Antitrust in the Streaming Age: Why the Paramount–Warner Deal Deserves a Modern Analysis

Jennifer Huddleston and Christopher Gardner

In July 2026, a group of 12 state attorneys general brought an antitrust challenge to Paramount’s takeover of Warner Bros. Discovery. Now, a judge has granted an order restraining the transaction for at least 14 days and preventing it from closing on July 22 as planned. It is possible that, regardless of the outcome of the case, the litigation could further delay the transaction.

The state case focuses on the potential impact of the transaction on movie theaters and basic cable distributors. But does this correctly understand the current entertainment market consumers experience?

Innovation has changed the nature of entertainment significantly over the last few decades. Today’s consumers are no longer limited to basic cable and movie theater options but have a plethora of choices, including streaming, video on demand, and traditional home video methods like DVDs. In considering the entertainment landscape, competition must be viewed not as it existed in a prior era, but as the reality consumers choose from today. 

The gap between market theory and consumer reality emphasizes the utility and importance of the consumer welfare standard and not a subjective belief about what the market should be made up of. The consumer welfare standard is not just a legal abstraction; it requires an objective analysis of a merger’s economic impact on everyday Americans. This standard considers a variety of consumers and could refer to either creatives or consumers, but it must not define the market more narrowly than it exists.

The states allege the Paramount-Warner Brothers merger will allegedly increase the market share of the subsequent firm to ~30% in three key markets: wide release theatrical film distribution, anticipated top-grossing theatrical film distribution (“a submarket of theatrical film distribution”), and licensing basic cable television channels. But how Americans access entertainment and what it means for theatrical film creation and distribution has changed as more options have entered the market. 

In short, this market definition is likely narrower than what creatives or consumers actually experience. It also makes the presumption that market share alone is enough to prove harm rather than looking at the actual impact of a large company.

Creatives have more choices when it comes to how they distribute their features, and consumers have more choices to access forms of entertainment at lower costs. Consider the example of a newly released blockbuster film. Consumers who place a high value on the movie theater experience will be willing to pay the $12.75 per person for a ticket. Others may choose a growing “on demand” market at a lower cost that will enable the whole family or friend group to watch at home or wait for a movie to appear on their streaming service of choice, and thus be included in a cost they already pay for. In each context, the content is fundamentally the same. Each distribution channel, whether over streaming, cable TV, or movie theaters, is often a substitute for another, and consumers have increasing access to lower-cost options than in the days when the only or primary option was to pay for a theatrical experience or purchase the physical media permanently. 

Consumers often have multiple services and low switching costs when choosing one over another. Consumers may subscribe and then cancel particular services to find the best combination that fits their needs. The rise of more options through specialized services or streaming services with broad libraries has also lowered the cost of entertainment more generally. Through January of 2025, the average consumer of bundled cable or satellite television paid $187.99 monthly. This is compared to the average monthly cost for unbundled cable or satellite TV at $121.86. The average consumer accessing live TV through streaming paid a monthly cost of only $73.47. Customers who only want access to more specialized portfolios can find even lower costs. 

But theatrical film releases in general face more competition than before. In 2024, consumers only spent 15–18 percent of their screen-based leisure time watching movies. Since 2022, the total time per week watching TV and movies has also fallen by a little under 10 percent. Increasingly, consumers and creatives are finding the type of entertainment they previously would have found only in theatrical features in everything from creator-driven content, both in long- and short-form. The entertainment ecosystem continues to change and shift, and focusing only on theatrical elements is accurate to neither the creative nor the consumer.

Many creatives have also experienced lower costs thanks to innovation. Streaming has lowered costs and increased opportunities for distribution for creatives. Internet creators are now able to gain traction through organic engagement that allows them lucrative sponsorships and in some cases a jump to more traditional creative formats. The recent box-office explosion of horror movies Obsession and Backrooms, both netting over $300 million, were directed by filmmakers who got their start on YouTube. Some high-profile incumbent creatives are also choosing to eschew wide theatrical releases for streaming releases. Martin Scorcese’s recent films Killer of the Flower Moon and The Irishman “largely avoided theaters and went to Netflix and Apple TV+, respectively.” 

Of course, as with any shifts in the entertainment industry, there are still debates over the impact. Much of the 2023 SAG-AFTRA strike, for example, centered on debates over appropriate compensation in the streaming era. Overall, the number of feature films and similar works created has increased globally to historic highs, in some cases supported by the emergence of innovative distribution options beyond traditional theatrical or television releases.

Changing creative dynamics goes beyond just new distribution channels for creatives. Technological advances in digitization have transformed the process of distributing an independent film, enabling bespoke, multiplatform distribution strategies tailored to the different needs of independent films relative to traditional blockbusters. The rise of streaming has also shifted consumers from basic cable, well before any merger might have impacted film distribution on those channels. And the demise of movie theaters can be traced back to a wide array of factors that should not be blamed on a single business transaction.

There are unique elements to mergers and acquisitions involving broadcast licenses that are beyond the scope of this piece. Similarly, there is a conversation to be had more broadly around ensuring the editorial independence of the media, particularly considering recent actions around broadcast licensing and other regulatory tools. However, in considering the latter, we must ensure that antitrust remains an objective tool focused on consumer welfare, not something that could exacerbate concerns about government overreach by politicizing transaction approval or disapproval based on the preferred owner rather than market reality.

Regulators are rarely able to accurately predict the future of the industry. But in this case, they must also be sure not to get stuck in the past when it comes to understanding the market that consumers and creatives experience. 

Source: https://www.cato.org/blog/innovation-media-landscape-paramount-warner-brothers