Paramount Faces Regulatory Hurdles in Warner Bros. Acquisition Bid

After defeating Netflix in the bidding war for Warner Bros. Discovery, Paramount now confronts federal regulators who must determine if the massive media merger would harm consumers. The deal would consolidate Hollywood's "big five" studios into four and create the industry's largest entertainment company.

The battle for Warner Bros. Discovery has entered a new phase as Paramount, fresh off its victory over Netflix, now must navigate the complex world of federal regulatory approval.

Following an extended and chaotic bidding process, the entertainment conglomerate emerged victorious against its streaming rival, but the real challenge may lie ahead. Federal regulators must now determine whether this massive consolidation would damage consumer interests.

The scale of regulatory concerns is substantial. Unlike Netflix’s bid for only portions of Warner Bros., Paramount seeks to acquire the complete operation, a move that would fundamentally alter Hollywood’s structure and the broader entertainment industry.

The Department of Justice must still evaluate this major combination, which could grant Paramount significant control over movie pricing and content distribution, potentially harming consumers. Both the DOJ and Federal Trade Commission have previously derailed numerous mergers by filing lawsuits demanding modifications or blocking deals entirely.

Even with federal approval, state regulators in California and international authorities in countries where both companies operate could create additional barriers that might prove impossible to overcome.

President Donald Trump adds another unpredictable element to the equation.

While presidents typically avoid interfering in antitrust matters to prevent political influence in business decisions, Trump has shown willingness to involve himself in areas usually handled by government attorneys and regulators.

This Paramount-Warner Bros. combination would shrink the remaining major movie studios from five to four while creating the industry’s dominant player.

Paramount’s catalog features major hits including “Top Gun,” “Titanic” and “The Godfather.” The century-old Warner Bros. studio has created everything from “Harry Potter” and “Superman” to “Barbie” and “One Battle After Another.”

Paramount recently completed its own $8 billion acquisition of Skydance just months earlier. Warner Bros. completed its $43 billion merger with Discovery four years prior.

Regulators face a fundamental question: What constitutes excessive market concentration?

During Netflix and Warner’s negotiations, both companies argued that merging Paramount and Warner, two entities with nearly identical assets, created greater risks for employment losses and competitive issues.

Warner’s chief revenue and strategy officer Bruce Campbell testified before a Senate antitrust committee that “one of the reasons that the Netflix offer appeals to us so much” stemmed from the streaming company’s lack of comparable film studio and production facilities. He explained that a Netflix purchase would preserve those operations without forced regulatory sales, enabling growth in the film division of the merged entities.

Warner must now advocate for combining both studios.

Employee welfare presents additional concerns.

Industry organizations have spent months warning that any agreement could trigger significant job cuts — concerns amplified by the enormous debt Paramount must assume to fund its proposal.

While some analysts believe layoffs won’t attract antitrust attention, related issues exist. Northwestern University’s Pritzker School of Law professor Jim Speta noted regulators might object if they determine the merged entity becomes large enough to dictate worker compensation.

Beyond conventional film production, a merged Paramount and Warner would wield considerable influence in television and streaming competition.

Paramount controls networks like CBS, MTV and Nickelodeon, plus the Paramount+ streaming platform. Warner’s portfolio includes CNN, Discovery and HBO Max.

Paramount contends that joining with Warner would enable delivery of expanded content libraries to customers while competing against much larger streaming competitors. According to streaming guide JustWatch, the combined entity would control 20% of U.S. on-demand subscriptions — matching Netflix’s current individual market share.

However, questions remain about consumer benefits. Critics argue the merged company would possess sufficient power to manipulate prices and increase subscription requirements for accessing specific content.

Democratic Senator Elizabeth Warren, a prominent antimonopoly advocate, described a Paramount-Warner merger as “an antitrust disaster threatening higher prices and fewer choices for American families.”

Regulatory discussions will likely center on market definition and whether it extends far beyond traditional boundaries to include competitors like Google’s YouTube.

Netflix previously argued it competes against all online video content, not exclusively streaming services, claiming a Warner combination wouldn’t create excessive market power.

Just weeks earlier, Paramount CEO David Ellison characterized that reasoning as Netflix “trying to mask its dominance.” He may now adopt Netflix’s previous arguments.

Regulators will also examine whether housing CNN and CBS under one corporate structure damages competition crucial to news operations.

Some experts doubt news concerns will carry equal weight with streaming and content library issues in the antitrust review. Nevertheless, a CNN-CBS combination will likely receive scrutiny.

Similar to expanding streaming market definitions, merger supporters will probably highlight broader media options beyond traditional television news, including social media information sharing.

The president initially suggested involvement in any Warner transaction before retracting those comments and stating that regulatory approval remains with the Justice Department.

Paramount benefits from Trump’s close ties to billionaire Oracle founder Larry Ellison, father of Paramount CEO David Ellison, who serves as both a Trump contributor and major financial supporter of Paramount’s Warner acquisition bid.

Under new Skydance leadership, Paramount has implemented changes Trump might favor. The company has moved to attract more conservative audiences in news programming, including appointing Free Press founder Bari Weiss as CBS News editor-in-chief. If the Warner acquisition succeeds, many anticipate similar changes at CNN — developments Trump would likely welcome given his frequent criticism of the network’s coverage.

“The president does not like CNN, and he’s made that very clear — and he’s even suggested that changes to CNN might be relevant to review of the merger,” Northwestern’s Speta explained.

However, Trump’s unpredictability could still derail the agreement.

Despite new CBS management and Paramount’s $16 million settlement with Trump over a lawsuit regarding a CBS “60 Minutes” program he considered unfair, the president continues criticizing Paramount over the show’s editorial choices.