Nevada joins lawsuit to stop merger of Warner Bros. and Paramount

The proposed merger of two of the largest film studios in Hollywood would harm the industry and consumers, according to a lawsuit filed Monday by Nevada Attorney General Aaron Ford and attorneys general from eleven other states.  

Paramount Skydance Corporation’s proposed $110 billion buyout of Warner Bros. Discovery would “create a media behemoth” the lawsuit contends, by combining two of Hollywood’s five major film studios and two of five major cable companies. 

It would “inflict substantial harm on movie theatres, basic cable distributors, and, ultimately, audiences nationwide,” the suit alleges. 

Paramount Skydance, which is led by David Ellison, was formed by Skydance Media’s $8 billion purchase of Paramount Global last year. The deal was funded in large part by Ellison, his father, Oracle founder Larry Ellison, and RedBird Capital Partners. 

Larry Ellison has large real estate investments in Lake Tahoe, mostly on the Nevada side. In 2021, he purchased the Tahoe Hyatt for $345 million. 

The lawsuit, filed by the California attorney general’s office in the Northern District of California, alleges the merger between Paramount and Warner Bros. violates the Clayton Act, which says mergers are illegal if they have the potential to substantially reduce competition or tend to create a monopoly. The suit is redacted to protect sensitive business information. 

The lawsuit asserts the proposed merger would leave four film distribution companies in control of more than 85% of all film releases in the U.S., and leave only the merged company and Disney in control of 59% of all basic cable in the country.

“After this merger, for every dollar generated by wide-release theatrical films and basic cable channels in this country, the combined company will pocket more than a quarter,” says the suit. 

In a statement, Paramount said it intends to vigorously defend the deal. 

The attorneys general are asking Warner Bros. and Paramount not to close the merger until legal action concludes, and maintain they’ll request a temporary restraining order to stop the deal should the companies refuse. 

“When competition disappears, consumers are the ones who pay the price,” Ford said in a news release, adding the merger “threatens to reduce choices, drive up costs and diminish the variety of movies and television programming available to families. Nevadans deserve a marketplace where companies are incentivized to compete to deliver diverse entertainment, competitive prices and more innovation.” 

The proposed merger, the suit alleges. would eliminate fierce competition between Paramount and Warner Bros. that currently results in a variety of choices for film and television viewers.

It would also eliminate the leverage of movie theaters to negotiate terms for dates and time slots with film distributors, which the suit says would be costly to theaters and consumers, 

The deal, the suit alleges, would eliminate competition between the two companies, which currently compete for cable distribution. The outcome would be higher subscription fees and reduced content. 

“The combined company’s essential basic cable content would confer enormous bargaining power,” the suit asserts. “Few distributors could withstand the threat of a blackout of Defendants’ more than 50 basic cable channels, leaving them little choice but to accept onerous terms.”

Nevada and California are joined in the suit by Arizona, Colorado, Connecticut, Massachusetts, Minnesota, New Jersey, New Mexico, New York, Oregon, and Washington.