Careful what you bid for: The Ellisons’ Paramount/WBD deal is slipping toward a costly legal and financial cliff

David Ellison finally got the “yes” he wanted. After eight rejections, a hostile tender offer, a Delaware lawsuit, and a bidding war that Netflix declined to escalate, Paramount Skydance signed its $110 billion agreement to acquire Warner Bros. Discovery in February. In Hollywood romance terms, the boy got the girl. But every must-watch franchise gets a sequel. The premiere came in mid-July, after a coalition of state attorneys general led by California’s Rob Bonta filed suit to block the deal.

Consolidation at this scale, the states contend, would hand one company a share of American screens that antitrust law has eyed with suspicion for six decades, and the damage would reach far beyond the box office. Fewer studios means fewer employment opportunities, and often weaker paychecks, for the writers, crews, and craftspeople who create the movies. More than 5,500 industry professionals, Robert De Niro, Glenn Close, Jane Fonda, and Lin-Manuel Miranda among them, have signed an open letter urging regulators to block a merger they warn would leave the country with just four major studios.

Leading Paramount’s defense is chief legal officer Makan Delrahim, who as President Trump’s antitrust chief sued to block AT&T’s purchase of Time Warner, the last time the same Warner assets changed hands. The man who once fought a Warner merger all the way to trial now argues the largest one in media history is good for competition. Where you stand apparently depends on where you sit.

Back during the peak of the Netflix-Paramount bidding war, we called it a lose-lose proposition. The coin landed Paramount’s way, and the levy for calling the toss may still very well come due. Last week, the company agreed to hold the merger until five days after a trial verdict or June 1, 2027, whichever comes first, canceling the injunction hearing and conceding the calendar to its opponents. The fight has now turned to the trial date. The states want a start of April 2027, while Paramount wants November 2026, and every quarter of the difference adds to the price of a deal already too rich.

A 63-year-old precedent with fresh teeth

The states’ complaint argues the combination would push both theatrical distribution and cable programming into “highly concentrated” territory according to the Department of Justice’s definition of the term, and the math proves them right. The share of 2025 domestic ticket sales puts the post-merger distribution market’s Herfindahl-Hirschman Index—the measure of market concentration—near 1,960, cleanly above the 1,800 threshold the DOJ’s merger guidelines deem highly concentrated. And the count of U.S. cable network owners places cable around 2,100, where Warner and Paramount already rank first and second, respectively.

Suppose, though, the distribution numbers sit only at the shallow fringes of concentration. The merger’s other market effects are too consequential to ignore. Under the Supreme Court’s 1963 ruling in United States v. Philadelphia National Bank, a merger producing at least 30% of a relevant market creates a “threat of undue concentration” and is presumptively unlawful under Section 7 of the Clayton Act. In addition to the distribution and cable concentration........

© Fortune