Paramount Skydance has reportedly triumphed in its attempt to acquire Warner Bros. Discovery, but the competition with Netflix is anything but settled.
Executives at PSKY, as it’s often called, are expressing concerns about the recent $80 billion acquisition deal, which edged out Netflix’s bid back in February. They feel the lawsuit lodged last week by a dozen state attorneys general to halt the merger shows signs of Netflix’s influence.
Honestly, it sounds a bit paranoid, if I’m being real. The evidence behind this theory isn’t entirely solid.
California Attorney General Rob Bonta and New York Attorney General Tish James, who are leading the lawsuit, have ties to Netflix’s progressive network and may have been encouraged by Netflix to challenge the deal, potentially threatening its competitors.
Sure, Bonta and Netflix share similar political views, but it seems unlikely he needs to spell out the advantages of this lawsuit to CEO Ted Sarandos.
Politicians in California — with their ambitions of one day becoming governor — might understandably be uncomfortable with the fact that Larry Ellison, who is backing the deal, is a notable associate of Donald Trump.
The DOJ has approved the acquisition fairly quickly, perhaps anticipating a right-leaning ownership of CNN, CBS, and other networks.
However, there are suspicions at Paramount Skydance that some studio insiders are manipulating the situation.
Notably, all press releases regarding Bonta’s lawsuit make mention of Netflix and highlight how the merger would create a robust competitor, arguably limiting Netflix’s ability to charge high prices for popular entertainment.
“It’s strange how fixated Paramount seems on Netflix,” commented Rich Greenfield during an episode of the “Risk and Return” podcast, adding that Netflix’s name keeps cropping up in their communications.
Considering a Move?
This “fixation” might explain why some news about relocation leaked shortly before the lawsuit was announced. Rather than navigate the legal landscape with Bonta, David Ellison might be thinking about relocating the company’s headquarters away from Los Angeles.
But what’s often overlooked in the buzz about this potential move is a basic reality check. Relocating Tesla’s factory to Texas was a significant step, but does it even make sense to shift a media company that would possess two historic studio locations if the deal goes through?
“Isn’t it odd that all the talent resides in New York and LA, yet the upper management is jetting around the country to meet them?” Greenfield pointed out.
Anyway, it’s clear that Netflix benefits from the ongoing drama.
Even if the merger proceeds, the lawsuit could still weaken competitors.
And if the deal isn’t finalized by September, there’s the looming $650 million quarterly fee. Plus, integration isn’t instantaneous; if a federal judge appointed by Biden issues a preliminary injunction, we might see delays pushing the completion to 2027, leading to lengthy and challenging legal battles.
The Ellisons grasp this, along with the realization that their legal prowess might not be as effective as they hope.
Reading through the lawsuit, I feel like Bonta might be stuck in a different era. It seems he’s not fully grasping the impact of YouTube, streaming services, or the shifts in media consumption.
The “Trump” Connection
Of course, that’s kind of beside the point.
Bonta appears to be after a political spectacle.
He almost acknowledges it. As Paramount references Netflix in its defenses, Bonta also brings up former President Trump as a primary rationale for the lawsuit. It’s almost as though he’s targeting Trump alongside the Ellisons.
So, while Bonta pursues legal action, he seems intent on gaining as much as he can from it.
The Ellisons’ struggle to integrate CBS, CNN, studios, and streaming could leave Sarandos facing a significant obstacle in the drawn-out competition for WBD.
Who knows what the ramifications could be if this deal falters? Perhaps Netflix might even revive its interest.
“I think the odds are about 20 to 1,” someone familiar with the deal remarked.
“But all it takes is one unpredictable, left-leaning judge.”
Neither PSKY nor Netflix shared comments on the matter.
