Paramount's Warner merger has a new power play problem

Paramount's Warner merger has a new power play problem

Hillary Remy

4 min read

Twelve state attorneys general sued to block one of the biggest media mergers in American history.

Now, two months later, the coalition is fracturing. Some want a deal. Some want structural change. Some want to block it outright. And a financial clock for Paramount starts ticking Sept. 30.

The merger in question would combine Paramount and Warner Bros. Discovery into a single company owning CBS, CNN, HBO, Paramount Pictures, Warner Bros., and dozens of cable networks.

Paramount is in advanced talks with the state attorneys general over a settlement that could resolve the antitrust lawsuit, CNN reported. But the coalition is divided, and the divisions are significant.

Why the Paramount-WBD merger is still in legal limbo

The U.S. Department of Justice reviewed the proposed merger and allowed it to proceed without conditions in June. That should have been the last major regulatory hurdle. Instead, 12 state attorneys general filed their own antitrust case, arguing the federal review was inadequate.

State AGs can pursue independent antitrust actions even after federal regulators clear a deal. The state coalition's lawsuit is now the primary obstacle between Paramount and closing the acquisition.

A judge has ordered both sides to appear for a mandatory settlement conference on Oct. 14 and 15, according to Deadline. If that conference fails to produce a deal, the case is heading to trial in California in early March.

A trial would be costly, slow and uncertain. Paramount has agreed to pay a $7 billion regulatory termination fee to Warner Bros. Discovery if the merger collapses for antitrust reasons.

That number gives both companies a powerful incentive to settle.

What each state is asking for

California Attorney General Rob Bonta leads the 12-state coalition and has been pushing in recent days to reach a settlement. But the coalition is not speaking with one voice.

What the merged company would own:

Paramount Pictures and Warner Bros. film studios

CBS and CNN news operations

HBO, Paramount+, Pluto TV and major streaming platforms

Showtime, MTV, BET, Nickelodeon and dozens of cable networks

CBS Sports and major live sports rights

Large production, distribution, and licensing operations

New York Attorney General Letitia James is not currently on board. She has been seeking additional protections for workers, including employees at Paramount and Warner Bros. Discovery operations in New York. Her office has been in contact with at least six affected labor unions during the negotiations, CNN reported.

Connecticut Attorney General William Tong is "fighting to preserve the independence of CNN and CBS News," according to CNN. A merger that unites two major film studios, two national news organizations, dozens of cable networks, and major streaming platforms raises editorial independence concerns that go beyond typical antitrust analysis.

Connecticut and at least two other states are not satisfied with the terms currently on the table. They are seeking additional remedies before signing on.

Bonta himself has publicly insisted on structural remedies, meaning actual asset sales, such as the divestiture of cable channels, rather than behavioral commitments. Reported settlement terms include independent monitoring of CNN content and commitments around theatrical releases, CNN also reported.

Those terms are behavioral, not structural. That gap is at the center of the stalemate.

The outside pressure trying to kill the Paramount-WBDdeal

Hollywood unions and advocacy groups have not waited for the attorneys general to decide. The Block the Merger Coalition organized protests outside Bonta's Los Angeles office on Sept. 21, James's New York office on Sept. 22, and the Writers Guild of America West headquarters on Sept. 23.

The coalition called any deal built on unenforceable concessions "an insult to everyone who has stood up against this harmful transaction," CNN reported.

The coalition has also raised questions about the Ellison family's political ties. Paramount CEO David Ellison has cultivated close relationships with the Trump administration. His father, Larry Ellison, Oracle's executive chairman, is a longtime Trump ally.

Opponents argue those relationships may have influenced the DOJ's decision to clear the deal without conditions.

Los Angeles Mayor Karen Bass, facing a difficult reelection campaign, said she would "fight like hell" to keep film and television production in California after Paramount reportedly threatened to leave the state if the deal was blocked, CNN reported.

The threat turned the merger into a local political issue as well as a national antitrust one.

What happens next and what it means for the deal

The Oct. 14-15 court-ordered conference is the next major inflection point. The judge mandated the session as a required step before the trial can begin. Appearing at the conference does not mean either side has agreed to anything.

If the conference produces a settlement that enough states accept, Paramount moves closer to closing. If it falls apart, the trial begins in March and the outcome becomes even harder to predict.

Bonta previously canceled a scheduled meeting after accusing Paramount of leaking details from a prior discussion, which adds mistrust to an already complicated negotiation.

For investors, the situation is in motion but not resolved. Paramount is carrying a $7 billion liability if the merger collapses on antitrust grounds, and the clock starts running Sept. 30.

Neither number disappears until a court approves a settlement or one side wins at trial.