Lawmakers urge DoJ for post-merger review of Warner Bros. Discovery

Four Democratic members of Congress are urging the U.S. Department of Justice to conduct a post-merger review of Warner Bros.-Discovery (WBD), asserting that since the WarnerMedia-Discovery transaction closed the new company has hurt jobs and limited consumer choice.

Senator Elizabeth Warren (D-MA), Representative Joaquin Castro (D-TX), Rep. David Cicilline (D-RI), and Rep. Pramila Jayapal (D-WA) sent a letter last week to Attorney General Merrick Garland and antitrust chief Jonathan Kanter, urging the department to investigate the state of competition in labor and consumer markets after the merger, which they claim allowed WBD to potentially adopt “anticompetitive practices that reduce consumer choice and harm workers in affected labor markets.”

Warner Bros. Discovery completed its merger of Discovery Inc. and AT&T’s WarnerMedia and in April 2022, with no challenge to the deal from the DoJ.

The letter points to several actions by WBD since then, taking aim at a strategic content review that resulted in canceled projects (such as the $90 million “Batgirl” film which was dropped after it was already in post-production) and pulled 68 titles from HBO Max (some of which found other homes but some which can’t be found on other platforms) as the company looked to content write-offs and cost savings.

“WBD’s new ownership is hollowing out an iconic American studio,” wrote the politicians regarding cancelled projects and content cuts post-merger.  

The lawmakers said their examples “are merely a prelude of what could come as WBD plans further cuts,” asserting WBD’s conduct around content amounts to a “catch and kill” practice that they said vastly limits consumer choice.

“The damage to content creators whose projects are cancelled in deep development and post-production cannot be overstated,” they said in the letter.

With some titles pulled from HBO Max, certain shows like “West World” and “The Nevers” have become available to third parties as WBD looks to save on residuals and drive revenue, with availability of those two series among others on Tubi and The Roku Channel under FAST content deals inked in early 2023.

In October WBD disclosed expectations for up to $4.3 billion in restructuring charges, including $2 billion - $2.5 billion from content and development write-offs related its strategic assessment of content programming. In a December 14 filing with the SEC, WBD revised its original estimate upward, instead expecting $2.8 billion to $3.5 billion in content impairment and development write-offs.

Speaking at an investor conference in January, WBD CFO Gunnar Wiedenfels noted that WBD had right-sized its content spend, suggesting public pushback over its actions were reflective of “an industry that went overboard and that went on a spending frenzy.”

“We shaved off a lot of the excess last year, and I think that’s something that everyone else in the industry is going to go through,” Wiedenfels said at a Citi investor conference, adding that content adjustments are something WBD now has behind it.

In the letter to antitrust officials, lawmakers, meanwhile, also pointed to WBD cost-cutting efforts that reduced headcounts, including layoffs at CNN and other units that “affected thousands of people,” as well as the forthcoming combined streaming product of HBO Max and Discovery+. The letter noted the expected $20 price tag for a premium plan, with lower price point options between $10-$16 per month for less premium plans with both ad-supported and ad-free options.

“This leaves questions unanswered about whether a lower-priced platform will have reduced quality from the current product – while consumers are paying the same price and lack the transparency necessary to fully evaluate their relative prices,” the politicians stated. “With fewer alternatives available to consumers, there is less competitive pressure on WBD to innovate or provide a variety of quality content.”

While WBD hasn’t disclosed all of the details around the forthcoming streaming service, it’s scheduled to hold a presentation this Wednesday to provide an update on the combined HBO Max/Discovery+ platform.

WBD is also targeting a further $3.5 billion in cost savings, which the politicians believe “does not bode well for workers.”

Despite calls for a post-merger investigation, the letter doesn’t appear to expect the DoJ to break up the combined Warner Bros. Discovery but hopes the transaction’s competitive consequences “inform updates to merger guidelines to ensure that the guidelines reflect the needs of workers, consumers, and content creators in the media and entertainment industry.”