WATCH: Sen. Schiff Presses Netflix and Warner Bros. on Impact of Proposed Sale on U.S. Production and Workforce Layoffs, Consumer Costs and Choice

Washington, D.C. - Today, U.S. Senator Adam Schiff (D-Calif.), a member of the U.S. Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights, questioned Netflix's Co-CEO Ted Sarandos and Warner Bros. Discovery, Inc.'s Chief Revenue & Strategy Officer Bruce Campbell about the potential impact of the proposed Netflix-Warner Bros. Discovery sale.

Senator Schiff voiced concern about how this sale could potentially impact domestic film production, the workforce, consumer costs, and theaters. During the exchange, Schiff also highlighted his commitment to advancing his federal film incentive proposal to promote American jobs and spur local economic growth by creating additional support for film and television production in the US, allowing us to compete with foreign incentives.

Watch the full clip HERE.

Key excerpts:

Schiff: Mr. Campbell, let me start with you. A lot of my concerns, whether it's this merger or the proposed Paramount merger, have to do with the impact on the workforce, impact on consumer choice and cost, among other things. Most of the media consolidation we have seen has not resulted in lower costs for consumers, but has resulted in a lot of layoffs and job losses. Do you think that will be the case here? That is, as a result of this merger should we expect, there will be a round of layoffs? And how large? Should we expect consumer prices to go up? And if not, why should we think this will be the exception?

Campbell: […]No, I think the answer is no in both cases. One of the reasons that the Netflix offer appealed to us so much at Warner Brothers Discovery is to Mr. Sarandos' point that they don't have the type of film studio and film distribution infrastructure that we do today. They don't have the type of television studio that we do today. And we believe, based on our discussions with them in the negotiation process that they're not only going to keep those operations intact, in fact, they're going to invest in those operations and invest in continued production, including on our lots in Burbank and elsewhere. Similarly, on the consumer side, as Mr. Sarandos said, 80% of the HBO Max subscribers today already get Netflix. Now with this transaction, Netflix will have the opportunity to offer those two services together at a discount. In addition, they'll have the opportunity to take our content and the HBO Max content and put it on the Netflix platform. Which they've invested in for over 20 years. It is the best technology platform available to consumers. It is superior to the platform we have. I think that too will be very pro-consumer.

Schiff: Mr. Sarandos, let me ask you about a couple of things. And I know we discussed part of this already […] Share with us your thoughts on the impact on the theater industry. I happen to be one of those people who loves to go see movies in the theater and be surrounded by other people experiencing the same thing. There was a lot of concern that, given the business model you've had to date, that theatrical exhibitions will be cut down from 45 days or whatever they generally are the industry standard down to a lot less, maybe 17. How long do you expect theatrical exhibition to be? How will that change or not change? Also, in terms of jobs. For many of the other studios, we have seen a growth since the pandemic in production at home. Netflix has been a bit of an outlier, though, where we've seen more production move overseas. Now, I know you're building a new facility in New Jersey, but what accounts for the production shift, the greater production shift we've seen of Netflix to production overseas? And how do you think they'll be affected by this?

Sarandos: […] We have some local for local production that happens overseas, meaning we have a service in South Korea, and we produce some Korean content for the South Korean market, in local language, local cast, local producers, that kind of producing. That happens separate and aside from this. Almost all of our, a vast majority of our content spend is produced in the United States. There have been many studios, including Disney, just recently moved all the Avenger movies to London. By way of example, there's a production incentive that draws production away. What I've been doing for the last several years is working with the state of New Jersey to create an incentive that competes with that UK incentive and brings production home. We're building the big studio in New Jersey for that since that incentive passed. We had eleven projects, seven of them were slated to go to the UK, pulled back into New Jersey. So, we are leading production in the United States and intend to keep growing it. As Bruce said, the Warner Brothers slate of movies are still getting made. We're making them. We're going to operate Warner Brothers studio largely as it is today, including releasing the movies in the theater with the traditional 45-day window. Now, I know I've earned some skepticism over that over the years on this, because I was talking a lot about Netflix business model, which was different from that. We didn't own a theatrical distributor before. We do now, and a great one. They did $4 billion in box office last year. That's all baked into the price of this company that we're looking at, and we want to keep that going and invest further in that. This will continue to push up those jobs that we talked about and push up that production primarily in the U.S. This will keep the theater business intact. This will definitely keep production in the U.S. growing. I think what we've done in New Jersey is going to change the course of production in the U.S. completely. And I think other states will see the value of that as well.

Schiff: Well, this gives me a perfect final opportunity to do a little self-promotion. Mr. Chairman, I have a bill that would provide a film tax credit analogous to what's been driving film production overseas that's offered in other countries and would welcome anyone who would like to work together.

Sarandos: I greatly support you on that, Senator.

Schiff: Thank you very much.

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