Employment in Hollywood has already been bleak. But with the impending sale of Warner — whether its the whole company to Paramount or the studios, HBO and HBO Max to Netflix — that picture could become even dimmer.
Industry workers fear that a consolidation between two major players in Hollywood could further decrease production and lead to the sweeping job cuts that typically occur after big corporate acquisitions. Many have pointed to the downsizing that followed Walt Disney Co.’s $71-billion purchase in 2019 of much of Rupert Murdoch’s Fox entertainment assets.
More than 4,000 people lost their jobs, according to industry sources. As part of the tie-up, Disney dramatically scaled back the staff and movie pipeline at the once prolific 20th Century Fox movie studio and eventually folded much of Fox’s TV production operations into an ABC-led studio. A parade of film executives shuffled out the door.
“We’ve seen this play out,” said Kevin Klowden, an executive director at the nonprofit Milken Institute Finance. “It’s going to happen again.”
Discovery’s takeover of the Warner assets in 2022 also prompted successive rounds of layoffs, and the Larry Ellison family’s purchase in August of Paramount has prompted more than 2,000 job cuts.
Both Netflix and Paramount have told Wall Street analysts that their takeover plans for Warner would involve cost cutting.
Paramount has promised more than $6 billion in cuts over three years, Andy Gordon, Paramount’s chief operating and chief strategy officer, told analysts during a Monday call.
“We feel confident in our $6-billion number after doing due diligence extensively with Warner Bros.,” said Gordon, a prominent former Goldman Sachs banker.
Some analysts predicted that Paramount’s deal, should it be successful, would lead to the elimination of at least 6,000 jobs and prompt other cutbacks that would ripple across the industry, including a decline in film and TV production and the staff to make, market and distribute programming.
For his part, Paramount Chief Executive David Ellison has said a Paramount-Warner Bros. union would lead to a surge in movie production because he wants the joint studio to release at least 30 films a year.
“We really view this as our deal is completely pro-competitive, it’s pro-creative talent, it’s pro-consumer as opposed to the combination with Netflix would give them such a scale that it would be bad for Hollywood and bad for the consumer and is anti-competitive in every way,” Ellison said.
Each company owns a movie studio, television production arm, more than a dozen cable channels and prime real estate. Paramount owns the storied Melrose Avenue lot and Warner has a tony campus in Burbank. The company would control both CNN and CBS News and could combine operations.
“This almost certainly means various types of value engineering of their operations, which probably means some form of job cuts, paring down duplicative areas and probably more of an embrace of AI and all the types of things that in Hollywood people get itchy feet about,” said Columbia Law School professor Eric Talley, an expert on corporate finance.
Netflix’s acquisition of Warner might also lead to cuts, although not as much right off the bat, analysts said. That’s because Netflix lacks a robust movie studio and television production capabilities on the scale of Warner Bros. or Paramount.
“Netflix is a little bit less of an automatic job-cut synergy picture because they don’t have the legacy studio properties that require their own dedicated administration,” Talley said. “It’s a bit more like fitting two puzzle pieces together, side-by-side, rather than putting one on top of the other,” such as a combination of Paramount and Warner Bros.
Netflix has said its proposed takeover would lead to $2 billion to $3 billion in cost cuts, mostly in the acquisition of services and goods.
“Think of it as support areas of the business where there’s overlap, there’s also overlapping tech stacking capabilities,” Netflix Chief Financial Officer Spencer Neumann told analysts in a Friday conference call. Eventually, there would be cutbacks in programming costs, “but that’s not the bulk of the savings,” Neumann said.
Because Paramount wants to buy all of Warner Bros. Discovery, including its cable channels, unlike Netflix, which only wants Warner Bros. film and TV studios and HBO, there are expected to be more cuts.
Netflix executives have portrayed the deal as a job creator, saying the company’s original productions have employed 140,000 people from 2020 to 2024 and that it has used 500 independent production companies to make about 1,000 original projects.
Netflix is building a studio in New Jersey, as well as expanding its operations in New Mexico and its film base in Hollywood.
“Beyond just the jobs, we’re also producing — we’re also investing in the entertainment ecosystem,” company co-Chief Executive Ted Sarandos told investors at a UBS investor conference Monday.
“In the offer that Paramount was talking about today, the Ellisons were talking about $6 billion of synergies. Where do you think synergies come from? Cutting jobs,” Sarandos said. “So we’re not cutting jobs. We’re making jobs.”
However, industry analysts predicted that if Netflix absorbs Warner, the labor-intensive business units would undoubtedly be scrutinized and could ultimately be downsized.
“There might be great advantages for those on Wall Street but I’m greatly worried about the middle-class workers in the industry,” said Daniel Green, a former TV production crew member who now directs a masters program on entertainment industry management for Carnegie Mellon University. “People who are below the line are already suffering.”
Hollywood still hasn’t fully recovered from the effects of the COVID-19 pandemic emergency, which stymied production and temporarily shut movie theaters, a move that inadvertently changed audience viewing habits and encouraged them to watch more films from home.
There was a temporary reprieve during the so-called peak-TV era, when studios poured money into making shows and movies for their streaming services to build up their platforms in a bid for viewership. But the flurry of activity stopped as those platforms lost money and studios chose to cut back.
Then came the dual writers’ and actors’ strikes in 2023 that put a damper on production again.
This year alone, Disney, Warner Bros., NBC News and Paramount laid off workers.
The contraction in the Southern California’s bedrock entertainment industry — further fueled to the flight of production to cheaper locales — has contributed to a massive economic hit to California, which had the most layoffs of any state through October, behind only Washington, D.C.
“In L.A., where Hollywood’s already reeling … the next phase in all of this is looking at what other shoe is going to drop,” said Klowden of Milken Institute Finance.
For now, the outcome is in flux.
Paramount offered Warner shareholders $30 in cash for all outstanding shares — a $77.9-billion expenditure. Paramount’s deal requires $41 billion in equity, backstopped by Larry Ellison’s family and RedBird Capital Partners, according to a regulatory filing. Joining with an ownership stake would be President Trump’s son-in-law Jared Kushner’s investment firm, Affinity Partners, and sovereign wealth funds from Saudi Arabia, Abu Dhabi and Qatar.
Paramount said in its regulatory filings that the Middle Eastern funds would forgo having a say in the media company’s operations.
Paramount would also need more than $60 billion in debt financing. Apollo Capital Management, Citigroup Global Markets and Bank of America have agreed to step up to finance the debt.
That would leave the company saddled with billions more in debt than David Zaslav inherited when his smaller Discovery took over WarnerMedia in 2022. That debt came, in large part, from a $43-billion dividend that Warner Bros. Discovery paid AT&T to exit.
“We want to bring our proposal directly to WBD shareholders to evaluate a clearly superior proposal across both economic value and regulatory certainty,” David Ellison said on Monday’s call. “They deserve that choice.”
Netflix has said it intends to fund the transaction through a mix of cash on hand, new debt financing and its stock, which would leave it with less debt.
Netflix’s bid is 84% cash and 16% stock.
But analysts wonder whether either company will be able to steer the deal through regulatory approvals in the U.S. and abroad.
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