What the Warner Bros. Discovery bidding war could mean for audiences

The Hollywood blockbuster battle to buy Warner Bros. doesn’t seem like it’ll be ending anytime soon. Paramount continues to try to appeal to individual shareholders — while it looks like Warner Bros. Discovery still favors the bid from Netflix.

Regardless of where Warner Bros. ultimately goes, this deal will surely shake up the business of making movies, whether you’re watching from a movie theater or from the comfort of your own couch.

“Marketplace Morning Report” host Sabri Ben-Achour met Yeshiva University finance professor Abraham Ravid at an Upper West Side movie theater to ask him more about the future of movies, depending on how the deal plays out. The following is an edited transcript of their conversation.

Sabri Ben-Achour: So you know, we're here in the, inside the theater. You can smell the popcorn. When was the last time, do you go to the movies? When was the last time you went to one?

Abraham Ravid: I go to the movies if there are special occasions, like the festival, meeting with directors. Otherwise, I only watch streaming.

Ben-Achour: Really, really? Why is that?

Ravid: Well, because, you know, getting here today, it's a lot more complicated, and I have a very nice screen at home and a projector, so I basically do what I need to do.

Ben-Achour: We don't know who's going to win this fight over Warner Brothers, whether it's going to be Paramount, the old school media company, or Netflix, the streamer. What difference would it make to viewers who wins?

Ravid: So, it seems to me, it would be slightly better for viewers if Paramount and Warner merge. I mean, Netflix’s idea is to be the first in streaming, and then they want to vertically integrate. All in all vertical integration is not very good for consumers and generally not very good for companies, unless there is no competition.

Ben-Achour: Why is that?

Ravid: Because you as a consumer, you would like to see whatever movie you want. If there is vertical integration, you know, they could just shut out the competition.

Ben-Achour: We're actually standing right in front of a giant “Spongebob Squarepants” movie ad. And over there, there's “Zootopia 2.” These movies are here in theaters. Netflix movies do not usually come through theaters, at least not for very long. Will it want to send Warner Bros. movies into theaters as often or for as long as Paramount might?

Ravid: They claim they do. They will have to send movies to theaters for at least a week if they want them to be in the Academy Awards, although the academy might change the rules, it's not clear that they will not shrink the window further. Over the last 10 years, the theatrical window has been shrinking.

Ben-Achour: This has got to be a concern for theaters like this, one or smaller theaters too, I imagine.

Ravid: Yes, I think theaters should be concerned, regardless of this. I want to give you one number, which I think is really tells the story. So if you look at the number of theater goers per population, at the height of the number of tickets that were sold, which was 2003, on average, each American bought about 5.2 tickets. Last year, it was 2.2.

Ben-Achour: Wow.

Ravid: It just continues to slide now.

Ben-Achour: The Warner Bros. we’re talking about was formed from a merger between Warner Media and Discovery in 2022 and one thing that happened then, that I found to be so insane, is they literally shelved fully made movies to get a tax write off. Would that happen again, do you think?

Ravid: It certainly is a business strategy. In other words, if you have a movie that you have made and you don't think it's any good, what are you going to do now, marketing is very expensive. Marketing tends to be a significant percentage of the overall cost of the movie. So by shelving a movie, you save the marketing costs, and if you don't think you're going to make any money, then a tax write off might be the right thing to do.

Ben-Achour: “Avatar 3” is showing in this theater. Now, “Avatar” used to be owned by 20th Century Fox. Now it's owned by Disney. It's still here. Does consolidation in the entertainment industry mean fewer movies?

Ravid: In principle, not necessarily. In practice, they might decide to have fewer movies at every point in time, so that there's no competition. So, their own movies will not be competing with each other, so that, basically, you might at every point in time you might have fewer movies. On the other hand, studios are now also trying to strategically time their releases so that they're not competing with some big movie from another studio. So I don't think it's clear.

Ben-Achour: So, if it's not clear whether consolidation means fewer movies get made, does consolidation make movies more boring? Like the bigger the audience the film is intended for, the less edgy it is?

Ravid: I think what happens is if you’re a movie maker, you have fewer places to go, then you will have to cater to the studio that you're going to. Let's assume that they all consolidate, one big studio. So, if the studio chief doesn't like what you're offering, you're on your own. If there are five studios, you can go and make competing offers to other studios.

Ben-Achour: Are there any movies coming out soon that you really want to see?

Ravid: I would really like to see, of the movies playing now and I haven't seen yet. Marty — what is this thing called? “Marty Supreme,” sounds interesting.

Ben-Achour: That's playing here. You can see that now if you want.

Ravid: Oh, all right, maybe I'll stay and watch it then.