The European Commission has approved, under the EU Merger Regulation, the proposed acquisition by Paramount Skydance Corporation of Warner Bros Discovery. The approval is conditional upon full compliance with the commitments offered by Paramount.

Paramount and Warner are both active in the production and distribution of theatrical and audiovisual entertainment content, such as films and television series. According to the companies, the transaction will allow Paramount to better compete in the rapidly evolving entertainment industry, which is quickly expanding into streaming.

The Commission investigated the impact of the transaction in the national and European Economic Area (EEA)-wide markets for: the production of films for release in cinemas, the distribution of films for release in cinemas, the production and licensing of AV content, the wholesale supply of television channels, and the retail supply of AV services.

The Commission found that, at film production level, enough film studios remain as competitors in the EEA. These include other major US studios like Disney, NBC Universal and Sony, along with smaller US studios such as Amazon MGM, A24 and Lionsgate, as well as European studios.

However, at film distribution level, the Commission found that as a result of the transaction, there will be high concentration and increased transparency in the EEA countries where Paramount has a structural partnership with Universal, due to the addition of Warner’s film portfolio. The partnership focuses on the distribution of Paramount’s and Universal’s films to cinema operators through their joint venture, United International Pictures. The transaction would have meant Warner’s films were also distributed via UIP and, without the commitments, it would have led to worse rental and distribution terms for cinema operators, ultimately disadvantaging consumers.

As regards the AV value chain, the Commission’s investigation showed that enough alternative competitors remain to exert sufficient competitive pressure on the merged entity in the EEA. In particular regarding the overlap in pay-TV channels for children, the Commission found that streaming platforms offering children’s content will continue to act as a competitive constraint on the merged entity’s TV channels.

To address the Commission’s preliminary competition concerns at film distribution level, Paramount offered the following remedies:

• Termination of Paramount’s stake in UIP in the EEA within 13 months from the closing of the transaction;

• For a period of ten years, Paramount will not, directly or indirectly:

• Enter into any agreement or understanding with Universal to jointly co-distribute films in the EEA;

• Shift the distribution of Warner’s films from Warner’s existing distributor to the theatrical distributor used by Paramount, where that distributor also distributes Universal’s or Disney’s films in all UIP countries in the EEA (that is Bulgaria, Croatia, Czechia, Cyprus, Denmark, Estonia, Finland, Greece, Hungary, Iceland, Latvia, Lithuania, Norway, Poland, Portugal, Romania, Slovakia, Slovenia and Sweden); and

• In the UIP countries in the EEA where Paramount and Universal do not share the same distributor, shift the distribution of Paramount’s films from Paramount’s existing distributor to the theatrical distributor used by Warner, where that distributor also distributes Universal’s or Disney’s films.

These commitments fully address the competition concerns identified by the Commission by ensuring that the films of the merged entity will not be distributed jointly with those of Universal or Disney.

Following the positive feedback received in the context of the market test, the Commission concluded that the transaction, as modified by the commitments, would no longer raise competition concerns.

The decision is conditional upon full compliance with the commitments. Under the supervision of the Commission, an independent trustee will monitor their implementation.

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Categories: Articles, Broadcast, Business, Content, FTA, M&A, Pay TV, Policy, Production, Regulation

Tags: EC, European Commission, Paramount Skydance, warner bros discovery