California Atty. Gen. Rob Bonta and 11 other Democratic state attorneys general filed a lawsuit Monday to block Paramount Skydance’s proposed nearly $111-billion takeover of Warner Bros. Discovery — a last-ditch effort to derail a deal that would transform Hollywood.
Tech scion David Ellison’s proposed merger has been hurtling toward the finish line after securing approvals from the U.S. Justice Department and numerous foreign governments. President Trump, an ally of Ellison’s billionaire father Larry Ellison, favors the deal. Trump is eager for a big shake-up at CNN, which is controlled by Warner Bros.
David Ellison now faces his biggest challenge yet as he attempts to build a new entertainment behemoth.
The 37-page lawsuit, filed in federal court in San Francisco, alleges that the proposed merger — one of the largest in Hollywood — would violate the U.S. Clayton Act, a century-old antitrust law to prevent mergers that weaken competition and raise costs for consumers.
The proposed merger “would extinguish competition,” Bonta said during a Monday news conference in the Hollywood Hills with the landmark Hollywood sign as his backdrop. “It would result in higher prices, lower content quality, and fewer movies and TV shows.”
“Movie theaters, basic cable TV distributors and audiences on every sofa and in every movie seat would feel the impact of this unlawful merger,” Bonta said.
Paramount, in a statement, blasted the suit, calling it “a fundamentally flawed application of the antitrust laws” and a veiled attempt to protect streaming giants, including Netflix.
“We will vigorously defend the transaction and demonstrate that this challenge is inconsistent with sound competition policy and the competitive realities of the media marketplace,” Paramount said.
California and the 11 other states, including New York, New Jersey, Nevada, Washington and Colorado, allege the merger would devastate the theatrical film business by combining two historic studio rivals. The Ellison family would control such storied franchises as Harry Potter, Bugs Bunny, Batman, “Top Gun” and “Game of Thrones.”
The proposed purchase also would unite two prominent news organizations — CNN and CBS News.
The states have asked Paramount to delay the closing of its Warner Bros. takeover until the litigation can be resolved.
If Paramount refuses, Bonta said the coalition would seek a temporary restraining order asking a judge to hold up the merger, a move that would cause costly delays and escalate legal expenses for Paramount.
Larry Ellison, co-founder of software giant Oracle, is bankrolling his son’s ambitions to acquire a second major entertainment company in less than a year. When the Ellison family acquired control of CBS owner Paramount in August, David Ellison touted the move of Paramount’s headquarters from New York’s Times Square to Hollywood.
Now, Paramount is reportedly mulling over a threat to leave California in the face of Bonta’s legal action.
Bonta said such talk sounded like “a last-ditch effort to try to blackmail my office and the attorneys general into allowing an illegal deal and illegal merger to go through. We can’t do that.”
If the merger is finalized, Paramount would own four streaming services, including Warner’s HBO Max, and become the dominant U.S. cable TV channel owner with more than 50 channels, including HBO, TBS, HGTV, Animal Planet, Food Network, Comedy Central and Nickelodeon.
The U.S. Justice Department last month approved the merger, saying the combination would probably bolster competition — not harm it. The agency’s decision had been expected because of Larry Ellison’s strong support of Trump.
In a show of confidence this year, the Ellisons agreed to increase the payout to Warner investors should the regulatory approval process drag on. Those extra 25-cent-per-share payments begin with the October-December quarter, and would add more than $650 million in deal costs each quarter — giving David Ellison an increased incentive to quickly close the deal.
“Delaying this transaction will only harm entertainment workers who have already suffered over recent years as technology has disrupted their livelihood and cost California tens of thousands of entertainment jobs,” Paramount said.
The proposed merger has sparked fears in Hollywood that it would bring thousands of job losses — similar to past consolidations, including Walt Disney Co.’s 2019 takeover of Fox entertainment properties.
Some theater owners, hard hit by the COVID-19 pandemic and production slowdowns, have expressed concerns the merger would lead to fewer films being made.
“The ramifications of further movie studio consolidation will be significant and lasting, not just in Hollywood, but on Main Streets across this nation where local movie theaters serve as cultural and financial cornerstones for communities of all sizes,” said Michael O’Leary, chief executive of Cinema United, a theater trade group.
The Writers Guild of America also applauded Bonta’s legal effort.
“This industry has had a front-row seat to the harms of consolidation, with hundreds of billions wasted on mergers that promise benefits and instead leave us all worse off,” WGA West President Michele Mulroney said in a statement. “This is one of the worst proposed mergers we’ve seen.”
The new colossus would significantly dampen competition, Bonta and the other Democratic prosecutors argue. They pointed to the wide-release film distribution business, where Warner Bros. and Paramount control about 27% of the market.
After the merger, just four companies — Paramount-Warner, Disney, NBCUniversal and Sony Pictures — would control 86% of the films that are widely released, Bonta said.
Paramount has said the deal will boost competition. Ellison has promised to continue releasing 30 films a year with a combined Warner Bros.-Paramount studio, roughly the current output of the two studios.
Ellison also vowed to protect the HBO brand.
Another concern is the licensing of basic cable TV channels, including CNN and HGTV, to pay-TV providers such as Charter’s Spectrum, DirecTV and Google’s YouTube TV. Warner Bros. is the second largest cable channel owner and Paramount is the third largest. Together their channels would represent about 27% of the market.
The typical threshold for antitrust concerns is at least 30% market share.
More than 5,000 entertainment industry workers, including Jane Fonda, Ben Stiller, Bryan Cranston, Javier Bardem, Lin-Manuel Miranda and Mark Ruffalo, signed an open letter calling on Bonta to block the merger.
Some have expressed concerns about marrying CNN and CBS News after months of turmoil at CBS News since David Ellison hired journalist Bari Weiss as CBS News editor in chief. Last month, Weiss orchestrated a dramatic shake-up at the venerable “60 Minutes” news program, with top executives and three well-known correspondents exiting.
The Ellison family recently shed its movie theater chain, which it picked up as part of the Paramount acquisition, to clear the way for the Warner deal.
California Atty. Gen. Rob Bonta is leading an effort by state attorneys general to block Paramount’s proposed takeover of Warner Bros. Discovery.
(Paul Kuroda / For The Times)
The deal also faces opposition outside the United States. The British culture minister in late June said she was weighing whether to intervene in the deal due to concerns about maintaining a competitive media market. Britain’s Competition and Markets Authority also has opened an investigation into Paramount’s proposed merger.
In April, a federal judge in Sacramento granted a request from Bonta and seven other attorneys general for a preliminary injunction, freezing the merger of Nexstar Media Group, which owns KTLA-TV, and Tegna. The deal was designed to create the nation’s largest TV outlet group.
A larger group of state attorneys general also won a New York jury verdict against Live Nation Entertainment and subsidiary Ticketmaster. Jurors found that Live Nation had illegally monopolized the live concert industry.
Bonta also has an ongoing case against Amazon for price fixing, which the company denies.
Still, legal experts say the states may face an uphill climb to derail the Paramount-Warner Bros. merger because Netflix, Amazon and Apple have dramatically changed the entertainment industry, lessening the influence of traditional studios such as Paramount and Warner Bros.
Paramount’s deal would mark the third time Warner has changed hands in the last decade.
AT&T bought the company in 2018 and then sold it to the smaller Discovery four years later. That deal left Warner Bros. burdened by debt, leading to deep cost cuts and setting the stage for the Ellison takeover.
