Blocking the Paramount-Warner Brothers merger won’t save Hollywood 

From the start, the sale of Warner Bros. Discovery has unfolded like a Hollywood drama.

Years of financial turmoil, failed corporate restructurings, and competing acquisition bids have now given way to the latest unexpected plot twist. After a Joe Biden-appointed federal judge in California granted a temporary restraining order, Paramount and Warner Brothers agreed to pause their transaction while an antitrust lawsuit proceeds.

The legal battle is only beginning — and California is playing a leading role.

Led by California Attorney General Rob Bonta, twelve state attorneys general filed the lawsuit earlier this month challenging Paramount’s acquisition of Warner Brothers. They claim they were forced to act to protect consumers and competition.

But that’s not the whole story.

The lawsuit is based on a new antitrust philosophy that treats any corporate consolidation as inherently nefarious, regardless of its impact on prices or consumer choice. 

Unfortunately, this isn’t the first time Bonta has tested out his esoteric theories about how markets should work. Bonta played a leading role aiding in the downfall of the budget carrier Spirit Airlines.

The low-cost airline sought a merger with JetBlue as a last ditch lifeline to stay afloat and serve its customers. Bonta brought California into an antitrust lawsuit to block the merger.

After the courts killed the deal in 2024, Bonta put out a press statement celebrating the outcome as a “big win for consumers.”

In reality, the decision forced Spirit Airlines to file for bankruptcy. The airline laid off 15,000 workers, and left travelers with one fewer budget-friendly option. That’s hardly consumer protection. 

Traditionally, antitrust lawsuits were supposed to be based on a “consumer welfare standard.” That principle states that antitrust action should be strictly limited to situations where market concentration harms consumers.

Instead, regulators in California and like-minded states have begun espousing a “big is bad” standard that views size itself as a threat to competitive markets. 

This fixation on size rather than market outcomes led regulators to overlook how a financially distressed company like Spirit could have benefited from economies of scale and cost synergies to provide better service to its customers. Now, Bonta insists on repeating the same mistake with the Paramount-Warner Brothers merger. 

In an election year when voters are understandably focused on affordability, Bonta and his group of attorneys general — most of whom are up for reelection this November — have found a convenient scapegoat in a high-profile merger.

They may be enjoying their time in the spotlight, but if they get their way, it will be audiences and Hollywood workers who are left with an empty stage. 

Opponents of the deal are ignoring a basic economic reality. Years of missteps have left Warner a shadow of its former self, and today the legacy Hollywood studio is saddled with an unsustainable $30 billion debt load. Following years of lackluster profitability, the company even mulled splitting itself into two separate entities before Paramount stepped up with an offer. 

Bonta & Co. argue that letting this acquisition go through would kill jobs in California’s entertainment sector. That logic gets the problem exactly backward.

Warner’s financially precarious position limits its ability to undertake major investments, and, in an increasingly global production environment, deep pools of capital are precisely what Hollywood creative economy needs to remain competitive.  

The scale and cost savings unlocked by a merger would allow the new corporate entity to challenge the multinational technology companies that now dominate streaming. Successfully competing with cash-rich streaming giants would require the studio to focus on producing new original content, and, to that end, Paramount has already announced plans to release thirty films per year. 

This supply of new projects will provide crucial support to California’s beleaguered production ecosystem. One study reckons Paramount’s thirty-film goal could generate nearly $1 billion annually in investment for filmmaking, and support over 40,000 jobs. 

What makes Bonta’s meddling especially egregious is that the federal Department of Justice, as well as over a dozen international jurisdictions, have already approved the deal, finding that a proposed tie-up would enhance competition against streaming giants and offer consumers more choice. 

Even the European Union — hardly friendly to U.S. businesses — blessed the merger after some new commitments from Paramount.

When it comes to economic policy, Europe is rarely a model worth emulating. But, in this case, Bonta and other attorneys general would be wise to take some notes.

Antitrust enforcement should remain focused on instances of corporate consolidation that actually harm consumers through higher prices and reduced choice. The Spirit Airlines fiasco perfectly illustrates the risks of applying abstract theories found in academic textbooks without accounting for how markets actually function in the real world.

Hollywood doesn’t need this courtroom drama. It needs new capital and fresh hope.

Alex Ciccone is Policy And Government Affairs Manager at National Taxpayers Union.