Paramount Skydance may have emerged victorious in the bidding war for Warner Bros. Discovery, but the regulatory fight is only beginning.
Within hours of Netflix formally declining to match Paramount’s $31 per share offer, California Attorney General Rob Bonta issued a pointed reminder that the transaction has not cleared regulatory scrutiny. “These two Hollywood titans have not cleared regulatory scrutiny — the California Department of Justice has an open investigation, and we intend to be vigorous in our review,” Bonta said, signaling that state-level oversight could become the next battleground.
While conventional wisdom suggests that the current Justice Department may be less inclined to block the merger outright, federal clearance is only one layer of a complex approval process. State attorneys general retain independent authority to challenge mergers, and they have shown increasing willingness in recent years to act even without federal backing. Legal scholars note that multistate coalitions can pool resources to mount significant challenges, as seen in previous high-profile cases such as Sprint–T-Mobile.
Analysts broadly believe the deal has a stronger federal pathway than a hypothetical Netflix–Warner combination would have. Research notes from TD Cowen have suggested that approval “seems likely given the political environment,” though even those assessments acknowledge potential challenges from Democratic state attorneys general and from regulators overseas. The transaction must also clear scrutiny in the European Union and the United Kingdom, where competition authorities have historically taken a tougher stance on media concentration and sports rights consolidation.
The structure of the merger presents regulators with a classic horizontal integration question. Paramount and Warner Bros. Discovery both operate major film studios, television production arms, streaming services and cable networks. The consolidation would unite Paramount Pictures and Warner Bros. Pictures, HBO and Paramount+, and a sprawling portfolio of linear channels including CNN, TNT, TBS, Discovery Channel and others. While the traditional cable business is in secular decline, the combined entity would still command significant influence across distribution pipelines.
From a streaming perspective, competition analysts argue that the merger may not trip federal concentration thresholds. Diana Moss of the Progressive Policy Institute has noted that a Paramount–HBO combination would control just over 20% of subscription streaming, substantially below the roughly 35% share that a Netflix–HBO merger would have commanded. If federal regulators decline to challenge concentration in the streaming market, it would become considerably more difficult for states to sustain a unilateral antitrust case on that basis.
However, streaming share is not the only potential pressure point. Labor-side concentration could emerge as an argument, particularly given that the merged company would become one of the largest employers of creative talent in film and television. Moss has described such a case as legally complex and still formative in antitrust jurisprudence, noting that it would represent an aggressive theory of harm. Industry unions have voiced concerns that consolidation reduces the number of buyers for writers, directors and producers, potentially suppressing bargaining leverage. The Writers Guild of America reiterated its opposition, warning that combining two major studios would reduce competition and harm creative workers.
Beyond market concentration, political optics are intensifying scrutiny. Democrats have raised questions about Paramount Skydance CEO David Ellison’s visible engagement with Donald Trump and Republican lawmakers during the bidding process. Ellison attended the State of the Union as a guest of Sen. Lindsey Graham, a move that critics say underscores the increasingly political dimensions of high-stakes corporate consolidation. Calls have emerged for Ellison to testify before Congress, though lawmakers do not have direct veto authority over the merger.
The political dimension extends to concerns about editorial independence. Some analysts have speculated that regulators could face pressure to attach conditions relating to CNN, which Trump has repeatedly criticized. While such conditions would fall outside traditional antitrust analysis, the increasingly politicized climate around merger enforcement has made observers wary of unconventional interventions.
Foreign investment scrutiny also looms. Lawmakers have called for a review by the Committee on Foreign Investment in the United States (CFIUS) due to backing from sovereign wealth funds including Saudi Arabia’s Public Investment Fund, Qatar Investment Authority and Abu Dhabi-based entities. Paramount has maintained that these investors hold non-voting equity stakes with no governance rights, arguing that a CFIUS review is unnecessary. Whether that position satisfies congressional critics remains to be seen.
Timing may prove decisive. Warner Bros. Discovery CEO David Zaslav has indicated that the deal could take six to twelve months to close. European regulators are likely to conduct detailed examinations of potential overlaps in film distribution, sports rights and streaming bundling. Even if U.S. federal authorities allow the statutory waiting period to lapse without challenge, extended overseas review could delay integration plans and create operational limbo.
Financial leverage adds another layer of risk. The merged entity is projected to carry a debt load approaching seven times earnings, a ratio that has raised eyebrows among analysts. Paramount has pledged to reduce that leverage ratio to approximately 4.4 times earnings, implying aggressive cost-cutting and rapid deleveraging. Credit markets will watch closely. Larry Ellison, David Ellison’s father and co-founder of Oracle, has reportedly provided substantial financial backing, including personal guarantees tied to Oracle stock. A sustained drop in that equity could complicate balance sheet assumptions.
Industry insiders also warn that merger fatigue inside Warner Bros. Discovery may deepen. Since 2018, the company’s core assets have changed ownership multiple times — first under AT&T’s acquisition of Time Warner, then through the WarnerMedia–Discovery merger, and now potentially again under Paramount Skydance. Each transition brought restructuring, layoffs and strategic resets. Another prolonged review period could slow greenlighting decisions and make filmmakers wary of committing projects during ownership uncertainty.
Despite these risks, most analysts still assign higher odds to approval than rejection. Precedent suggests that horizontal media mergers are often resolved through targeted divestitures or behavioral remedies rather than outright blocks. The Disney–Fox transaction in 2019 ultimately secured clearance with certain conditions, even amid heightened antitrust rhetoric. The key question is whether today’s more polarized political climate alters that calculus.
For Paramount Skydance, the celebration phase may be brief. Winning the auction is only the first step. The real test lies in navigating a regulatory maze that now spans federal agencies, state attorneys general, European competition authorities, labor stakeholders and political actors eager to score points.
For Warner Bros. Discovery employees and creative partners, the coming months promise continued uncertainty. And for Netflix, which walks away with a $2.8 billion breakup fee and renewed investor confidence, the regulatory storm now shifts squarely onto its rival.
The bidding war may be over, but the scrutiny phase has just begun.
Read More:
