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DOJ asked to review Warner Bros. Discovery merger

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Four Democrats in Congress have asked the U.S. Department of Justice to review the Warner Bros. Discovery merger, alleging the deal is responsible for “hollowing out an iconic American studio.”

In a letter Friday to Atty Gen. Merrick Garland and Assistant Atty. Gen. Jonathan Kanter, the lawmakers cited “harm” caused by last year’s union of the two media companies, which prompted layoffs of thousands of employees in Los Angeles, New York and Atlanta.

Opportunities for Latinos and other artists have been reduced because the merger “heightened barriers to entry in the media and entertainment industry,” the lawmakers wrote.

Warner Bros. Discovery has wiped out hundreds of millions of dollars in programming in recent months, projects that provided jobs for hundreds of workers. The studio canceled the $90 million movie “Batgirl,” to qualify for tax benefits. The film was to feature the first Latina superhero in the DC Comics franchise.

The company also dumped an upbeat HBO Max comedy series with a Latino cast, “Gordita Chronicles”, after only about a month on TV.

Saturday marks the one-year anniversary of AT&T’s $43 billion consolidation of its WarnerMedia with cable programming firm Discovery. The transaction minted a larger media giant but it also saddled Warner Bros. Discovery with more than $50 billion in debt. Since then, the company has been struggling to control its huge debt load and has prioritized cost-cutting.

“There have been massive layoffs. Content creators, in many cases, have been hurt,” Rep. Joaquin Castro (D-Texas) said in an interview. “And some consumers are holding on to TV and streaming subscriptions that feature less content than a year ago.”

Castro was joined by Sen. Elizabeth Warren (D-Mass.), Rep. David Cicilline (D-R.I.) and Rep. Pramila Jayapal (D-Wash.) in sending the letter that asks the DOJ “to investigate the state of competition in affected labor and consumer markets following the consummation of this merger, which appears to have enabled Warner Bros. Discovery to adopt potentially anticompetitive practices.”

A Warner Bros. Discovery spokesman declined to comment.

Despite the criticisms of high-profile members of Congress, it would be highly unusual for the DOJ to try to unwind a merger that already received the blessing of regulators.

At the least, Castro said the DOJ, which is currently reviewing how best to modernize and enforce antitrust laws, should look at the Warner Bros. Discovery merger as an example of why some deals should not be approved.

“It isn’t done too often, but there are some actions here that are also somewhat unprecedented,” the Texas lawmaker said, citing Warner Bros. Discovery’s controversial decision to jettison “Batgirl” after filming was complete and the project was in post-production.

The decision to kill the movie stunned Hollywood insiders. Dumping a movie after shooting is completed, especially one with such a high profile, is exceedingly rare. Choosing to not release a film of the size of “Batgirl,” meant the company had to eat substantial costs. Warner Bros. Discovery executives said privately that the film did not perform well for test audiences.

“For the sake of a tax write off, because the company is carrying so much debt as a result of the merger, they canceled it,” Castro said. “If there had been no merger, that movie would have ended up going to theaters and on the streaming platforms.”

Earlier this year, the chief executive of DC Studios, Peter Safran, said that while there were “a lot of incredibly talented people in front of and behind the camera in that film but [it] was not releasable.” He credited Warner Bros. Discovery Chief Executive David Zaslav and his team for making “a bold and courageous decision to cancel it, because it would have hurt DC and those people involved.”

In addition to Warner Bros. Discovery, other media companies, including Walt Disney Co., have been cutting thousands of jobs as Wall Street has become worried about the high cost of launching successful streaming services.

A Justice Department spokesperson on Friday confirmed the department received the letter, but declined further comment.

Over the last few years, Castro has emerged as one of the strongest voices for increasing diversity in U.S. media. After the 2019 mass shooting at a Walmart in El Paso, which killed 23 people and injured dozens of others, the San Antonio congressman has looked closely at Hollywood’s portrayal of Latinos because of a recognition that people’s attitudes of others can be shaped by media consumption.

Zaslav, in the run-up to the merger, touted to Wall Street that his team would find $3 billion in annual cost savings after the merger.

Last fall, Warner Bros. Television canceled its writers and directors workshops amid cost-cutting. However, the company reversed the move amid protests that it was axing one of the few programs that nurtured diverse talent.

The lawmakers also pointed to CNN cuts, which eliminated hundreds of jobs at the cable news network.

“WBD is trying to sustain its entertainment business at the expense of news and journalism,” the lawmakers wrote.

Chief Executive David Zaslav’s first move after the merger was to close the nascent CNN+ streaming service. His team also dismantled CNN’s documentary film unit, which had been an important stop for film producers.

The four lawmakers have spoken out about the Warner Bros. Discovery deal before.

They led a group of more than 30 lawmakers who raised concerns about the proposed merger in late 2021, four months before the merger was complete.

At the time, the group told Garland and Kanter, who oversee the antitrust division, that the union “raises significant antitrust concerns.” They questioned the fate of such legendary properties as CNN, HBO and the Warner Bros. film and TV studio.

AT&T and Zaslav have long maintained the deal was not anti-competitive because Discovery was much smaller than WarnerMedia, and the combination of the two companies did not reduce the number of Hollywood studios because Discovery did not own its own movie studio before. Discovery owned such channels as Animal Planet, Investigation Discovery, TLC, Food Network and HGTV.

“We have stayed on top of the results and consequences of the Warner Bros. Discovery merger, and have been quite disappointed because a lot of the things that we feared have come true,” Castro said.

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