The timing was almost too conspicuous. Netflix CEO Ted Sarandos had just flown to Washington, D.C. to attend meetings at the White House, likely to gauge the temperature on just what regulatory hurdles the company would encounter to acquire Warner Bros. He faced a bet-the-company decision. Paramount had raised its bid, dethroning Netflix in the jockeying for the fabled studio. Sarandos had days to decide whether to counter. Instead, just hours after he was pictured departing the White House, he dropped out of the bidding war. Paramount had won.
Now, all eyes turn to two people: Makan Delrahim, a savvy legal operator who’s familiar with the ins-and-outs of D.C. dealmaking and is the architect of Paramount’s merger blueprint, and Rob Bonta, California’s top prosecutor who will likely lead the effort among state attorneys general to block the deal. Expect a court face-off that will shape the landscape of Hollywood for years to come.
On Thursday, amid speculation that the government will rubber stamp the deal for its favored bidder, Bonta planted his flag over the merger. “Paramount/Warner Bros. is not a done deal,” he said in a statement. “These two Hollywood titans have not cleared regulatory scrutiny — the California Department of Justice has an open investigation, and we intend to be vigorous in our review.”
Bonta said he’s in talks with other attorneys general about the acquisition. Still, they’re starting behind the eight ball. Paramount filed for approval of the deal last year and has already submitted the necessary information to the Justice Department, an atypical maneuver meant to put the federal government and states on a time crunch. Such compliance with this regulatory requirement in normal circumstances can take over a year, but Paramount got it done in a couple of months. It’s now a race against the clock. Paramount will likely look to close the deal as soon as it gets approval from foreign regulators.
A lawsuit can be filed after the merger is consummated, but the playing field will look different at that point. In that scenario, Paramount would have started to integrate Warner Bros. into its operations. Courts have historically been more open to stopping a deal rather than unwinding one.
The upshot: Time is a big consideration right now, and it’s largely on Paramount’s side. To buy some, California could seek a temporary court order blocking Paramount from closing. Everything is on the table from the types of arguments made to the relief sought, according to a person with knowledge of the situation. “It’s all well and good they got past the federal government, but they haven’t gotten past California,” this insider in the state government says. “They can’t short circuit our investigation or concerns here.”
Timing aside, state attorneys general, particularly Bonta, appear confident they can advance a compelling narrative that the merger violates antitrust laws. A Sherman Act claim, which blocks deals that entrench an existing monopoly, is almost surely off the table, but the argument that the merger violates the Clayton Act, which blocks deals that will create a monopoly, could be almost as strong, if not stronger in some areas. The story they can tell: The acquisition will shrink the playing field from five major studios to four and bring together two major newsrooms. And unlike the Netflix deal, there are horizontal issues since Paramount and Warner Bros. compete against each other in cable TV, news and sports.
An under-discussed possibility involves centering the case around a could-be monopsony, a dynamic in which a buyer with outsize market power can purchase labor and goods at prices under market value. Talent in Hollywood have been sounding the alarm on this issue for years. “Media consolidation has made it exponentially more difficult to sell a television or movie project,” wrote Leonard Dick, a writer on Lost and House, to the Federal Trade Commission in 2023. “If I am partnered with say, 20th Television (owned by Disney) and the Disney-owned streamer/networks don’t want to order it, chances are slim to none another network/streamer will buy it because they want to own their own shows.”
Dan Gregor, a writer on How I Met Your Mother, echoed those concerns, telling the FTC that he has “zero leverage to negotiate now.”
In a post on X on Friday, Mark Ruffalo urged state attorneys general to come together to talk with talent about how the deal will “kill competition in the industry and drive down wages.” He asked people to weigh in on the merger here.
“We are looking at this from all sides, including horizontal consolidation and certainly any vertical impacts,” said the person familiar with Bonta’s thinking, who noted that the deal’s impact on labor is a “significant concern.”
Theatrical releases may also factor into the case. Disney’s acquisition of 20th Century Fox could be instructive. After the merger, the studio’s output plunged from 14 movies in each of 2017 and 2018 to a combined 19 from 2023 to 2025. Paramount CEO David Ellison has pledged to release at least 30 movies per year. Can he follow through on that promise? Maybe in the short-term, but it’s tough to make the math work on that commitment farther out.
One consideration for Paramount will be the court that oversees the potential merger challenge. The Central District of California, where the lawsuit will likely be filed, has its share of conservative judges, but not to the degree of, let’s say, the Northern District of Texas, where the president filed his 60 Minutes lawsuit. Political considerations will take a backseat in the case, but it’s almost impossible to ignore. If the case is a coin flip, that could be the tiebreaker.
“A five-to-four merger in the cardboard market would be viewed differently than in this context with these companies that will have control over most major news outlets,” says Rebecca Allensworth, an antitrust professor at Vanderbilt law school.
Syracuse University Professor J. Chrisopher Hamilton, who’s worked as a business exec and lawyer for the Paramount Global, Disney, Warner Bros. Discovery, stresses the “sheer scope of narrative control” the merger will bring. “We are talking about HBO Max, Paramount Plus, Turner Classic Movies, and a vast universe of cable networks that shape how tens of millions of Americans consume not just news, but culture, history, and storytelling itself,” he says. “When you control the news division and the entertainment pipeline simultaneously, under the same ideological constraints, you don’t just control what people are told, you control what they imagine, what they aspire to, and what they believe is normal.”
Consumers present another roadblock. Earlier this month, they filed a lawsuit looking to block Netflix’s bid to acquire Warner Bros and could do the same against Paramount. They’re not as well-resourced as the federal government or state attorneys general and are widely perceived as doomed to fail, but there’s been some success on this front. In 2021, a federal appeals court affirmed a decision requiring a company in the door manufacturing industry to divest certain assets.
For Delrahim, his thinking could be geared not so much toward whether the deal will get done but rather what Paramount will have to concede. Competition enforcers under President Donald Trump have reverted to accepting settlements to resolve concerns about mergers. If the Justice Department sues, it could be an avenue for him to shape the ideology of the content the company creates.
Overseas, don’t expect European regulators to lodge an aggressive challenge to the deal either. Historically, their focus has largely revolved around local fixes aimed at requiring companies to sell off certain cable/TV assets in certain territories where there’s not much competition. The European Commission approved the purchase of 21st Century Fox in 2019 after Disney agreed to divest from several European factual TV channels, including History and Lifetime, since they overlapped with Fox’s National Geographic channels. And in what could be a closer analogue to the Paramount-Warner Bros. deal, Amazon’s 2022 purchase of MGM was greenlit without any conditions. Big picture concerns of streaming consolidation and theatrical releases fell by the wayside in both of these instances.
Regardless of legal considerations, Ellison will have to deal with have to navigate the practical realities of carrying nearly $100 billion in debt. He’s planning $6 billion in cost savings but that figure could quickly balloon to multiple times that amount, as Sarandos said it would.
