Warner Bros.-Discovery merger in trouble?

House Dems, Writer’s Guild voice opposition to deal

Media consolidation is a hot topic once again as criticism of recent mergers has Capitol Hill up in arms.

Thirty Democrats in the U.S. House sent a letter to the Justice Department Monday to investigate the proposed $43 billion merger between Warner Media and Discovery Communications – one of many occurring in media industry during the last decade.

The letter was sent to Attorney General Merrick Garland and Assistant Attorney General Jonathan Kanter, who now leads the Justice Department’s anti-trust division. The pols are concerned the merger would reduce competition, reduce voices in the marketplace, and raises serious anti-trust concerns. It stated: “The merger threatens to enhance the market power of the combined firm and substantially lessen competition in the media and entertainment industry, harming both consumers and American workers.”

The letter also stated minorities – notably Latinos, would not benefit, stating the merger would reduce jobs, therefore reduce chances of Latino representation in the business.  “Economic justice cannot be realized without ensuring that all communities — especially low income and minority communities — are protected from the exploitation and abuse that often accompanies concentrated economic power,” the letter said. This is notable given the Los Angeles area – home to Hollywood – is nearly 50 percent Latino, but make up far less in terms of key positions in the entertainment industry, which is more than 85 percent white.

This came on the heels of a report released by the Writer’s Guild of America West Tuesday, stating media mergers in the last decade has not benefited writers, as their base salary has been stagnant since 1995 – not to mention thousands of layoffs across the board.

“This report shows that the existing system of merger review is broken,” said WGA West president Meredith Stiehm.

The report looked at five mergers, including Comcast-NBC in 2010 and most recently, the Disney-Fox merger as the report notes promises made by media companies when they merge are usually not kept. The report also took aim against the Warner-Discovery combo, noting the Disney-Fox merger resulted in Disney controlling two of the four biggest streaming services and cost increases for consumers. The guild also chides the government for failing to enforce anti-trust laws.

You can read the report, Broken Promises, on T Dog Media’s Slideshare page.

At the UBS Global, Technology, and Telecom Conference webcast, AT&T CEO John Stankey – who plans to spin-off Warner Media to Discovery, brushed off any concerns the deal would violate anti-trust laws, calling the concerns “unfounded”.

“I would also tell you that those letters that I’m looking at, relative to maybe some of that have occurred in past transactions, are not very strong in the foundation of their concerns, nor do I have concerns about what they’re articulating in terms of our ability to navigate through that.” Stankey told viewers.

The increased scrutiny comes as the Biden Administration is urging competition, stating that concentration in any industry would not benefit the economy. In November, the Justice Department sued to block Penguin Random House $2.2 billion acquisition of Simon & Schuster from ViacomCBS, a move the WGA applauded, saying the deal would harm writers and authors. Typically, a Democratic administration would take a harder line against media mergers, though the Obama administration approved the Comcast-NBC merger in 2011, tagged with conditions.

Companies are racing to build up scale to combat global powerhouses such as Netflix as viewing patterns are shifting toward streaming. But the real question is at what cost? What we’re seeing is basically a repeat of the same song we saw before when cable TV was growing and when the fin-syn rules went away. Is it building up scale or building up profits? Is it recruiting a racially diverse workforce and paying workers a fair wage? So far, you know the answer and if Stankey thought this transaction was going to coast to the finish line, he should know Trump isn’t in office anymore.

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