Paramount Skydance executives are privately suggesting that Netflix is orchestrating a lawsuit filed by 12 state attorneys general to block the company's proposed $80 billion acquisition of Warner Bros. Discovery (WBD).
The lawsuit, led by California Attorney General Rob Bonta and New York AG Tish James, aims to halt the mega-merger. Executives at Paramount Skydance, known as PSKY, believe that Netflix is leveraging political allies to challenge a deal that would create a formidable competitor.
This assessment, described by multiple individuals within PSKY, points to the progressive political leanings shared by Bonta, James, and Netflix leadership as a potential driving force. However, the suit's merits are also seen as politically advantageous for California politicians aspiring to higher office, particularly given the deal's association with Donald Trump ally Larry Ellison, father of PSKY CEO David Ellison.
The Department of Justice's Antitrust Division reportedly greenlighted the deal quickly, which Paramount Skydance suggests was partly to allow a Trump-aligned ownership over media assets like CNN and CBS. Paramount Skydance's responses to the lawsuit have repeatedly referenced Netflix, framing the merger as a crucial step in countering Netflix's market dominance and potential for overpricing content.
Analyst Rich Greenfield noted this consistent mention of Netflix in Paramount's statements, calling it an "obsession." This perceived fixation may also explain recent reports that David Ellison was advised to move PSKY's headquarters out of Los Angeles to avoid regulatory scrutiny.
While the move of headquarters is a significant logistical challenge for a media company with talent and operations rooted in Los Angeles and New York, industry observers suggest Netflix benefits regardless of the deal's outcome. The ongoing legal battle introduces financial penalties, with a $650 million quarterly fee due if the deal does not close by September. Furthermore, a lengthy court process, potentially extending integration until 2027, could weaken the combined entity.
Paramount Skydance's legal arguments appear to be undermined by the current media landscape, with the lawsuit's complaint by Attorney General Bonta drawing criticism for seemingly overlooking the impact of streaming, Amazon, Apple, and social media on traditional media. The argument that controlling more cable channels or studios equates to monopoly pricing power is questioned in an era of widespread cord-cutting.
California AG Bonta has emphasized the connection to former President Trump in his rationale for the lawsuit, positioning the action as a challenge to Trump's influence through his allies. This political framing is seen as a tactic to maximize the case's spectacle.
Should the deal fail, some within the industry speculate that Netflix could re-enter the bidding process. Representatives for PSKY and Netflix declined to comment on the allegations.