Paramount Skydance says its proposed acquisition of Warner Bros. Discovery will produce more than $6 billion in savings within three years, mostly by cutting redundant corporate functions, technology, procurement, and other overhead. Those savings may well materialize. But the people whose leverage stands to change most after the deal are not the executives consolidating back offices. They are the writers, actors, directors, producers, and other creative workers whose work the combined company would buy, finance, distribute, and monetize. That is the real tension in this merger—and in the efficiencies defense across creative industries more broadly. A firm can become cheaper to run while growing stronger against the people who supply its most valuable input. Antitrust law should not credit these kinds of efficiency justifications.
Under the 2023 Merger Guidelines, a cognizable efficiency must be merger-specific, verifiable, and not itself the product of reduced competition. Since United States v. Philadelphia National Bank, agencies and courts have at times treated the efficiencies defense with suspicion. That suspicion should not be applied the same way in every industry. In creative and content markets—publishing, music, film, live entertainment, media—the efficiencies defense ought to face a materially higher bar than it does in industries where the product is homogeneous and the claimed savings are mechanical.
A different kind of efficiency
In industries with an engineering-legible product—think steel, cement, hospital services, or industrial gas—claimed efficiencies usually take the form of hard cost reductions: plant consolidations, elimination of duplicate distribution networks, procurement scale. These can be tested. An economist can examine engineering studies, historical cost data from comparable deals, and accounting records, and reach a falsifiable conclusion about whether the savings are real, merger-specific, and likely to be passed through.
In creative industries, by contrast, the claimed efficiencies are often softer: better curation, improved cross-promotion, “synergy” between catalogs, or more efficient allocation of marketing spend across a combined slate. These claims are much harder to falsify because there is no engineering baseline against which to test them.
The Penguin Random House (PRH) / Simon & Schuster (S&S) litigation remains the cleanest illustration, and it never even required a full merits trial on efficiencies to make the point. PRH’s economic expert based his analysis on projections supplied by the company’s own executives and conceded he had not independently verified the numbers. The Justice Department moved to exclude his testimony on that ground; Judge Florence Pan granted the motion before the merits trial finished. PRH had claimed the merger would generate enough savings to produce more than $100 million in additional author compensation by 2025. That is a specific, appealing figure. It is also exactly the kind of internally generated, externally unverified claim the Guidelines’ verifiability requirement exists to screen. That this happened in the highest-profile creative-industry merger challenge in a generation is not a coincidence. It is what happens when the underlying claims are inherently softer.
The efficiencies defense is designed to answer a particular kind of injury: higher prices or reduced output from diminished competition. That frame works for most goods markets. It is frequently the wrong frame for creative industries, where the theory of harm is often not about the price a consumer pays but instead about the diversity, quality, or range of what gets made at all.
Consider a merger between two of a handful of major publishers, record labels, or streaming content aggregators. The harm the government is most likely to allege is not that book prices (or records or streaming services) will rise a few percentage points. It is that fewer independent voices will get published, mid-list authors will lose outlets, and viewpoint and genre diversity will narrow because acquisition decisions become more centralized and more risk-averse. A cost-saving efficiency does not answer that harm. Even the most talented economist cannot offset “the market for original storytelling has fewer buyers” with “the merged firm’s warehouse and distribution overhead is four percent lower.”
This is a structural feature of creative markets, not an incidental one. Vertical and horizontal media deals have long tried to answer diversity concerns with efficiency claims anyway—the argument that a combined firm can invest more, produce higher-quality content, and thereby serve consumers better. Sometimes that argument may be true. But it is a quality claim dressed as an efficiency claim, and it should be treated with skepticism.
Skip the offsetting benefits
Philadelphia National Bank also stands for the proposition that a merger-induced harm to one party cannot be offset by merger-induced benefits to some other party. The PRH/S&S case is worth returning to because its real theory of harm was not about the price of books. It was about monopsony power over authors. The government claimed the combined firm would suppress advances for the exclusive right to publish anticipated top-selling manuscripts—a distinct market Judge Pan credited when she blocked the deal. PRH’s efficiencies pitch, which focused on savings in distribution, marketing, and overhead, was aimed at the wrong side of the transaction. Even if every dollar of those claimed savings had been real and verified, it would have done nothing to cure suppressed competition for author advances.
This is not unique to book publishing. Creative industries generically feature concentrated buyers and many differentiated sellers who are largely interchangeable from the buyer’s perspective: labels and artists, studios and screenwriters, ticketing platforms and touring musicians. Live Nation’s ongoing antitrust troubles—a monopolization case rather than a merger challenge, but instructive here—turn on precisely this dynamic. The government’s 2024 complaint alleged that the company’s control over promotion, venues, artist services, and ticketing let it squeeze artists and venues, not just fans. A jury agreed the conduct amounted to unlawful monopoly maintenance. The broader lesson is straightforward: efficiency defenses pitched at consumer-facing distribution economies are non-responsive to buy-side harm, and creative industries are disproportionately likely to present exactly that kind of harm.
None of this means creative industries categorically lack legitimate efficiencies. Content and platform businesses increasingly have cost structures—high fixed costs for product development, near-zero marginal costs of distribution, strong economies of scale and scope—where genuine, verifiable efficiencies are especially plausible. A streaming platform’s marginal cost of serving one more subscriber a given piece of content is close to zero; combining catalogs or infrastructure can produce real, measurable savings in licensing overhead, content delivery, and cross-platform bundling. AT&T’s defense of its acquisition of Time Warner rested on exactly this kind of claim—the elimination of double marginalization from vertically integrating a content owner with a distributor. It was a specific, quantifiable, economically well-established mechanism that Judge Leon found credible enough to help clear the deal in 2019. That is what a legitimate creative-industry efficiency claim looks like: a hard, structural, textbook mechanism.
The honest synthesis is therefore narrower than a blanket rule that efficiencies matter less in creative industries. Efficiencies defenses in these markets deserve heightened skepticism as currently pled. But the double-marginalization defense in AT&T/Time Warner shows the rigorous version is possible. The excluded testimony in PRH/S&S shows what happens by default when parties do not do the work.
It is worth pausing on why PRH/S&S became the template rather than an outlier. Book publishing has an unusually transparent record: the advance for any given manuscript is a matter of contract, and the “anticipated top-selling books” market Judge Pan credited was provable with auction data. Most creative industries do not offer that kind of clean record. Music licensing, film financing, and platform content acquisition involve compensation structures—royalty splits, backend participation, algorithmic promotion—that are harder to observe and harder to model than a book advance. If a court had this much trouble crediting an efficiencies claim in the one creative sub-industry with relatively legible pricing, there is little reason to expect merging parties in less transparent markets to clear a lower bar. If anything, the opacity of compensation in those markets should make agencies more skeptical of self-reported efficiency projections, not less.
There is also a timing asymmetry. Efficiency benefits in creative-industry mergers are almost always prospective and long-dated—that will supposedly appear over years—while the competitive harm to a concentrated seller pool is often immediate and structural, showing up in the next negotiating cycle. Courts evaluating a Section 7 challenge are not well positioned to defer judgment while a speculative benefit plays out over a multi-year horizon, particularly when the harmed party has no comparable ability to wait and see. A rigorous efficiencies standard should discount claims more heavily the further out their realization sits.
A modest proposal
Agencies and courts evaluating efficiencies claims in creative-industry mergers should apply three specific tests before giving them weight. First, is the claimed efficiency mechanically verifiable against something other than the parties’ own internal projections—the way double marginalization can be modeled independently of what executives said about it? Second, is the efficiency actually responsive to the theory of harm being alleged, or does it answer a price-based question when the real harm concerns diversity, quality, or buy-side suppression? Third, where the harm runs through a concentrated-buyer market—advances, session rates, licensing fees, artist compensation—has the merging party shown that the efficiency flows to that side of the business rather than merely to the consumer-facing side?
If the district court were to apply this three-part test to the claimed efficiencies in the pending Paramount Skydance / Warner Bros. Discovery transaction, it would likely reject the merging parties’ claims. First, the claimed savings appear to rest largely on the merging parties’ own projections rather than independently verified evidence of merger-specific savings. Second, even genuine cost savings would not address the competitive harm caused if the merger reduces competition for creative talent and leaves fewer purchasers of content leading to less content diversity. Finally, no evidence suggests any of the savings would actually flow to the writers, actors, producers, and other creative talent whose bargaining power the merger diminishes. Applied honestly, this framework does not zero out the efficiencies defense in creative markets. It disciplines it. Parties who can offer only a PRH/S&S-style unverified synergy story should lose on efficiencies, as PRH did before the merits trial even reached the question. Parties who can show an AT&T/Time Warner-style structural, quantifiable mechanism should receive the credit the Guidelines were designed to give them.
Shishene Jing is a former antitrust attorney with the Federal Trade Commission Bureau of Competition Technology Enforcement Unit, where she worked on an investigation into the artificial intelligence industry. She clerked for Judge Jed S. Rakoff on the Southern District of New York and Chief Judge Robert A. Katzmann on the Second Circuit.