Many states have Paramount Skydance’s Warner Bros. Discovery filed a lawsuit to block the company’s takeover. The lawsuit, led by California Attorney General Rob Bonta, was filed in federal court in the Northern District of California. CNBC reported on this.
Timing is noted. The Justice Department approved the roughly $110 billion deal last month without conditions or buybacks after an eight-month investigation.
The states are essentially doing what the federal government refuses to do. it happened It was mentioned as a possibility last weekand now it happened.
What states actually claim
The complaint alleges violations of the Clayton Act, which prohibits mergers that would substantially lessen competition. It defines three markets.
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These are wide-release theatrical broadcast, top-grossing or blockbuster theatrical broadcast, and basic cable license. States gives the combined company 27% of wide release distribution, 30% of anticipated blockbusters and 27% of the basic cable package.
Bonta framed the damage from a consumer perspective. A merger would mean higher prices, lower quality and less content, he said, hurting movie theaters, cable distributors and viewers.
He also used the political register. America has no kings in government or economy, he said.
Paramount’s defense is not weak
The company called the lawsuit fundamentally flawed and wrong on both the facts and the law. This is nonsense, but the underlying argument is more serious than rhetoric.
Paramount has argued that the market has been reshaped by Netflix, Amazon and Apple, making theatrical streaming share a weak measure of strength. In this reading, the states are suing a cause that is already dying.
There is a precedent on his side. Disney acquired most of Fox’s Hollywood assets in 2019 on the same basis, and regulators gave it the go-ahead.
The irony is that the rival Paramount beat is the strongest exhibit for his work. Netflix signed a deal for Warner’s studios and HBO Max, walked away instead of receiving more offers and He authorized a $25 billion buyback instead of.
Why this is a tech story
Take a seat in the studio and it’s about the Ellisons. Paramount is chaired by David Ellison, but the offering was financed and underwritten by his father, Larry, the co-founder of Oracle.
Larry Ellison is a Trump supporter and adviser, and sits on the White House’s artificial intelligence advisory board. Last year, the administration gave him and Oracle a controlling stake in TikTok’s US operations.
Think what that adds up to. Oracle provides the infrastructure on which a large part of American commerce and government runs, and the same family will now control the US arm of TikTok, CBS News, CNN, two major broadcasters and a wall of cable channels.
The concentration of distribution over infrastructure is the part that interests everyone involved in technology. This isn’t an allegation of wrongdoing, and that’s not what Bonta’s complaint is about, but that’s why this deal is bigger than Hollywood.
Process questions
The DOJ’s approval itself became controversial. The Wall Street Journal reported that senior officials fast-tracked the clearance before embattled career lawyers could intervene, a characterization the outgoing antitrust chief denied.
Paramount’s chief legal officer is Makan Delrahim, who ran the DOJ’s antitrust division during Trump’s first term. He led an unsuccessful effort to block AT&T from taking over Time Warner, the same assets currently in play.
Trump has publicly endorsed the Ellisons and openly discussed the future of CNN. The president’s willingness to comment on a pending media operation violates the convention that antitrust regulators should exercise discretion.
The FCC still hasn’t signed off, as Paramount holds licenses for 28 local stations. Trump-appointed chairman Brendan Carr called it a good deal that should be completed quickly.
The money is in the watch
Delay is expensive, and so is going to court. As of October, Paramount owes Warner shareholders about $650 million for every 90 days the deal is lost.
Next year’s June bill and bill is $7 billion. The financing already includes $80 billion in new debt and non-voting stakes from Saudi, Qatari and Emirati sovereign wealth funds, making the combined company a near-certain candidate for deep cuts.
Integration does not wait for the courts either. Paramount has been HBO is consolidating its streaming tech stack in preparation for Maxit is also an asset It is pushing into markets like India.
All twelve attorneys general are Democrats, and Paramount will say it loudly. But the states have cleared it from federal scrutiny did not set any conditionsand now a court, not a press release, will decide whether 27% of the blockbuster market is a problem.
