoffs, framing cost savings as a mechanism to sustain film and television jobs in the long run[2].
- Separately, an economic analysis of Paramount’s pledge to release 30 theatrical films annually finds that this commitment could generate almost $20 billion in additional U.S. economic activity and support over 90,000 jobs nationwide, suggesting that increased production and distribution could deliver broad gains for theaters, local businesses, and tax revenues across multiple communities[5].
- The LAEDC report itself, while commissioned by Paramount, presents a starkly different perspective from merger critics, projecting that a full corporate exit from California could permanently eliminate between 28,990 and 57,980 jobs and reduce annual economic output by $10.6 billion to $21.2 billion, while also estimating that the 30-film production pledge could add hundreds of millions of dollars in output and more than a thousand job-years in the state over several years[7][11].
- According to that analysis, even a slower retreat tied to merger-related ticking fees and financing costs would carry measurable economic damage, with hundreds of job-years and hundreds of millions of dollars in annual output at risk, reinforcing the argument that keeping Paramount’s headquarters and operations in California through a successful merger is preferable to prolonged conflict or relocation[7].
- Some institutional assessments emphasize that consolidation can proceed with limited harm if carefully managed; a report prepared for Los Angeles County highlights that about 2,495 local jobs and roughly 6,000 positions globally are at potential risk from direct merger-driven consolidation of duplicative corporate and technical roles, but treats these as exposure estimates rather than a forecast of layoffs, implicitly leaving room for mitigation through negotiation and planning[6][9].
- That county analysis, noting that federal antitrust authorities have concluded the merger could help workers by strengthening competition rather than reducing job opportunities, offers a more guardedly optimistic institutional view, suggesting that the transaction might be compatible with labor protections if regulators secure adequate conditions and oversight[9].
- Pro-merger commentators also argue that consolidation is a necessary response to the “endgame” of the streaming era, in which legacy studios struggle to match the scale and technological investment of dominant platforms; from this vantage point, combining Paramount and Warner Bros. Discovery is seen as a last opportunity to build a viable competitor that can sustain costly content production and global distribution rather than face incremental decline[2][4].
- Finally, some advocates maintain that substantial debt loads and aggressive cost targets, while concerning, are common features of modern media deals and can be managed over time, asserting that disciplined integration and strategic investment—backed by the merger’s promised efficiencies and production commitments—could stabilize the combined business and, in their view, ultimately preserve more jobs and creative output than either company could secure alone[1][2][5].
