The effort to stop Paramount’s acquisition of Warner Bros. Discovery has hit a critical point. Lawsuits have been filed and a trial date is set but the opposition is getting cold feet due to fears of economic uncertainty.
For those who have not been following this story: for about a year, Paramount, which is owned by Skydance, which in turn is owned by the Ellison family, has pursued a merger with Warner Bros. Discovery. This merger has been contentious within the film and media industry and it has been opposed by several unions and the theatrical industry. Nevertheless, Paramount has progressed toward its goal. Warner Bros. Discovery shareholders voted in favor of the sale to Paramount and government regulators around the world have approved the merger. This includes the US Department of Justice although the DOJ’s approval process was highly irregular.
In recent weeks, Mexico’s government has also approved the merger. Mexico was the last government regulator to sign off on the deal which means the only major obstacle remaining to the merger is a collection of lawsuits. The Writers Guild filed a lawsuit alleging that the Paramount-Warner Bros. Discovery merger violates federal antitrust law. In another lawsuit, Paramount’s shareholders have accused their company’s CEO David Ellison and his billionaire father Larry Ellison of striking an illegal deal with President Trump for approval of the merger. The suing shareholders claim that the Ellisons and Paramount’s Board of Directors have put the studio at “enormous financial and legal risk.”
The most significant lawsuit was brought by a coalition of state attorneys general who aim to stop the merger, alleging that it violates the Clayton Act. The trial has been set for March 2027. That start date is causing a headache for Paramount. As part of their deal to acquire Warner Bros. Discovery, Paramount had promised to pay Warner Bros Discovery shareholders about $7 million per day after September 30 if the merger was not completed. With a March 2027 trial date, this delay is going to cost Paramount over a billion dollars in fees.
Paramount has sought a path toward a settlement, employing both stick and carrot tactics. Paramount CEO David Ellison has threatened to uproot Paramount and move the studio out of California unless the state attorneys general lawsuit is settled. The studio has floated the idea of selling cable news channel CNN as a way of easing concerns about media consolidation. Paramount has also demanded that the state governments backing the lawsuit pay the daily $7 million fee.
For the past month it seemed like forces were aligning against Paramount’s acquisition of Warner Bros. Discovery but the studio’s pressure campaign does seem to be working. Resistance to the merger is starting to crack.
California’s present governor Gavin Newsom and the Democratic nominee for governor of California Xavier Becerra have recommended that the states settle the lawsuit. Los Angeles mayor Karen Bass has also urged a settlement. However, LA mayoral candidate Nithya Raman has criticized the merger and supported the state-led lawsuit.
The theatrical industry has changed its mind about the lawsuit. Cinema United, a lobbying organization that represents theater owners, had previously endorsed the states’ lawsuit opposing the Paramount-Warner Bros. Discovery merger. Meanwhile, AMC Theatres, Regal Cinemas, and now Cinemark have openly supported the merger. With the three largest exhibition chains in the US now supporting the merger, Cinema United has changed its position.
Among the unions, the Writers Guild, the Teamsters, and the actors union SAG-AFTRA have opposed the Paramount-Warner Bros. Discovery merger. However, the Directors Guild and the International Alliance of Theatrical Stage Employees have conditionally come out in support of the merger. In a letter, the DGA and IATSE said they would support the merger if Paramount meets certain concessions. Some of those conditions include maintaining Paramount and Warner Bros. as separate motion picture studios with their own production and marketing divisions and each studio committing to release at least fifteen movies a year. Essentially, the DGA and IATSE want a merger in name only. There’s nothing legally binding about the demands and these unions fail to understand the essence of a merger which is to consolidate operations—which means job losses—and eliminate competition. The DGA and IATSE position is, at best, incredibly naïve.
The common refrain among those supporting the merger is the fear of uncertainty. This is understandable. Production and economics typically thrive under stable conditions. The film and television industry has been disrupted in recent years by the pandemic and the labor strikes. Theatrical attendance is only now back up to pre-pandemic levels. There is a genuine fear that a protracted legal proceeding will paralyze the industry. But settling the lawsuit out of fear is sacrificing long term well being for short term gains. A Paramount-Warner Bros. Discovery merger will make a lot of money for a few executives and shareholders but that financial windfall will came at the cost of everyone else: consumers, theaters, and especially film and television industry workers.
A new study supports this conclusion. As reported by The Wrap, a study by CVL Economics and the Department of Economic Opportunity found that the merger could result in the loss of nearly 4,500 film and TV jobs in Los Angeles County over the next three years. The report also found that the merger would result in the loss of $1.26 billion in wages, $2.78 billion in economic value, $4.06 billion in total business output, and $547 million in tax revenue. A previous study by CVL Economics and the Department of Economic Opportunity found that the merger could lose nearly 2,500 local jobs in the Los Angeles area and roughly 6,000 jobs globally. Given these figures, it is astonishing that Los Angeles Mayor Karen Bass came out in favor of a settlement.
The merger will be bad news for consumers. Merging Paramount and Warner Bros. Discovery puts a lot of cable networks and streaming platforms under one corporate banner, eliminating competition. Theaters are not going to be able to negotiate for exhibition deals and the combined studio will almost certainly produce fewer movies.
The merger is an existential a threat to the entire American film industry. A merged Paramount and Warner Bros. Discovery will be highly financially unstable. The combined company would be over $79 billion in debt, probably more after the fees and litigation costs. That’s estimated to be seven times the company’s earnings. With that debt ratio, the combined company is unlikely to survive. And if the merged Paramount and Warner Bros. Discovery collapses, there won’t be enough movies being made to support the workforce and not enough films to supply the theaters. This merger could bring down the whole American motion picture industry.
It’s now been reported that representatives for the state attorneys general lawsuit are scheduled to meet with Paramount for settlement talks. To be clear, any settlement would likely end with the merger going through.
There is a real risk that the states might not see their antitrust lawsuit through especially in light of the upcoming elections. It’s up to citizens and consumers to keep up the pressure on state governments. Please contact your state legislators, your congressional legislators and senators, your state film commissions, and your state attorney general and ask them to oppose the Paramount-Warner Bros. Discovery merger. When you do reach out to these politicians, please be concise, impassioned, and respectful. We need to persuade, not to bully.
Here is a sample letter you can use to contact government officials and anyone else who might be influential in stopping the Paramount-Warner Bros. Discovery merger.
Dear [TITLE/NAME],
I’m writing to you regarding the possible sale of Warner Bros. Discovery to Paramount. This merger would be a disaster for consumers, for workers, and for the film and television industry and it should be stopped.
The sale of Warner Bros. Discovery to Paramount will result in mass layoffs, cripple the theatrical industry, and create a monopoly that will hurt workers and consumers. Filmmakers will have fewer options to get their projects financed or distributed. Theaters will have no leverage to negotiate exhibition deals. Consumers will suffer from reduced competition between streaming services.
The merger should also be stopped because it amounts to a foreign takeover of American entertainment and news outlets by international governments that do not have respect for freedom of speech.
We need the government to protect the film industry and the public from this unnecessary, monopolistic, and illegal merger.
I hope you will lend your efforts to stop the Warner Bros. Discovery sale.
Sincerely,
[Signature]