A dozen states have sued to block Paramount Skydance’s acquisition of Warner Bros. Discovery. The lawsuit, led by California Attorney General Rob Bonta, was filed in federal court in the Northern District of California. CNBC reports.
The moment is punctual. The Justice Department approved the roughly $110 billion deal last month without conditions or divestitures, after an eight-month review.
In fact, states are doing what the federal government refused to do. Was marked as a possibility last weekand now it has happened.
What the states really say
The complaint alleges a violation of the Clayton Act, which prohibits mergers that could substantially reduce competition. Identify three markets.
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These are wide-release theatrical distribution, blockbuster or top-grossing theatrical distribution, and basic cable licenses. The statements put the combined company with 27% of mainstream distribution, 30% of expected blockbusters and 27% of the basic cable package.
Bonta framed the harm in consumer terms. The merger would mean higher prices, lower quality and less content, he said, hurting theaters, cable distributors and audiences.
He also sought a political record. The United States has no kings in the government or in its economy, he said.
Paramount’s defense is not weak
The company called the lawsuit fundamentally flawed and erroneous in both fact and law. This is a repetition, but the underlying argument is more serious than the rhetoric.
Paramount argues that Netflix, Amazon and Apple have reshaped the market, making a share of theatrical distribution a poor measure of power. By this reading, states are litigating over a business that is already dying.
There is also precedent on their side. Disney absorbed most of Fox’s Hollywood assets in 2019 following the same reasoning, and regulators allowed it.
The irony is that the challenger Paramount beat is the strongest evidence for its case. Netflix had an agreement for the Warner studios and HBO Max, it withdrew so as not to be outbid and authorized a buyback of 25,000 million dollars instead.
Why this is a technology story
We take away the study lots and this is about the Ellisons. Paramount is chaired by David Ellison, but the deal was financed and guaranteed by his father Larry, co-founder of Oracle.
Larry Ellison is a Trump supporter and advisor who has served on a White House board advising on artificial intelligence. Last year, the administration gave him and Oracle a majority stake in TikTok’s U.S. operations.
Consider what that brings together. Oracle provides the infrastructure on which much of American commerce and government runs, and the same family would now control the US arm of TikTok, CBS News, CNN, two major streamers and a wall of cable channels.
That concentration of distribution over infrastructure is the part that should interest anyone who covers technology. It’s not a whistleblower, and Bonta’s complaint isn’t based on it, but it’s the reason this deal is bigger than Hollywood.
The process questions
The Justice Department’s approval has been questioned. The Wall Street Journal reported that top officials rushed the authorization before career lawyers weighing a challenge could intervene, a characterization the outgoing antitrust chief has denied.
Paramount’s chief legal officer is Makan Delrahim, who headed the Justice Department’s antitrust division during Trump’s first term. He led the failed attempt to block AT&T’s acquisition of Time Warner, the same assets now at stake.
Trump has publicly supported the Ellisons and openly discussed the future of CNN. The president’s willingness to comment on a pending media transaction is a break from the convention that antitrust regulators operate at arm’s length.
The FCC has not yet approved because Paramount has licenses for 28 local stations. President Brendan Carr, a Trump appointee, has already called it a good deal that should be approved quickly.
The money is in the clock.
Delay is costly, and that is the point of suing. Since October, Paramount has owed Warner shareholders approximately $650 million for every 90 days the deal lapses.
If June is lost next year, the bill will be $7 billion. The financing already involves $80 billion of new debt and non-voting stakes in Saudi, Qatari and Emirati sovereign wealth funds, making the combined company an almost certain candidate for deep cuts.
Integration does not wait for the courts either. The main thing has been consolidating its streaming technology stack in preparation for HBO Maxan asset that is also Entering markets like India..
All twelve attorneys general are Democrats, and Paramount will say it out loud. But states passed a federal review that did not impose any conditionsand a court, not a press release, will now decide whether the 27% blockbuster market is a problem.
