The Justice Department has approved the merger of Paramount and Warner. The European Commission cleared the deal with a slim remedy. A number of states sued to stop it.
So how did three agencies investigating the same transaction come to such different conclusions?
On market definition, there is clearly a disagreement. The states are looking at potential blockbusters and see Paramount and Warner as two of only a handful of big suppliers. The DOJ and the EU think there is a wider and more lively pool of rival studios.
But that’s only the first question of market definition.
Even if the blockbusters are a separate market, regulators still have to figure out how to measure the competitive significance of each studio. States rely on historical box office receipts. But box office receipts are a function of audience demand, marketing, timing of release, screen allocation, and negotiated licensing terms, not simply bargaining power.
In this episode we discuss the following:
why blockbusters might constitute a separate product market;
the rationale for the licensing of theatre on negotiated financial and non-financial terms;
where exhibitors obtain bargaining power;
why box-office shares can be useful but incomplete evidence;
and why winning the market-definition debate does not necessarily determine the meaning of the resulting HHI.
The main issue is not whether Paramount and Warner are big studios. The question is whether this physical separation materially improves the exhibitor’s alternatives in negotiations.
Read the full article and graphic analysis:
One Merger, Three Answers
The Department of Justice closed its review of Paramount Skydance’s acquisition of Warner Bros. Discovery without requiring a divestiture. The European Commission cleared the same transaction with one narrow remedy. A coalition of state attorneys general sued to block it.
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