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Paramount is looking to convince California’s attorney general that its blockbuster deal to acquire Warner Bros. Discovery will be a boon to movie theaters.
Theaters will be a key part of the combined company’s plans to boost engagement on streaming platforms in order to compete in a crowded playing field led by Netflix, Disney and Amazon, Paramount Chief Legal Officer Makan Delrahim told California Attorney General Rob Bonta in a letter last week. He wrote that Paramount saw “the potential to compete with its much larger competitors” by “leaning into theatrical releases to attract audiences and ultimately subscribers.”
“Theatrical screenings build awareness and anticipation through marketing and word of mouth, and then help convert that demand into viewing when the title later becomes available (and promoted) on the platform,” the message, first published by Semaphore, said. “With a continued focus on theatrical distribution, Paramount is gaining opportunities to cross-promote and engage new audiences for future releases.”
The letter comes as Paramount, which has received approval from shareholders and the board of directors of Warner Bros. Discovery, prepares to avoid a lawsuit challenging the merger from government regulators. Any effort on this front will almost certainly be led by Ponta. “There are red flags everywhere for us,” he told reporters during a news conference on Monday. “We’re looking at things like higher prices, lower wages, fewer jobs, lower quality, less choice, and less competition.”
Paramount stressed in the letter that it will expand theatrical distribution with the goal of creating momentum behind films before they reach streaming services. To compete with streaming giants like Netflix, Amazon and Disney, it said it plans to maximize theatrical production.
An example of a film that teaches corporate thinking: Top Gun: Maverickwhich broke streaming viewership records on Paramount+ in 2022 after a theatrical run that grossed more than $1.4 billion. The release also increased engagement with the catalog on the platform, leading to a nearly 400 percent increase in viewership for the original film and the Tom Cruise-led film. Mission: impossible She said the franchise increased by 140 percent. Last year, Paramount CEO David Ellison called for an expansion Top Gun, Star Trek and transformers Perks are a top priority.
The deal’s impact on theatrical distribution will likely play a major role in the antitrust suit. Historically, Paramount and Warner Bros. Discovery has accounted for nearly 25 percent of its total domestic box office revenue over the past five years, according to OpusData. The merger would make the company the nation’s largest theatrical distributor by most estimates. Ellison pledged to release at least 30 films a year with a running period of at least 45 days, although this commitment raised skepticism in some parts of Hollywood.
However, unlike its theatrical business, the combined company will only have a small share of the streaming business. Paramount and Warner Bros. Discovery combined accounts for roughly 10% of total online viewership, well below the likes of Netflix (32.5%), Disney (16.7%), and Amazon (15.3%), according to Nielsen data.
The deal sparked comparisons to the merger of Disney and 21st Century Fox in 2019, which saw fewer films released in theaters by the entertainment giant in the following years.
Regulators are one of several groups — including the European Union, the FCC and consumers — that could pose an obstacle to completing the acquisition. Paramount+ subscribers filed a lawsuit last month challenging the deal, claiming the acquisition would significantly reduce competition in streaming, news and theatrical distribution in violation of antitrust laws.
