DAYEN ON TAP

It’s not unprecedented for states to challenge a merger without the federal government—Washington state blocked the Kroger-Albertsons merger in 2024 in a separate trial from the FTC, and states (unsuccessfully) challenged the Sprint merger with T-Mobile when the first Trump administration wouldn’t go after it. But they need to have documents or witness testimony, and they need to put it all together, with limited windows into Paramount and Warner Bros.’ business, within about a month.

There are absolutely reasons to challenge this merger, though they are not going to be the likely true allegation that Ellison will bias CNN. This consolidates five major studios down to four, continuing the trend from when Disney bought Fox. One of the key elements of the 2023 merger guidelines, which are still active, is that reducing the bargaining power of suppliers or workers would fit the description of lessening competition, in violation of the Clayton Act. Fewer studios would certainly weaken the bargaining power of producers, directors, screenwriters, and the like. (I’ll do a separate piece on this, but the way the deal is structured guarantees mass layoffs and lower output of movies and TV shows.)

A recent attempted merger between Simon & Schuster and Penguin Random House was blocked on precisely these grounds in 2022, with the Biden Justice Department arguing that authors would get smaller advances with fewer suitors. A California-led challenge can make this case. But they would need to collect stories from people who have pitched in Hollywood and seen bidding wars for their services and who would be harmed by this deal, and fast. (The website Block the Merger is already doing this work.)

(They may get some help from the need for other countries to clear the deal, including the European Union—CNN International operates all over the world. That might delay but not derail the merger, to my understanding. But time is what the state AGs need.)

There are other reasons this merger would be awful. It likely spells doom for most movie theaters, which couldn’t run a business with substantially less content. Streaming would be consolidated, even if not as much as in a Netflix tie-up, and prices would go up. Film libraries would be locked up by Paramount-Warner, giving them an advantage. And the ideological concerns are obvious—maybe not a justiciable issue but one with a ton of political importance.

Finally, this would be a terrible deal from a business perspective. Paramount is making a $111 billion bet that hinges largely on a revival of cable television. It’d be like investing in buggy-whip futures today. Paramount just released its quarterly revenue numbers, and while streaming revenue is up, TV media revenue was once again down. The Comedy Central/MTV/Nickelodeon family of networks will now be joined by TNT, TBS, Discovery, and others, creating a giant group of zombies with no hope of profitability in an age of cord-cutting. And Ellison has said that he expects growth in that segment! It’s more likely a huge lead weight that combined with the massive debt undertaken in this deal will implode the company.

I recognize that economic viability isn’t likely Ellison’s goal, and shaping the media is (maybe he can talk his creditors into that, maybe not). But this deal presages the death of Hollywood as a cultural and social force, another ruined industry at the mercy of monopolists and financiers, something that practically all of us care about given the human desire for storytelling. A lifeline exists outside of Trump’s grasp to rethink this looming disaster, and eventually move us to a better Hollywood than we have now. But the state AGs are going to have to act fast.