Twelve state attorneys general (AGs) led by California have filed an antitrust lawsuit to block Paramount Skydance’s pending $110 billion acquisition of Warner Bros. Discovery, arguing the Hollywood mega-merger would substantially lessen competition.
The Department of Justice approved the deal last month.
Filed Monday in the U.S. District for the Northern District of California, other state AGs joining the lawsuit include Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, and Washington.
Paramount emerged as the winning suitor for WBD in March with the pending agreement, after a relentless pursuit that saw Netflix bow out of the running earlier this year when the price got too high.
The combination would bring together Paramount and WBD film and TV studios, as well as linear cable channels and digital and streaming services like HBO Max and Paramount+.
The state AGs signed on to the lawsuit contend that Paramount buying WBD would end competition between the two rival entities, as well as threaten viewers with higher prices, the decline of theatrical film releases, and a reduction in the variety, quality and amount of content distributed.
“Today, I am leading a coalition of states in challenging the proposed merger of Warner Bros. and Paramount and asking the court to block the deal. The unlawful merger of these two entertainment behemoths would lead to higher prices, lower quality, and less content for film and television, harming movie theaters, basic cable distributors, and ultimately, audiences on every sofa and movie theater seat in the U.S.,” said California Attorney General Rob Bonta in a statement.
Specifically, the coalition zeroed in on three areas where the lawsuit argues a Paramount-WBD merger would substantially lessen competition: wide release theatrical film distribution; anticipated top-grossing theatrical film distribution; and licensing basic cable television channels.
In the U.S., if combined, the entity would bring together two of the five major film distributors (the other three being Disney, Universal and Sony), controlling around 27% share of the market. The AGs noted that after a merger, only three distributors would control three-quarters of those films, while four (including the defendants) would control 86%.
A combined Paramount-WBD would also control more than 30% of anticipated blockbuster theatrical films, the AGs noted.
They also cited competition issues for the market distributing basic cable channels, where WBD is the second largest and Paramount is the third, resulting in a 27% share for the combined entity.
“California's film and entertainment industry touches the lives of Americans daily — it comes into the living rooms of families, has a starring role in many young people's first dates, and is a point of immense pride and employment for Californians up and down our state,” Bonta continued. “Consolidation here not only leads to higher prices — it also leads to fewer opportunities for important stories to come to life, and fewer ways for audiences to encounter stories, ideas, and perspectives beyond their own experiences.”
As for Paramount, the company released a statement after the lawsuit was filed Monday, asserting the claims reflect “a fundamentally flawed application of antitrust laws” that is wrong “on both facts and law,” and contends the suit is based on a misrepresentation of competition in today's entertainment industry.
“The combination of Paramount and WBD will create a stronger, well-capitalized, creative-first media company that is better positioned to compete with companies like Netflix that have come to dominate the industry for audiences, premium content, and creative talent,” said Paramount in a statement. “Put simply, any attempt to block this transaction undermines the very principles antitrust law is designed to promote: more competition, more choice for consumers, and more opportunities for creators and workers.”
The company went on to argue that in practice, the effect of the lawsuit will be to shield dominant streaming platforms like Netflix and tech giants from needed competition – while also indicating Paramount doesn’t intend to back down as it seeks to complete its pending WBD deal.
“We will continue to fight against any attempt to derail a deal that strengthens competition, expands opportunity, and positions the combined company to compete in an increasingly competitive global media landscape," stated Paramount.