LOS ANGELES, CA – AUGUST 27, 2014 – Director David M. Rosenthal, in white, talking strategy with cameraman BJ McDonnell on the set of the movie “The Perfect Guy”, on Nichols Canyon Rd. on the Hollywood Hills, August 27, 2014. There’s a bill speeding through the state Legislature to quadruple tax credits for location shooting which will keep hundreds if not thousands of jobs in California, experts say, and help reverse the trend in which big-budget films and TV shows have increasingly fled here for lucrative incentives in other states. (Photo by Ricardo DeAratanha/Los Angeles Times via Getty Images)
Los Angeles Times via Getty Images
A new study from two media industry academics argues that one of the underappreciated consequences of a successful Paramount merger with rival Warner Bros. Discovery would be an upending of the current system of local and state tax incentives which have become an integral part of the movie business.
Authors Peter Johnson and Cale Epps argue a Paramount-Warner Bros. merger would “strengthen one studio’s leverage within this system, weaken public bargaining power, intensify interstate and international subsidy competition, reduce production in mid-tier markets, and increase instability for local workers, vendors, and infrastructures.”
One consequence of the merger would be to strengthen the combined company’s ability to push for changes to tax incentive programs (e.g., higher subsidy rates, lower budget minimums, lower local employment thresholds, grants over credits, etc.). The consolidation also makes it more likely a larger company would use its market size to threaten to move production to a more financially lucrative state. And use that threat to extract more favorable conditions from state legislatures.
The study provides two examples of Paramount using its market power in order to try and change the tax incentive structure in its favor.
Taylor Sheridan and Texas Lt. Gov. Dan Patrick
The office of Lt. Governor Dan Patrick
In 2023, Paramount persuaded Republicans in Texas to provide a series of financially favorable changes to the state’s production laws. The effort included a visit by Yellowstone producer Taylor Sheridan to Lt. Gov. Dan Patrick.
“On Monday night, I had a great dinner with Yellowstone creator Taylor Sheridan and gave him a tour of the Senate. He has incredible talent and an amazing success story. He’s the best screenwriter of our time and one of the best storytellers ever to make movies. Best yet, he’s a Texan and gets Texas. My goal is for Taylor to move all of his TV and movie production to Texas. Working together, I think we can get it done.”
The Texas legislature then slashed the in-state labor minimums were slashed in 2023 from 70% to 55% and later cut the minimums to 2025 to 35%, which allowed the studio to bring in its own out-of-state workforce. A move which further impeded the growth of a locally-based trained workforce.
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