United States President Donald Trump is drafting an economic plan featuring a federal tax incentive to keep film and television production in Hollywood. The proposed measure aims to encourage major American production companies to shoot projects at domestic studios rather than moving production to foreign countries, reinforcing the domestic entertainment sector.
The tax proposal follows a meeting between Trump and 87-year-old actor Jon Voight, an Academy Award winner who continues to advocate for the American film industry. Trump urged Congress, the legislative branch of the federal government, to act quickly and called on Republicans and Democrats to pass joint legislation designed to save the country's entertainment and media business.
In an official statement, Trump said audiences should continue seeing motion pictures on the big screen that are produced in Hollywood, which he described as the film capital of the world. The legislative push comes as 12 American states move to block a planned mega-merger between entertainment giants Paramount and Warner Bros. Discovery.
Economic risks of the Paramount merger
The proposed merger between Paramount Skydance and Warner Bros. Discovery faces growing regulatory scrutiny in federal court, where the deal is valued at approximately 111 billion dollars. Beyond the legal battle over whether the transaction can close, a new economic analysis warns of severe consequences for employment across Southern California's historic filmmaking hub.
The study, conducted by research firm CVL Economics for the Los Angeles County Department of Economic Opportunity, estimates that executing the integration could put 4,495 direct job-years at risk in film and television production between 2027 and 2030. When including indirect and induced positions among vendors, service firms, and consumer spending, total employment at risk reaches 10,360 job-years.
Financial losses from the consolidation would also be substantial across the regional economy. The CVL Economics report projects a drop of 1.26 billion dollars in labor income, a loss of 2.79 billion dollars in value added, and a reduction of 4.06 billion dollars in total economic output, along with putting 547 million dollars in tax revenues at risk, including 78.6 million dollars in local tax revenues.
Concerns focus on market concentration resulting from bringing two major rivals in production, distribution, and streaming under single ownership. Paramount and Warner currently hold production deals with roughly 895 creative figures, and combining the companies would drastically reduce the number of independent studio buyers capable of greenlighting new television projects and feature films.
Decline in Los Angeles film employment
The regulatory review arrives during a difficult economic period for the entertainment industry in California, where production activity has faced headwinds. Los Angeles recorded an average of 93,263 film production jobs in 2025, representing a 35.7 percent decrease compared to 2022 levels, while sector-related business establishments fell by 12.3 percent from their 2021 peak.
To manage high corporate debt following the transaction, the combined entity would need to execute annual cost-reduction plans exceeding 6 billion dollars. Globally, the report estimates that between 9,000 and 14,900 corporate job-years could be placed at risk as redundant administrative operations are eliminated across international offices.
As a point of reference, film production at acquired studios fell by 64.9 percent after Disney completed its acquisition of 21st Century Fox. While CVL Economics noted that the Fox precedent cannot predict exact outcomes for Paramount and Warner, it highlighted how major studio consolidation historically reduces overall production volume.
Antitrust court battle and delay costs
The primary hurdle for the transaction remains the antitrust lawsuit overseeing the deal in federal court. United States District Judge Araceli Martínez-Olguín set the trial to run from March 2, 2027, through March 19, 2027, with a pre-trial hearing scheduled for February 24, 2027. The schedule represents a major delay for Paramount Skydance, which had requested a trial start date in November 2026, while 12 state attorneys general and the Writers Guild of America union had pushed for April 2027.
The trial delay carries significant financial penalties for Paramount under the terms of the merger agreement. Paramount must begin accumulating compensation payments of 7 million dollars per day to Warner Bros. Discovery shareholders starting October 1, 2026, which could total around 1.2 billion dollars if the trial concludes on schedule in late March 2027.
In response to the mounting costs, Paramount petitioned the court to modify the order blocking the merger and demanded that the plaintiffs post a bond of 1,884,726,092.73 dollars before September 30, 2026, arguing that the prolonged legal delay inflicts millions of dollars in losses on the company.
Opposing arguments and production flight
The legal filing has expanded the conflict with opposing states led by California Attorney General Rob Bonta. State prosecutors and the Writers Guild of America argue that combining the two entertainment giants would harm competition across film, television, and streaming markets, resulting in widespread layoffs and higher prices for subscribers.
Paramount maintains that completing the acquisition will strengthen its competitive standing against dominant streaming platforms such as Netflix and Disney, ultimately benefiting both consumers and industry workers through a more robust production ecosystem.
The court dispute threatens to reshuffle the geographical map of Hollywood production as studios seek competitive operational environments. Advisers to Skydance chief executive David Ellison described California's regulatory environment as inhospitable and warned that continued regulatory opposition could accelerate the company's exit from the state.
Paramount has already secured alternative facilities, leasing approximately 28,000 square meters of production space in Bayonne, New Jersey. The company is also evaluating Texas due to lower operating costs and the presence of software company Oracle, led by David Ellison's father Larry Ellison, while Warner Bros. Studios Leavesden in the United Kingdom offers facilities comparable to Burbank at 40 percent lower net real estate costs alongside local tax incentives.
