Now the main event…

It was a banner week for state attorneys general. First, a federal jury found that Live Nation and Ticketmaster operated as an illegal monopoly. Then a federal judge in California halted the Nexstar–Tegna merger, giving credence to states’ claims that the deal would diminish competition in local TV markets. More than a few people are now asking whether the newly emboldened A.G.s will make a run at Paramount–Warner Bros. Discovery. The answer is: Almost certainly.

For years, the Justice Department set the pace on competition enforcement. But in the more transactional Trump era, state A.G.s are learning that it’s no longer enough to sign on to a federal complaint and call it a day. If there’s a void, they’ll have to fill it themselves. To their credit, they’re adapting quickly. Tennessee’s Jonathan Skrmetti and Colorado’s Phil Weiser have been quietly organizing along these lines. And where state offices lack in-house firepower, they’ve shown they can punch above their weight by bringing in outside counsel, as they did with Jeffrey Kessler in the Live Nation trial.

Both Live Nation and Nexstar have vowed to appeal, but the recent run of favorable results is clearly buoying state enforcers and sharpening their instincts. In the Live Nation case, for example, the states prevailed by showing that the company’s promises to not retaliate against venues that strayed from Ticketmaster were hollow. That same sort of skepticism is likely to follow David Ellison, whose incessant assurances that “Warners will be Warners”—that theatrical output will be preserved, licensing continuity maintained, talent commitments honored, etcetera—could face a tougher, less credulous hearing.

Meanwhile, state A.G.s have also learned from the Nexstar battle that they’ll need to move fast. After the Justice Department and F.C.C. chairman Brendan Carr waved through the merger—creating a new local-broadcasting colossus without so much as a commission vote at the agency—Nexstar raced to close the deal. The states, alongside DirecTV, did manage to secure a preliminary injunction, but only after Nexstar argued that layoffs and other irreversible steps were already underway. That sequence will not be forgotten. If anything, it will amplify the mistrust between state and federal regulators.

Both lessons point in the same direction for Paramount–WBD, and the drumbeat is getting louder. Exhibitors, guilds, and Hollywood professionals are urging state A.G.s to take a closer look. That message may resonate with ambitious enforcers like California’s Rob Bonta, whose office, I’m told, has begun scouting for outside counsel. Indeed, a state-led preemptive strike—regardless of its ultimate merits—looks increasingly inevitable as regulators navigate the political overtones and a rising appetite for action.

Meanwhile, you’ve surely seen the “Block the Merger” open letter circulating through Hollywood, signed by more than 3,000 actors, writers, and directors, including Jason Bateman, Joaquin Phoenix, J.J. Abrams, Florence Pugh, Denis Villeneuve, Ben Stiller, Kristen Stewart, and Pedro Pascal. Efforts like this don’t materialize out of thin air, of course—backers here include the Democracy Defenders Fund, the Committee for the First Amendment, and the Future Film Coalition, which are planning a protest outside CBS during the network’s White House Correspondents’ Dinner party. But I’m also hearing that there’s some suspicion inside Paramount and beyond that Netflix is astroturfing the glitzy campaign as a way to either delay the deal—remember, the Ellisons have to pay WBD shareholders a ticking fee of roughly $650 million per quarter if the closing drags past September 30—or kill it outright.

So is this groundswell as organic as it looks? The Democracy Defenders Fund, run by veteran Washington operative Norm Eisen, strenuously denies that Netflix is meddling backstage—and Netflix also insists it has nothing to do with the letter or protest. That said, I’ve heard Netflix has been quietly shopping for public affairs operatives to help oppose the deal, and has retained economist Nicholas Hill—a former D.O.J. Antitrust Division official who testified for the plaintiffs in the Live Nation trial—to engage with regulators about the Paramount–WBD merger. I also spoke with a senior government official who told me his staff has fielded multiple complaints in recent weeks from Hill and others connected with Netflix, focused on the transaction and the prospect of attaching licensing conditions. “Frankly, I am surprised at how aggressive they’ve been with me,” he told me. Netflix denies hiring Hill (who didn’t respond to inquiries) and tells me it’s not interfering in the ongoing regulatory review in any way.

Despite the rallying cries for regulators to rush and block ParaBros, this won’t be an easy antitrust case at all. Meanwhile, anyone in Hollywood—hello, Mark Ruffalo—agitating for the government to step in doesn’t actually have to wait. The Clayton Act conveniently comes with a private right of action, which allows individuals and businesses threatened by anticompetitive conduct to seek an injunction through litigation.

When a case does inevitably arrive, expect it to center on one or both of two fronts: streaming video-on-demand, via the consolidation of HBO Max and Paramount+; and the theatrical market for wide-release films. The twist is that challengers may have an easier time than usual getting through the courthouse door. In most merger cases, market definition is half the battle. Here, Paramount has actually already done much of that work itself.

When Ted Sarandos and Netflix were circling WBD, Paramount argued—loudly—that such a deal would “further cement [Netflix’s] dominance in streaming video-on-demand,” while dismissing efforts to stretch that market to include YouTube or TikTok as something “no serious regulator would ever accept.” Paramount also warned that vertically integrating WBD’s studios into Netflix would increase leverage over exhibitors and creative talent. Read now, those submissions look like a draft complaint just waiting to be repurposed. Oops.

Paramount will have its rebuttals ready, though. For starters, the company will argue that a combined WarnerMount would command nowhere near Netflix’s scale in streaming, with just 20 percent of the market by its own math. More broadly, it will note that, unlike Netflix, Paramount and WBD have historically licensed plenty of content to third parties. It will also push back on any attempt to carve out a submarket for blockbuster films. On vertical leverage—the choke-point logic that helped sink Live Nation—Paramount will insist there is no credible threat. Not when David Ellison is showing up at CinemaCon and personally assuring exhibitors that the combined company will produce at least 30 movies a year, release each one theatrically, preserve a minimum 45-day window, and wait 90 days to toss them on S.V.O.D.

Theater owners and Hollywood guilds may not be persuaded, but skepticism is not proof. To prevail, challengers will need more than open letters and ambient industry anxiety. They will need economists, internal documents, and credible witnesses. Behind the scenes, the guilds are already commissioning white papers for regulators. Eventually, someone will try to dust off the playbook that allowed government prosecutors to block Penguin Random House’s bid for Simon & Schuster. In that case, the D.O.J. put Stephen King on the stand to embody the theory of future harm. King argued that while less competition among publishers probably wouldn’t hurt his own bottom line, it would be career-ending for many writers. Signing a letter is easy. Offering to be the star witness in a merger challenge is something else.

Thanks, Eriq. I’ll see everyone on Thursday.

Matt

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