Paramount weighs California exit if Warner Bros. deal collapses

Advisers to Paramount Skydance CEO David Ellison have urged him to consider relocating the studio out of California if the state succeeds in blocking his company’s $110 billion acquisition of Warner Bros. Discovery, according to a report from Semafor. No final decision has been made, and people familiar with the discussions cautioned the idea could amount to little more than brinkmanship, since much of the industry’s production already takes place outside Hollywood.

California Attorney General Rob Bonta followed through Monday by filing a federal antitrust lawsuit on behalf of a 12-state coalition in the Northern District of California. The suit alleges the merger, the largest in Hollywood history, would violate the Clayton Act by combining two of the industry’s five major film distributors and two of its five major basic-cable channel owners.

“The unlawful merger of these two entertainment behemoths would lead to higher prices, lower quality, and less content for film and television,” Mr. Bonta said in a statement announcing the suit. He was joined by attorneys general from Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington.

Later that evening, the coalition escalated further, filing an emergency motion for a temporary restraining order and preliminary injunction to halt the deal immediately rather than wait for the case to play out. Paramount and Warner Bros. had declined the coalition’s earlier request to hold off closing the merger voluntarily until the litigation concluded.

The lawsuit lands even though the U.S. Justice Department approved the deal in June with no required divestitures, according to The Hollywood Reporter. The merger still awaits sign-off from the Federal Communications Commission, U.K. antitrust regulators and the European Commission, though regulators in more than a dozen other countries have already cleared it.

Paramount has offered Mr. Bonta’s office a consent decree committing to produce 30 films annually with a 45-day theatrical window and a 90-day streaming window, and to keep both studios’ California lots open, Semafor reported. Ellison advisers have privately expressed frustration that Mr. Bonta has declined to engage with those terms, with one adviser describing the regulatory climate as “inhospitable.”

Paramount, in a statement, said it is “confident this transaction raises no such concerns” and pointed to the “dozens of antitrust authorities around the world” that have already cleared the merger.

Mr. Ellison has reportedly remained reluctant to leave California outright, having moved Paramount’s headquarters there from New York after his acquisition of the company closed last year. The studio does have a fallback option: It signed a lease last year for nearly 300,000 square feet of studio space in Bayonne, New Jersey.