Posted by Jonathan Klotz | Published
In what seems to be a far-reaching step since the announcement of the merger, 11 states, Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington, have filed suit in a California court plan to stop the $111 billion merger between Paramount and Warner Bros. it has always been so. On the one hand, the states oppose the monopoly, on the other, Paramount and Warner Bros. The lawyer says it creates more opportunities for competition. It was expected, but it is a disaster for the sale of Warner Bros. which must be completed by September 30, or it will cost Paramount millions.
September 30 deadline
Specifically, if the deal doesn't close by September 30, Paramount will owe Warner Bros. shareholders $6.9 million per day. Not individually, but collectively, that will add up to over 690 million per quarter in fines and fees. The latest move by the bloc countries puts that deadline at risk. This is despite the fact that the Ministry of Justice has signed an agreement to integrate in the past months, and other countries, including Italy, France, South Africa, Ukraine, among others have given light.
Another potential roadblock is approval from the United Kingdom, which is expected to come in the next few weeks, but which will lead to an audit by investigators. The acquisition of Paramount is expected to be approved by overseas regulators, but it will take time. That also does not include a lawsuit filed by consumers in April that asked the Federal Court to ensure that it does not create an illegal monopoly.
For all the disdain heaped on Warner Bros. President David Zaslav, he is a ruthless businessman. His inclusion of dues and a payout if the deal falls apart means that for Warner Bros, the whole situation is a win/win. If the deal goes through, Hollywood will be left with only four major studios, which will greatly reduce the market for big movies and shows to be made, which is why there are already fewer on the way.
Not For Sale Spectator Friendly
Paramount has put Star Trek on hold until everything is sorted out, and the only major franchise on the Warner Bros side is the upcoming Harry Potter series. James Gunn is connecting with the revival of the DC Universe, and executives at Paramount have said that he will be able to continue doing his thing, but that was in the past. Supergirl failed to reach the same level as Morbius. For fans of both the Paramount and Warner Bros. properties, it's a scary time right now with nothing certain about the future.
The new case filed by the Collected States will take time to work through the court system and stay on the docket. No jury has been assigned, and even if the decision goes against Paramount and Warner Bros., there are always appeals, which will be strengthened by the Federal approval that has already been recorded. All that said, the merger is bad for the consumer, and the best thing for society would have been for Warner Bros. to never be sold in the first place. Another potential buyer, Netflix, has its own issues to bring to the table.
This latest twist will heat up over the next 60 days, so it will be interesting to see what the companies will do as their next move, and how quickly the court will move. The clock is ticking and there are millions, if not billions in fines and fees on the line.
