Hollywood frets over Fox-Time Warner deal

In Hollywood, where a box office dud can sound the death knell for even the starriest career, anxiety is as much a part of life as red carpet premieres and tearful speeches at the Oscars.

The anxiety level ticked up several notches last week when news broke of an unsolicited $73bn bid by Rupert Murdoch's 21st Century Fox group for Time Warner. The deal would combine two of Hollywood's largest film studios - 20th Century Fox and Warner Brothers - and create a film company responsible for about a third of all US box-office sales and blockbuster franchises ranging from Batman to X-Men, Harry Potter to Avatar.

21st Century Fox has said it would maintain the independence of 20th Century Fox and Warner Brothers, two Los Angeles neighbours but, for decades, fierce rivals and competitors. "The proposal is designed to preserve and protect the creative identities of each of the businesses," said a person close to the company.

But behind the scenes the proposed 21st Century Fox purchase has caused alarm in the creative community that is Hollywood's engine. "We are adamantly opposed to the idea," says David Young, executive director of the Writers Guild of America West, which represents screenwriters.

"We think it's a disaster for talent in Hollywood and bad social policy," he adds. "Markets are efficient when there are a lot of people in them buying and selling. If markets get consolidated and there's a concentration of power what we will see is writers being paid less to create and consumers having to pay more."

In the past 12 months Warner Bros and 20th Century Fox have been two of the three best performing studios, releasing hits this year such as The Lego Movie and X-Men: Days of Future Past. They are among the six main studios currently operating in Hollywood, competing alongside Walt Disney, Sony Pictures, Paramount and Universal.

21st Century Fox's bid has been rejected by Time Warner, which this week moved to block a potential hostile takeover by amending its bylaws and scrapping a rule that would allow investors to call a shareholder meeting.

But if 21st Century Fox returns with an offer that wins the approval of the Time Warner board, the six studios will effectively become five.

Once 21st Century Fox declared its offer could generate $1bn of savings, speculation started about how a combination of the two studios would work - particularly if Warner Bros and 20th Century Fox are to continue operating independently. "You could combine home entertainment and distribution of the two studios and leave all production and marketing operations intact," says a rival studio executive.

The angst generated by a potential combination of the studios is not confined to writers. "It's definitely not good for talent," says an agent responsible for landing clients plum roles. "We're going to have to be more creative about what we do [with the studios] and how we get projects financed."

The possible 21st Century Fox-Time Warner combination would also bring together the two largest suppliers of television programming, responsible for shows such as Modern Family and The Big Bang Theory.

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"In our view it will be a violation of antitrust law," says Mr Young, who says the combined company would supply 40 per cent of television series shown in America. The guild has hired legal experts to represent it in front of antitrust regulators, he adds. "This is a merger that we absolutely have to stop."

21st Century Fox has indicated it would sell CNN, Time Warner's cable news channel, if its bid is successful. But it does not intend to dispose of either of the two studios because it believes the combination would not violate antitrust law. People familiar with the company say it has been advised that a six to five merger would not be contentious.

Still, there are other factors to consider, assuming 21st Century Fox succeeds with an improved bid. Culturally, the two studios are very different places to work and each has long-term relationships with key talent that are impossible to replicate. Warner Bros has had a relationship with Clint Eastwood that has spanned decades while Christopher Nolan, the director of The Dark Knight and Inception, has also made the studio his home.

It is unclear what impact a 21st Century Fox takeover would have on those relationships - or, indeed, if another buyer for Time Warner will emerge, now that Mr Murdoch has shown his hand. Uncertainty, alongside the everyday anxiety, is now firmly part of the Hollywood mix.

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