Study Warns Paramount-Warner Bros. Discovery Merger Would Upend Tax Incentives
A new academic study warns that a proposed merger between Paramount and Warner Bros. Discovery would grant the combined entity unprecedented leverage to extract favorable state tax subsidies, potentially destabilizing local film production economies.
Media academics Peter Johnson and Cale Epps have published a study arguing that a potential merger between Paramount and Warner Bros. Discovery would fundamentally disrupt local and state tax incentive programs. The researchers contend that combining the two entertainment giants would drastically alter the balance of power in subsidy negotiations.
For investors and market analysts, the findings highlight a hidden regulatory risk in the consolidation of the media sector. A unified entity would possess the market size to threaten relocating productions, thereby forcing state legislatures to offer higher subsidy rates and lower budget minimums.
The authors argue this dynamic would weaken public bargaining power and intensify both interstate and international subsidy competition. Consequently, the study predicts a reduction in production across mid-tier markets and increased instability for local vendors, workers, and infrastructure.
To illustrate this leverage, the researchers point to the studio’s recent lobbying efforts in Texas. In 2023, the company successfully persuaded state Republicans to enact financially favorable changes to local production laws.
These efforts were aided by a visit from Yellowstone producer Taylor Sheridan to Lieutenant Governor Dan Patrick. Following the meeting, Patrick publicly praised the filmmaker and outlined his legislative ambitions for the state.
“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 legislative outcome directly benefited the corporate bottom line. Texas lawmakers slashed in-state labor minimums from 70 percent to 55 percent in 2023.
Further reductions to 35 percent are scheduled for 2025. These policy shifts allowed the studio to import its own out-of-state workforce rather than hiring locally.
The study notes that such maneuvers ultimately impede the growth of a trained local workforce. This underscores the broader economic consequences of media consolidation for regional economies.
