Welcome to You’re Probably Getting Screwed, a weekly newsletter and video series from J.D. Scholten and Justin Stofferahn about the Second Gilded Age and the ways economic concentration is putting politics and profits over working people.

Last week dropped a bombshell on Hollywood with streaming giant Netflix announcing a $82 billion acquisition of Warner Brothers Discovery (WBD). The plot has only thickened since, with Paramount Skydance announcing a hostile takeover attempt of WBD to open the week. Caught in the middle of the boardroom drama are the people - actors, writers, directors, PAs, location scouts, editors, etc. - that make up the television and film industry and all of us fans that enjoy the fruits of their labor.

Warner has a massive footprint that includes film and television studios, intellectual property for popular television and movie franchises, streaming services, television networks, and even video game developers. Combining with Netflix would create a streaming behemoth with control over a third of the market and add to Netflix’s growing control over production. Paramount’s takeover bid is no better though. Paramount wants all of WBD, including its cable networks, which would combine CBS and CNN and two of the five largest studios. As former FTC Commissioner Alvaro Bedoya said on MSNBC, “Just because one deal is extremely illegal (Netflix-WBD) doesn’t make the other deal legal (Paramount-WBD).”

There are too many details here to capture in one small newsletter, so to help make sense of what is happening, I reached out to several friends that have worked in the industry for over a decade. Two are in Los Angeles and the other in Chicago and among them include members of the Directors Guild and Editors Guild. All three expressed grave concerns about the acquisition and what it will mean for workers in the industry, the prices consumers pay and the quality of the art produced. “Pretty much everyone I’ve spoken to working in the LA film/television industry is on pins and needles over this potential merger because nobody has felt confident about the state of Hollywood since the pandemic,” wrote Sam who works in post production.

Film and television have had a particularly volatile couple of years with COVID shutting down productions and major strikes in 2023. Amidst those significant events, consolidation and more specifically the growing grip of the streaming companies, has been reshaping the industry. “In essence, beyond the traditional effects any major market consolidation presents to an industry, Netflix creates a unique wrinkle in the situation by its very nature,” Sam said. “When they started producing their own films, the suspicion everybody had from the beginning was that the endgame was always to disrupt how people consumed content.”

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Netflix upending the order of things in Hollywood and beyond is something I heard consistently. Jon, a location manager, said Netflix has a habit of signing complicated deals with creatives that forego short-term incentives in favor of larger long-term ones that are often never realized because Netflix will cancel a successful show. An issue raised during the 2023 strikes was the opaqueness in streaming that leads to uneven compensation for creators. “Anecdotally I’ve seen people say they’ll get $400 checks every time an episode of the show they wrote airs on TV, but a residual from Netflix for like $2.50,” Sam texted me. Beyond the unique practices of Netflix, either of these transactions (Netflix merger or Paramount takeover) would mean one fewer company in an already highly consolidated market competing for workers. We have seen this show before (Microsoft-Activision anyone?) and the finale is usually lower wages and layoffs.

Another unique wrinkle of the Netflix merger my friends worried about is that allowing a studio that accounts for 15-20% of revenues to be subsumed, would dramatically tip the scales in the industry toward streaming. Companies like WBD, Amazon, Netflix and Paramount negotiate with the various entertainment industry unions through a trade association called the Alliance of Motion Picture and Television Producers. Jon told me that divisions emerged during strike negotiations among the streaming giants and the traditional studios. Streamers wanted to artificially prolong the strike and maximize worker pain while the more traditional studios wanted a quicker resolution. Make no mistake, we are talking about massive and powerful corporations on both sides of that divide, but the “tech companies” in this equation are a certain kind of ruthless and a Netflix merger would only strengthen their hand.

A final concern raised in my conversations was what Netflix would mean for the struggling theater industry. Cinema United, a trade organization for movie theater owners, told CNBC the Netflix takeover “would risk removing 25% of the annual domestic box office.” Mergers in the industry have already curtailed the output of movies and television shows, but Netflix has an incentive to curtail theatrical release altogether and already has shorter theatrical releases (the time period where a movie can be shown exclusively in a theater). More bluntly, in the days since announcing the merger Netflix CEO Ted Sarandos has made it pretty clear he wants to upend the theater model even more. All of this is a major threat to an already struggling industry that employs thousands of Americans, not to mention that films themselves are designed to be seen in a theater. “It’s simultaneously a commodity built for consumption while being an art form no different than a painting and music,” Sam said. “So it’s weird totally stripping it down to ones and zeroes.”

None of this is an argument to abandon streaming. We can have streaming alongside theaters and a more competitive Hollywood that fairly compensates people and allows creativity to fully flourish. I believe this because of Hollywood’s own antitrust history. Sarandos has positioned Netflix, much like Jeff Bezos has with Amazon, as the champion of consumers in an industry filled with inefficient nostalgia and protectionism. This despite recent price hikes that will surely intensify under this merger. This is nonsense though, while Netflix is unique and different, the company is simply seeking to engineer another crappy sequel. “It seems like in some ways we were here before in the 40s, worried about studios controlling the whole pipeline, and I don’t understand why we seem to be sliding back into that kind of situation so willingly,” wrote Nick, an assistant editor.

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Nick was referring to the Paramount Consent Decrees, which were agreements studios reached with the Department of Justice following a landmark antitrust case against Paramount in 1948. Those decrees attacked the vertical integration that had monopolized Hollywood, specifically the ability of the major studios to also own movie theaters, allowing for control of the production and distribution of films. Studios used their ownership of theaters to show their movies exclusively, blocking out rival studios or independent filmmakers. Where they did not own the theater, studios would employ block booking. This practice forced theaters to buy a bundle of movies from studios, blocking out rival films. The decrees created a film industry with competition that spurred innovation and creativity and allowed for independent producers and exhibitioners to participate in the industry alongside the giants.

In 2020 the DOJ sunset the decrees, ending the barriers on vertical integration. Since termination of the decrees, Disney has bought Fubo (which owns Hulu) and Amazon acquired MGM. The rationale for sunsetting the decrees is that they were outdated, many of the studios originally named no longer existed and they did not account for the streaming giants. This is all true, but the solution was not to simply scrap the decrees and let massive conglomerates to further corner control of our culture. Instead an updated framework for the industry is needed that recognizes the streamers monopoly incentives are the same as the studios. “If Netflix successfully destroys the theater industry and monopolizes streaming to where they’re predominately your only means of watching a film, it’s no different than when the film studios owned the production companies and the theater chains,” Sam wrote.

This approach to the emergence of streaming is also part of the broken approach to Silicon Valley generally in recent decades. Instead of updating our regulatory frameworks to account for Big Tech’s anticompetitive business models - which are often just the same old monopoly behavior with a new slogan (like the live action version of your favorite animated film) - policymakers have treated these firms as special innovators. Just as problematic is the way some influential commentators have treated media consolidation as either inevitable or not a serious problem. Had this kind of sentiment been the prevailing attitude in the 1940s the Paramount Consent Decrees would have never happened.

The backdrop for those agreements is important to remember. In the late 1930s FDR turned to antitrust and antimonopoly as key to pulling the country out of the Great Depression and fighting fascism. Assistant Attorney General for Antitrust Thurman Arnold engaged in an aggressive campaign of trustbusting and antitrust enforcement including against Hollywood. That aggressive enforcement was in keeping with a popular antimonopoly sentiment that was echoed in the press and a key part of our politics. Consider the anti-chain store movement that was taking place around this time that galvanized small businesses, workers and consumers and prompted politicians from state legislators up to members of Congress to act decisively to challenge the concentrated corporate power pervasive across the country. This is the reboot we need!

The story of Netflix and the monopolization of Hollywood has its unique elements, but is also just part of the broader rise of corporate conglomeration and the indifference toward it from many of our leaders. Like so many other corners of the economy, power is being shifted away from the people actually doing things - farmers, doctors, filmmakers, entrepreneurs and others - into the hands of Wall Street and Silicon Valley boardrooms. It is time to write a different script.

YOU’RE PROBABLY (ALSO) GETTING SCREWED BY:

Hollywood Monopolies

If you want a more detailed discussion on the consolidation ruining film and television I would check out this discussion from two months ago with former FTC Commissioners Lina Khan and Alvaro Bedoya as well as Matt Stoller of the American Economic Liberties Project on Paramount’s attempts to acquire Warner, which is still at play given the hostile takeover attempt mentioned above.

Surveillance Pricing

This week More Perfect Union published a video on a groundbreaking investigation they conducted alongside Consumer Reports and the Groundwork Collaborative to expose the ways Instacart is using surveillance pricing to raise your grocery bill. You can read more here and the MPU video is below.

Artificial Intelligence

Author Cory Doctorow gave a speech for the University of Washington’s “Neuroscience, AI and Society” lecture series called “The Reverse Centaur’s Guide to Criticizing AI” on how to fight the AI bubble and has made the transcript available on his blog.

This is another key to understanding – and thus deflating – the AI bubble. The AI can’t do your job, but an AI salesman can convince your boss to fire you and replace you with an AI that can’t do your job. This is key because it helps us build the kinds of coalitions that will be successful in the fight against the AI bubble.

GOOD NEWS

RPA Unsealing

You might recall that under former Chair Lina Khan the Federal Trade Commission brought two lawsuits attempting to revive the long dormant Robinson Patman Act, a key antitrust law that ensures a level playing field for small businesses. Under Trump’s FTC Chair Andrew Ferguson the agency dropped one of those lawsuits, against PepsiCo and also sealed the complaint the FTC had originally brought in the case. Fortunately the team at the Institute for Local Self Reliance has been fighting to get that complaint unsealed and a judge ruled this week that it should be.

Unfair Pricing Practices Webinar

A final plug to join me and some of the best antimonopoly champions around this afternoon for a webinar on unfair pricing practices and what we can do about it. While geared to Minnesota, these practices are happening everywhere and the solutions will look similar state-to-state so if you are not a Minnesotan, please still join. You can register here.

BEFORE YOU GO

Before you go, I need two things from you: 1) if you like something, please share it on social media or the next time you have coffee with a friend. 2) Ideas, if you have any ideas for future newsletter content please comment below. Thank you.

Break ‘Em Up,

Justin Stofferahn