Rob Bonta's Paramount Crusade Could Make California's Hollywood Exodus Even Worse
· Reason
Paramount Skydance is escalating its legal battle with California. CEO David Ellison has threatened to move the company's operations in the Golden State to a more friendly locale unless the state's attorney general, Rob Bonta, agrees to settle its antitrust lawsuit challenging Paramount's $110 billion acquisition of Warner Bros. Discovery, Inc., by the start of October, Puck reported on Tuesday.
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As part of the reshuffle, Paramount would move its Los Angeles headquarters first, before beginning a five-year plan to relocate its studio jobs. The company currently has about 17,600 employees worldwide, thousands of whom are based in California. Those jobs would presumably be eliminated as part of the relocation. Should Bonta call Ellison's bluff, California stands to lose $500 million annually in corporate tax revenue—not to mention the tax revenue paid by Paramount employees—according to Puck.
Ellison likely chose the start of October for his ultimatum because, under the terms of its agreement, Paramount must pay Warner Bros. shareholders a "ticking fee" of "roughly $650 million in cash value every quarter" the longer the deal is delayed, starting September 30, according to CNBC. The antitrust case isn't expected to start until March 2027, meaning Paramount would be on the hook for nearly $1.3 billion in fees by the start of the trial.
Alongside the attorneys general of 12 other states, Bonta launched his legal campaign against the proposed merger in July, alleging Paramount's acquisition of Warner Bros. violated Section 7 of the Clayton Act, which prohibits mergers and acquisitions if the deal substantially lessens competition or creates a monopoly. Seven days after the lawsuit was filed, a federal district court granted a temporary restraining order stopping Paramount from "closing or consummating" the merger, including "taking any steps, directly or indirectly, to integrate or consolidate" its operations with Warner Bros.
In her ruling, Judge Araceli Martinez-Olguin found the states made a "strong showing" that the merger would "substantially lessen competition" because it would result in Paramount having a 27 percent market share of theatrical releases. Of course, that still leaves a full 73 percent of the market in the hands of other companies.
While Martinez-Olguin says the merger is "likely to violate antitrust laws," 65 countries, including the U.S., seem to be OK with it and have either given the deal their blessing or chosen not to challenge it. In June, after an eight-month investigation into the deal, the Justice Department found the merger was "not likely to result in harm to competition or American consumers."
Ellison has tried to coax support for the deal by touting its impact on the state's $63.7 billion arts and entertainment industry to no avail. In a recent op-ed in The New York Times, he said the deal would result in Paramount making "more than $30 billion in annual content investment," industry-wide. The merger would also create over 40,000 jobs for an industry facing a 30-year low in employment, according to the California Policy Center.
But after a public rejection of his carrot, Ellison has turned to the stick. For now, his threats don't appear to have rattled Bonta. On Tuesday, he characterized Ellison's demand as an "attempt to blackmail the state into letting an illegal deal through."
Still, some California officials recognize the danger in the game of chicken Bonta is playing. The state's Democratic Gov. Gavin Newsom has reportedly "encouraged" him to "find a resolution out of court," according to The Wall Street Journal.
Hollywood stands to lose the most should the merger collapse. Instead of working for the people of his state, Bonta is working against their economic interests to bolster his bona fides as an antitrust crusader.
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