Movie Theater Owners Reverse Course on Paramount-Warner Bros., Now Favor Settlement Talks

Cinema United has had a change of heart on the prospect of a Paramount – Warner Bros. Discovery merger.

The movie theater trade organization previously cheered on 12 state attorneys general, including California‘s Rob Bonta, as they filed suit to block the merger of the two historic studios. But in a letter postmarked Tuesday, the organization changed course and called for both Paramount Skydance CEO David Ellison and Bonta to “meet in the immediate future and discuss all possible avenues for resolving“ the lawsuit.

The letter from Cinema United president and CEO Michael O‘Leary and Cinema United board chair Mike Bowers, the president and CEO of Harkins Theatres, was broad in its explanation of why the coalition, previously so fierce in its opposition to the mega-merger, was changing its tune. But they gestured to recent successes at the box office and fears that that momentum could slow in their explanation.

“Today, our industry has the wind at its back. Studio partners are creating and distributing extraordinary films. Audiences across generations are responding with enthusiasm,” O‘Leary and Bowers wrote. “But none of that can be taken for granted. Global exhibition believes in a bold future for this industry, but reaching our full potential requires working together.“

The leaders of the trade organization additionally expressed concern over the consequences that additional uncertainty about the future could mean for the entertainment business. “For many in our industry, the current environment is marked by disruption and uncertainty. That is why we believe that it is incumbent upon both of you to meet in good faith to discuss a resolution that would provide robust protections and serve the entire industry. In fact, it is the next logical step,“ they wrote.

Four guardrails would give movie theaters reassurance about the deal, they wrote. One is a commitment to “maintain or expand“ the production of projects meant for theatrical release with a significant marketing and a period of theatrical exclusivity. Another is a promise that the consolidation will not result in “an increase in rental terms.“ Finally, the organization also called for safeguards that ensure movie theaters of all sizes can exhibit projects without onerous requirements from a combined company and that theaters can continue to access the film catalogs “under reasonable conditions and precedents” of both Warner Bros. and Paramount.

In its gestures toward the potential ramifications of uncertainty in the marketplace, the Cinema United letter resembles a similar missive from the leaders of IATSE and the Directors Guild of America that was sent to Ellison and Bonta the previous week.