The Other States Have Entered the Chat

It's been a while since I checked in on the Paramount-Warner Bros. saga. Last time, the shareholders had voted yes, the Gulf money was on paper, and I said everything from there would be harder. Turns out that was an understatement too.

On June 12, the DOJ cleared the merger with no conditions — no divestitures, no behavioral remedies, nothing. The antitrust division said the deal wasn't likely to harm competition in streaming, linear TV, or theatrical film. Case closed.

Except it wasn't closed the normal way. The Wall Street Journal reported that the career antitrust lawyers who'd spent eight months on this were leaning toward recommending a lawsuit — and senior DOJ officials shut the investigation down before staff could formally say so. The staff's central worry was whether a merged company carrying this much debt could actually deliver its promise of 30 theatrical releases a year. Leadership decided debt wasn't grounds for a challenge and moved on. The staff wasn't even in the room when the division wrote its public clearance statement — and reportedly suspected the statement was worded specifically to raise the legal bar for anyone who might sue later. Anyone, say, at the state level.

They said it Monday. A coalition of twelve states — California, Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, and Washington — filed suit in federal court to block the deal, arguing it violates the Clayton Act on three fronts: wide-release film distribution, blockbuster distribution, and cable channel licensing. Post-merger, the states say, four studios would control 86% of wide-release films and 90% of the top grossers. That's not a competitive market, that's a duopoly with two extra chairs.

California AG Rob Bonta didn't hedge: the merger would mean "higher prices, lower quality, and less content... harming movie theaters, basic cable distributors, and ultimately, audiences on every sofa and movie theater seat in the U.S." The states have asked Paramount not to close until the case is resolved, and say they'll file for a temporary restraining order if it tries. Paramount's response was about what you'd expect: a spokesperson called the lawsuit "wrong on both the facts and the law."

Here's the detail that connects the two sections above. Oregon isn't just joining the coalition — it's running its own inquiry into whether Paramount helped write the DOJ's clearance statement in the first place, through an internal lobbying effort the company reportedly code-named "Project Warrior." Oregon's AG has asked a court to compel Paramount to hand over the records and separately wants a 60-day pause on the deal while he looks. If that pans out, the WSJ's "staff got cut out and the statement reads like it was built to box out state challenges" story stops being a leak and starts being an exhibit.

This is the same playbook state AGs ran on Live Nation-Ticketmaster and Nexstar-Tegna — federal regulators wave a deal through, states step in as the check nobody else will be. It worked against Live Nation. A federal judge is still holding up Nexstar-Tegna over it. Paramount is now the third act.

The day before the states filed, Semafor reported that friends and advisers of CEO David Ellison have been pushing him to move Paramount's headquarters — and redirect something like $30 billion in planned spending — out of California if Bonta sued. Bonta sued the next day. Ellison reportedly still doesn't want to leave; he moved the company from New York to LA less than two years ago. But the threat is now on the table, and Paramount already has a 285,000-square-foot lease in Bayonne, New Jersey, sitting there as a landing pad.

Here's why that threat has teeth. California isn't just risking a lawsuit's worth of legal fees — it's negotiating from a position that's already been bleeding for years. Since 2022, the U.S. has lost 73,000 production jobs, two-thirds of them in Los Angeles. On-location shoot days in greater LA fell from 18,560 in 2021 to under 7,000 by 2025. FilmLA's own president put it bluntly: California is now sixth in the world for filming, behind Toronto, the UK, Vancouver, central Europe, and Australia — and the crews in Georgia and New York don't need to import talent from LA anymore, because they've built their own. Newsom doubled the state's incentive program to $750 million and it barely moved the needle. ProdPro's 2026 survey of studio executives didn't even list California in the top two preferred hubs anymore — New York took the top spot, with California third and Georgia fourth.

Now put that next to the thread I've been pulling on for a few posts: Saudi Arabia isn't just sitting on 15% of the company that will own Warner Bros. Studios. It's simultaneously running a sovereign-scale version of the exact incentive war that's already hollowing out California — a 40% cash rebate, ten points better than Georgia's, 17 operational studios already built, NEOM planning more than 25 soundstages, and a stated goal of 100 international films shot in the Kingdom by decade's end. California is losing this fight to Georgia and Toronto and can't keep up as it is. It hasn't even started reckoning with a competitor that owns a piece of the studio itself and can offer better terms than either.

So when Ellison's advisers float leaving California, that's not an idle threat dressed up for a leak. It's Paramount pointing at a decade of data showing the state has already lost this argument to cheaper jurisdictions, and reminding Sacramento that one of its new shareholders happens to run the newest, best-funded one.

The market barely blinked — Paramount shares actually ticked up slightly the day the suit was filed, though the stock is still down roughly 29% for the year and sitting near its 52-week low. That's a company already priced for a fight, not one caught off guard by it.

The mechanics haven't changed: Paramount is carrying an expected $80 billion in debt once this closes, and the ticking fee clock is still running. Miss the September 30 deadline and Warner Bros. Discovery shareholders start collecting roughly $650 million a quarter until it closes, on top of a $7 billion breakup fee if regulators kill it outright. Meanwhile antitrust regulators in China, Saudi Arabia, Canada, Australia, and a dozen other countries have already waved the deal through — worth sitting with, given who some of the money behind this deal is. The EU and UK are still reviewing.

The DOJ said yes. The states said no. Oregon wants to know if Paramount had a hand in the "yes." And the company in the middle just found out that saying no to Sacramento might cost California a lot more than legal fees — assuming it was ever bluffing to begin with.

Got thoughts on this mess? Find me on Mastodon at @ppb1701@ppb.social

Want the full saga from the beginning? It's all here.