Hollywood Braces for Impact: Paramount-Warner Bros. Merger Faces Scrutiny Amid Tax Credit Debate

California’s film industry is at a crossroads as the proposed merger between Paramount and Warner Bros. Discovery faces increasing scrutiny, even as state and federal lawmakers debate the effectiveness of current tax incentive programs. Concerns over job losses and the potential offshoring of productions have reignited calls for more robust support for the U.S. Film and television industry.

State Tax Credits: A Partial Solution?

Despite Governor Gavin Newsom authorizing a $750 million film and TV tax credit program last summer, many believe it’s insufficient to counteract the potential negative impacts of the merger. Senator Adam Schiff (D-Calif.) emphasized that state programs alone cannot compete with the global incentives offered by other countries, advocating for a bipartisan federal film incentive proposal. The Guardian reported on the concerns surrounding the deal.

Schiff highlighted that the issue isn’t about Hollywood celebrities, but about the numerous jobs created by film and television productions – roles for set designers, carpenters, and lighting crews. He expressed deep concern about the potential consequences of the merger for these jobs.

The California Film Commission recently announced that 16 shows had received tax credits, representing $871 million in qualified in-state spending and an expected $1.3 billion in economic activity. National Today detailed the state’s response to the merger.

However, despite these gains, Los Angeles film activity was down 13.2% from July through September 2025 compared to the same period in 2024, extending a loss of 42,000 jobs between 2022 and 2024. This trend also reflects the continued struggles of local sound stages and the increasing trend of productions moving internationally.

Industry Calls for Federal Action

Matthew Loeb, president of the International Alliance of Theatrical Stage Employees (IATSE), stressed the demand for federal policymakers to level the playing field and enhance the competitiveness of the U.S. Film and television industry. He emphasized the importance of a globally competitive, labor-based tax incentive program to retain and attract film and television jobs in America.

“The Pitt” as a Case Study

HBO Max’s medical drama “The Pitt,” filmed at Warner Bros. Soundstages in Burbank, serves as an example of a production benefiting from California’s tax incentive. Star and executive producer Noah Wyle explained that filming in Los Angeles is challenging and expensive, and the tax incentive was essential for keeping “The Pitt” in the city. Deadline covered the ongoing investigation.

The reveal received a 20% tax rebate on many above-the-line costs. With an approximate budget of $6.6 million per episode, “The Pitt” received a rebate of around $760,000 per episode, saving over $11 million by the end of its first season. Wyle estimated the first season contributed around $125 million to California’s gross domestic product.

A Broader Economic Argument

Representative Laura Friedman (D-Glendale), working with Schiff on production tax incentives, argued that California’s success with the current program demonstrates its potential for national implementation. She added that tax incentives are a common practice across various industries in the U.S., and supporting Hollywood is vital for preserving America’s storytelling capacity.

Friedman stated, “Hollywood is not asking for special treatment…Hollywood and its ability to notify the story of America, it is something worth saving.”

Ongoing Regulatory Review

California Attorney General Rob Bonta has opened an investigation into Paramount’s planned $110 billion acquisition of Warner Bros. Discovery, vowing a “vigorous” review. MSN reported on the potential financial implications for Newsom’s economic advisor, Dee Dee Myers.

Bonta emphasized that the deal is “not a done deal” and that the California Department of Justice has an open investigation, intending to conduct a thorough review. The Attorney General’s office is concerned about the potential impact on the state’s economy and workforce.