Paramount Deal and U.S. Film Incentive Reflect Hollywood’s Deepening Ties to Government

Last week, politicians decided they could not let Hollywood slip away.

First, California Gov. Gavin Newsom pushed for a resolution of the Paramount antitrust case out of fear that the studio would leave the state. And in Congress, Republicans and Democrats joined to introduce a U.S. film incentive, recognizing they are at risk of losing a critical industry to foreign competition.

In short, it was the week that Hollywood became too big to fail.

“The American government has never done this,” says Stephen Galloway, dean of the Chapman University film school. “You have the government stepping in and not saying, ‘How can we prevent you from causing damage?’ Instead, they’re saying, ‘How can we prevent you from being damaged?’ That’s a fascinating turn.”

In both cases, the result is a deepening integration with the state. The Paramount antitrust settlement entails five years of government monitoring and commitments to keep ownership of studio lots, to produce a certain number of films and to install an oversight board as a watchdog for news networks CBS and CNN.

Neither side in the merger battle wanted this outcome. Paramount CEO David Ellison wanted to buy Warner Bros. Discovery without conditions but was willing to accept some state intrusion as the price of scale. California Attorney General Rob Bonta, meanwhile, wanted to block the deal outright or at minimum force divestitures.

“Structural remedies are always preferable to behavioral,” said Paula Blizzard, Bonta’s antitrust chief, at a seminar on Sept. 14, “because the government gets in, it says, ‘Change the structure; get more competitors,’ and then the government gets out.” A behavioral solution, she added, would require the state to become a “de facto participant” in the market.

Just a week later, Bonta flipped and announced a package of behavioral remedies. The consent decree requires Paramount to release at least 30 films a year and to negotiate WBD and Paramount cable carriage contracts as separate entities. The deal even requires Paramount to quadruple its U.S. production volume if a federal subsidy is adopted.

Bonta’s critics called the deal a “cave.” Compared with blocking the merger, it is. But it also commits the attorney general’s office to enforcing Paramount’s production levels in an unprecedented way.

“If we think that there is a problem, then we are going to initiate the court process,” Blizzard told Judge Araceli Martínez-Olguín at a hearing on Sept. 24. “This is an area where it may come back to you.”

Hollywood has historically been wary of government involvement, whether in the form of censorship or via anti-monopolization efforts. But unions and studio chiefs celebrated last week’s developments.

“In almost every instance, Hollywood by and large resisted and was scared of interference,” Galloway says. “The contrast is that these two moves are by and large welcomed by Hollywood.”

Democrats often decry “corporate welfare,” but have long made an exception for Hollywood studios, which provide union jobs. Now Republicans are coming around too. Last year, Texas increased its state incentive and offered bonuses for “faith-based” projects and films that promote Texas heritage.

“The cultural aspects were used to get more traditional fiscal conservatives on board with something that could be seen as a Hollywood handout,” says Pete Johnson, a media industry researcher and visiting assistant professor at New York University, who sees Texas as a precursor to President Trump’s backing of a federal film incentive.

Across party lines, the fear of losing Hollywood has proved a powerful motivator. Paramount’s threat to leave California spurred action from Newsom and L.A. Mayor Karen Bass. And the end of Peak TV and the decline in production jobs have galvanized support for incentives.

Sen. Tim Scott is a Republican from South Carolina — not exactly a film hub — but even he is a fan. “We cannot stand by as more and more American film production moves overseas,” he said last week, “taking jobs, investment and an important source of American cultural influence with it.”

Pictured: Paramount CEO David Ellison attended President Trump’s state dinner on Sept. 24, capping a historic week