US States Sue to Block Paramount-Warner Bros. Merger, Citing Harm to Theaters and Consumers

A group of 12 U.S. states has filed a lawsuit to block the proposed merger between Paramount and Warner Bros. Discovery, arguing the deal would stifle competition, squeeze financially strained movie theaters, and lead to higher cable television bills for consumers.

States Allege Unfair Leverage

The complaint, filed by California and 11 other states, alleges that combining two of the five major U.S. film distributors would create an entity with unfair bargaining power over theater owners. The states claim the new company would control over 27% of the market for both movie distribution and basic cable, allowing it to demand a larger share of ticket revenue from cinemas.

“While ticket prices will most likely go up, theaters will be forced to cut back on investments that make the experience better for audiences: comfier seats, expanded concessions, and premium screens,” California Attorney General Rob Bonta said in a statement. The lawsuit also contends that pay-TV operators would have less negotiating power, likely resulting in higher cable bills for subscribers as the combined company bundles popular networks like CNN, HBO, and TNT.

Theaters Fear Financial Squeeze

The legal challenge comes as the cinema industry continues its recovery from the pandemic. According to Rentrak data cited in the report, year-to-date box office receipts in the U.S. and Canada, while up 10.6% from last year at $5.1 billion, remain 16.3% below 2019 levels.

Ad

Theater operators and their advocates expressed concern that the merger would exacerbate their financial pressures. One unnamed executive from an independent theater chain noted that studios can already command up to 60% of proceeds for blockbuster films and worried a combined Paramount-Warner Bros. would have the power to raise those fees further. Cinema United, a trade group for theater owners, welcomed the lawsuit, stating the deal's ramifications would be “significant and lasting” for local theaters across the country.

Paramount Defends Merger

In response, Paramount stated the lawsuit “distorts settled antitrust law and is based on a misrepresentation of competition in the entertainment industry.” The company, led by CEO David Ellison, argued that delaying the transaction would harm entertainment workers and has already cost California jobs.

Paramount faces significant financial pressure to close the deal. The company has agreed to pay Warner Bros. Discovery shareholders a $650 million cash “ticking fee” each quarter if the merger is not finalized before October. The states' complaint does not take issue with the planned combination of the companies' respective streaming services, Paramount+ and HBO Max.