A dozen states have sued to block Paramount Skydance’s takeover of Warner Bros. Discovery. The suit, led by California attorney general Rob Bonta, was filed in federal court in California’s Northern District, CNBC reports.
The timing is pointed. The Justice Department approved the roughly $110bn deal last month without conditions or divestitures, after an eight-month review.
The states are, in effect, doing what the federal government declined to do. It was flagged as a possibility last week, and now it has happened.
What the states are actually claiming
The complaint alleges a violation of the Clayton Act, which bars mergers likely to substantially lessen competition. It identifies three markets.
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Those are wide-release theatrical distribution, top-grossing or blockbuster theatrical distribution, and basic cable licensing. The states put the combined company at 27% of wide-release distribution, 30% of anticipated blockbusters, and 27% of the basic cable bundle.
Bonta framed the harm in consumer terms. The merger would mean higher prices, lower quality, and less content, he said, hurting cinemas, cable distributors, and audiences.
He also reached for a political register. America has no kings in government or in its economy, he said.
Paramount’s defence is not weak
The company called the suit fundamentally flawed and wrong on both the facts and the law. That is boilerplate, but the underlying argument is more serious than the rhetoric.
Paramount contends the market has been redrawn by Netflix, Amazon, and Apple, making a share of theatrical distribution a poor measure of power. On this reading, the states are litigating a business that is already dying.
There is precedent on its side, too. Disney absorbed most of Fox’s Hollywood assets in 2019 on much the same reasoning, and regulators let it.
The irony is that the challenger Paramount beat is the strongest exhibit for its case. Netflix had a deal for Warner’s studios and HBO Max, walked away rather than be outbid, and authorised a $25bn buyback instead.
Why this is a tech story
Strip away the studio lots and this is about the Ellisons. Paramount is chaired by David Ellison, but the bid was financed and guaranteed by his father Larry, the Oracle co-founder.
Larry Ellison is a Trump supporter and adviser who has sat on a White House board advising on artificial intelligence. Last year the administration granted him and Oracle a controlling stake in TikTok’s US operations.
Consider what that assembles. Oracle supplies infrastructure that a large share of American commerce and government runs on, and the same family would now control TikTok’s US arm, CBS News, CNN, two major streamers, and a wall of cable channels.
That concentration of distribution on top of infrastructure is the part that should interest anyone who covers technology. It is not a claim of wrongdoing, and Bonta’s complaint does not rest on it, but it is the reason this deal is bigger than Hollywood.
The process questions
The DOJ’s approval has itself become contested. The Wall Street Journal reported that senior officials fast-tracked clearance before career attorneys weighing a challenge could intervene, a characterisation the outgoing antitrust chief has denied.
Paramount’s chief legal officer is Makan Delrahim, who ran the DOJ’s antitrust division in Trump’s first term. He led the failed attempt to block AT&T’s takeover of Time Warner, the same assets now in play.
Trump has been publicly supportive of the Ellisons and has openly discussed CNN’s future. The president’s willingness to comment on a pending media transaction is a break with the convention that antitrust regulators operate at arm’s length.
The FCC has still not signed off, because Paramount holds licences for 28 local stations. Chairman Brendan Carr, a Trump appointee, has already called it a good deal that should get through quickly.
The money is on the clock
Delay is expensive, which is the point of suing. From October, Paramount owes Warner shareholders roughly $650m for every 90 days the deal slips.
Miss June next year and the bill is $7bn. The financing already involves $80bn of new debt and non-voting stakes from Saudi, Qatari, and Emirati sovereign funds, which makes the combined company a near-certain candidate for deep cuts.
Integration is not waiting for the courts either. Paramount has been consolidating its streaming tech stack in preparation for HBO Max, an asset it is also pushing into markets like India.
All twelve attorneys general are Democrats, and Paramount will say so loudly. But the states cleared a federal review that imposed no conditions at all, and a court, not a press release, will now decide whether 27% of the blockbuster market is a problem.
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