California and 11 other states have gone to court to stop Paramount from completing its $110 billion purchase of Warner Bros. Discovery, claiming the merger would weaken competition in both film distribution and cable television — ultimately hurting movie theaters and pay TV providers.
The legal challenge poses a significant obstacle to Paramount CEO David Ellison’s ambition to reshape his company into a major rival against streaming giants like Netflix and Disney.
“With this lawsuit, California and our sister states are fighting for free and fair markets, not rigged markets. America has no kings in government or our economy,” Bonta said in a statement.
According to the states filing the suit, if the deal goes through, Paramount would control 27% of the market for distributing films shown in theaters across the country, 30% of the blockbuster film distribution market, and 27% of the market for basic cable channels.
A court ruling on the states’ challenge is not expected for several months, and the delay could cost Paramount hundreds of millions of dollars in the meantime.
The proposed merger has already sparked backlash from actors, writers, and others in the entertainment industry who fear it will result in job losses. Theater owners have also pushed back, worried that combining the Warner Bros. movie studio with Paramount Pictures would lead to fewer films being made.
Paramount, for its part, has argued the deal will actually increase production rather than reduce it, even as it plans to cut $6 billion by eliminating overlapping infrastructure, marketing operations, and corporate positions. Ellison has pledged that the merged studios would put out 30 films per year.
Despite the state-level opposition, the U.S. Department of Justice has already signed off on the deal, concluding it does not create any competition problems.
Paramount CEO David Ellison’s father, billionaire Oracle co-founder Larry Ellison, has developed connections with President Donald Trump, and the company has brought on former Trump administration officials.
Paramount has agreed to pay Warner Bros. Discovery shareholders roughly $650 million per quarter in fees if the deal fails to close before October. The company has warned that prolonged delays could force it to revisit the deal’s financing terms, create instability for its stock price, or potentially derail the transaction entirely.
