California-led states pause Paramount Skydance-Warner Bros Discovery merger

A coalition of 12 states led by California has prevailed in a recent plea to pause Paramount Skydance’s acquisition of Warner Bros Discovery, the parent company of studios including New Line Cinema and news network CNN, amid allegations that the merger would harm competition.

On Monday United States District Judge Araceli Martinez-Olguin, in response to a lawsuit seeking to block the merger that was filed by the states last Monday, gave the states 14 days to argue the merits of the case.

It could take months before the court issues its final ruling. Judge Martinez-Olguin will hold a hearing on the request on August 3.

The states argued in their lawsuit, which was filed in federal court in California, that the merger would reduce the amount of content available to consumers and lead to mass layoffs.

Under the terms of the merger financing, if the deal is delayed, Paramount would have to pay $650m per quarter, beginning September 30, under what is known as a ticking fee. The media giant would also owe a 25-cent-per-share fee, amounting to roughly $7m per day, according to the company’s merger agreement.

The deal has long been in the crosshairs of both Hollywood and Washington amid allegations that the merger would reduce jobs in movie and television production, limit options for consumers and affect the news landscape by bringing CBS News and CNN under one roof.

There are concerns internally that Paramount’s Larry Ellison, a close ally of US President Donald Trump, and his son David, the CEO, could bring in changes to CNN similar to what they carried out at CBS. That includes hiring Bari Weiss, a right-wing opinion writer with no previous television experience, to lead one of the US’s premier broadcast news channels.

Reports that Weiss could shape the future of CNN if the merger ultimately goes through has reportedly prompted some top talent to consider leaving. Paula Reid is headed to MS Now, and Anderson Cooper has reportedly floated the idea that he would leave the network in the event of a Weiss takeover.

Media freedom experts have warned that the merger would hurt access to diverse viewpoints in the news.

“A Paramount-Warner Bros merger would set a dangerous precedent in regulatory policy by favoring a media owner based on their willingness to generate news coverage pleasing to the President of the United States,” Rodney Benson, professor at the department of media, culture, and communication at New York University, said in newly published analysis of the impact of the merger on press freedom.

“This merger would also significantly increase concentration in ownership of major professional news outlets and social media, effectively reducing consumer choice and increasing the proportion of political news and information closely tied to the government in power.”

This was not the only lawsuit filed last week. On Tuesday, the Writers Guild of America also filed a suit to block the merger.

The suit alleged that the merger would “eliminate competition in an already consolidated industry, threatening the livelihoods of entertainment workers and the creative diversity of TV and film,” WGA West President Michele Mulroney said.

Representatives for Paramount Skydance did not respond to Al Jazeera’s request for comment.

On Wall Street, Paramount Skydance’s stock tumbled on news of the pause but quickly rebounded to trade roughly flat by midday. Warner Bros Discovery stock continued to fall following the ruling, down 3.8 percent in midday trading.