Twelve states sue to block Paramount’s Warner Bros. Discovery deal
California is leading an antitrust challenge against Paramount Skydance’s proposed takeover of Warner Bros. Discovery.
By Sal Moretti · Money Reporter
3 min read
A dozen state attorneys general went to federal court Monday to try to stop Paramount Skydance from buying Warner Bros. Discovery, arguing the entertainment deal would give one company too much power over movies, streaming and cable TV.
California Attorney General Rob Bonta is leading the challenge, filed in the U.S. District Court for the Northern District of California. The coalition also includes Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington.
The states say the combination would raise prices, reduce quality and leave audiences with fewer choices. Bonta said in a statement that the deal would hurt movie theaters, basic cable distributors and viewers across the country.
The proposed merger would bring together the Paramount and Warner Bros. film studios, along with Paramount+ and HBO Max. Paramount CEO David Ellison has previously said the two streaming services would be combined after the transaction.
The deal would also join CBS, MTV and BET with Warner Bros. Discovery outlets including CNN and TNT, creating what CNBC described as the biggest portfolio of U.S. television networks.
States warn of a bigger Hollywood giant
According to the complaint, the merged company would control close to one-third of films and nearly one-third of basic cable TV programming. The attorneys general asked the companies not to close the transaction until the court case is finished and said they could seek a temporary restraining order if the companies move ahead.
Bonta repeated the states’ case at a Monday news conference in Los Angeles in front of the Hollywood sign. He said the merger would reduce competition, increase prices, lower content quality and result in fewer films and television shows each year.
Paramount pushed back hard. In a statement Monday, a company spokesperson called the lawsuit a “misrepresentation of competition in the entertainment industry today” and said Paramount plans to defend the deal.
Paramount also argued that a delay would hurt entertainment workers and cost California jobs. The company said the merger would create a better-funded media company able to compete with Netflix for audiences, premium programming and talent.
No Warner Bros. Discovery response was reported Monday.
Federal approval is already in hand
The lawsuit lands after the U.S. Department of Justice’s Antitrust Division approved the deal in mid-June. The department said its review found the transaction was not likely to harm competition or American consumers.
The merger has also received approval in several other jurisdictions. The European Union is still reviewing it, with a provisional deadline set for July 22. The European Commission said in a public filing this month that Paramount had submitted concessions aimed at addressing concerns.
Warner Bros. Discovery shareholders approved the deal in April. Ellison has said the transaction was on track to close by September.
A delay could add to Paramount’s costs. Under the proposed agreement, Paramount would owe Warner Bros. Discovery shareholders an additional 25 cents per share each quarter if the closing slips past Sept. 30. CNBC reported that the fee would be worth about $650 million in cash for each delayed quarter.
The Writers Guild of America and Cinema United, the exhibition trade group, both backed the states’ challenge Monday. The WGA said the merger of two major Hollywood studios would mean fewer jobs, lower wages, less programming variety and higher consumer prices. Cinema United CEO Michael O’Leary said more studio consolidation would have lasting effects for Hollywood and local theaters nationwide.
Paramount secured the agreement after a long chase for Warner Bros. Discovery. CNBC reported that Ellison first targeted the company last September, after Paramount and Skydance completed their own merger. Warner Bros. Discovery initially agreed to sell its studio and streaming assets to Netflix, but Paramount later made a hostile offer, amended its bid and ultimately reached a deal to buy all of Warner Bros. Discovery for $31 per share.
This story draws on original reporting from CNBC.