Paramount/Warner Bros Merger Hits A Roadblock That Could Cost Billions

By Jonathan Klotz
| Published 41 seconds ago

In a move that could be seen coming miles away from the moment the merger was announced, 11 states, Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington, have filed a claim in California’s court system to stop the $111 billion merger of Paramount and Warner Bros. If it goes through, the merger will result in the largest entertainment company in history, and contract the entertainment market to the smallest it’s ever been. On one side, the states are arguing against a monopoly, on the other, Paramount and Warner Bros. counsel argues it creates more opportunity for competition. It was expected, but it’s a disaster for the sale of Warner Bros. which has to be completed by September 30th, or it’s going to cost Paramount millions. 

The September 30th Deadline

Specifically, if the deal isn’t closed by September 30th, Paramount will owe Warner Bros. shareholders $6.9 million per day. Not individually, but as a collective, which will still add up to a total of over $690 million per quarter in fines and fees. The latest move by the collected States put that deadline in jeopardy. That’s despite the Department of Justice signing off on the merger months ago, and other countries as well, including Italy, France, South Africa, Ukraine, among others have given it the green light. 

Another potential roadblock is approval from the United Kingdom, which is expected to come within the next few weeks, but will then lead to a through audit by investigators. Paramount’s buyout is expected to be approved by regulators overseas, but it will take time. That’s also not including the lawsuit launched by consumers in April that has asked the Federal Court to ensure it’s not creating an illegal monopoly. 

For all of the justified scorn heaped onto Warner Bros President David Zaslav, he is a ruthless businessman. His inclusion of the deadline fees and a payout if the deal falls apart means that to Warner Bros, the whole situation is a win/win. If the deal goes through, Hollywood will be left with only four major studios, significantly reducing the marketplace for major movies and shows to be made, which is why there’s already fewer in the pipeline. 

Nothing About The Sale Is Good For Viewers

Paramount has put a pause on Star Trek until everything is sorted, and the only major franchise series on the Warner Bros side is the upcoming Harry Potter remake series. James Gunn is plugging along with the DC Universe revival, and the incoming bosses at Paramount have said he’ll be able to keep doing his thing, but that was before Supergirl failed to reach the same level as Morbius. For fans of both Paramount and Warner Bros properties, it’s a scary time right now with nothing certain about the future. 

The new lawsuit filed by the collected States will take some time to work through the court system and land on the docket. No judge has been assigned, and even if a ruling goes against Paramount and Warner Bros, there’s always appeals, which would be bolstered by the Federal approval already on record. All that said, consolidation is horrible for the consumer, and the best thing for the public would have been for Warner Bros to never on sale in the first place. The other potential buyer, Netflix, has its own issues it brings to the table. 

This latest twist is going to heat up in the next 60 days, so it will be interesting to see what the corporations are going to do as their next move, and how fast the court will move. The clock’s ticking and there’s millions, if not billions, worth of fines and fees on the line.