Can the Paramount-WBD Merger Survive a Trial, Midterms, and a $650 Million Clock?

This episode of The Town is presented by HBO Max. HBO Max presents Hacks, nominated for 25 ME Awards, including Outstanding Comedy Series. In the aftermath of mistaken news reports that Deborah passed away, she and Ava returned to Las Vegas, determined to secure Deborah's legacy as a comedian. Don't miss the series' variety is calling one of TV's best comedies ever. Hacks is now streaming on HBO Max. It is Wednesday, August 5. We've got a trial date. March 2nd, 2027 in Oakland, California. Paramount lawyers will square off with the attorney's general of California in 11 states, over whether the Ellison family should be allowed to also own Warner Brothers Discovery and its studio, including HBO, and perhaps most importantly CNN. Obviously, that trial day seven months from now is not what David Ellison wanted, given the $650 million per quarter ticking fee, and the election coming in November, and it gives Rob Bonta and the states some pretty big leverage for a potential settlement. But Paramount is indeed getting what they ask for here. The trial on the merits of whether the combined Warner Mount would give it too much power in the market for TV networks, wide release movies, and the so-called tentpole movies at the legacy studios specializing in making for theaters. There's been a ton of discussion of the politics at play here, especially since David Ellison wrote a pretty scathing New York Times call in this week, arguing that the states just don't want him to own CNN. But there's been less discussion of the actual legal issues at play here. So that's today's show. Eric Gardner is here. He writes about the law and Hollywood forepuck, and he's been following this case pretty closely. We're going to talk about how it might play out. The key players, what this trial date means, the lawsuit that Warner's filed to keep his executives from jumping ship, and most importantly, when will this whole thing actually end? From The Ringer and Puck, I'm Matt Bellany, and this is The Town. All right, we are here with Eric Gardner, my colleague at Puck, and legal expert, and reader of all of the documents that have been filed so far in the Paramount Warner Brothers, California 11 state litigation. Welcome, Eric. Thanks for having me. Did I overstate the number of documents you've read? You haven't read everything. I've read everything three times, at least three times. Nice. Nice. Okay, good. All right, well, my point is you're reading this stuff closer than, more closely than I am. And I wanted to get your assessment of the case so far, because we've discussed it with Lucas and others, and a lot is going on here. And we now, I feel like we have a solidified procedural disposition. This case is going to trial in March, unless it's delay, which I don't think it will be. And we have a 12-day trial. We have the lawyers on both sides lining up, and we have Paramount. The perception is that this has not been going great for that. So first of all, do you agree with that? I think they took a bit of a gamble by agreeing to delay a hearing and to kind of wave the preliminary injunction issue and go straight to trial. And so far, that bet is not looking so hot. No, they wanted November. The state AGs wanted April. They got March. So much more on the side of the AGs. Certainly. Yeah. But, you know, they said from the beginning, we want time to litigate this and to present all the facts. And now they're going to have plenty of time to do their depositions and to seek documents and to prepare their experts. And this case will, I think, be a really interesting window into the state of Hollywood in 2027. Oh, yeah, absolutely. I mean, there'll be executives across the industry that will be testifying. We're going to see data about the industry like none other. There'll be experts that will come forward and testify about exactly the state of the industry, who's the real competition here. This is certainly going to be a broad canvas about how this industry operates and the health of it and what's coming up on the, you know, on the back end of things. You know, we haven't really talked a lot in this case about AI yet. But I'm sure that that will be part of the defense too. So, so this is definitely going to be, you know, I take the temperature of the industry type of case. Yeah, I talked to one of the theater owners recently. And they made a really interesting point here because they were saying it's not just the market power that the combined paramount water brothers is going to have in these negotiations for film rental prices. It's all the others. When you take out a buyer, when you take out a competitor, all of the players get more leverage in these discussions. Disney is probably looking at this and saying, if there are five, six competitors for opening weekends and then you take one away, we as Disney get more leverage and we can ask for more. So they're looking at this from the broader perspective of how taking out a competitor in the market is going to impact all of their business. Yeah, and that's why a lot of these statistics when it comes to markets, you know, measure stuff like concentration and like what share of the market, you know, a single dominant company has because that, you know, has direct impact on their leverage and their ability to kind of dictate terms when it comes to licensing. And you're right. It has, it has, you know, some immeasurable effects on some of the other companies that that are in the market as well. It makes it harder for, you know, you know, lesser companies to come in and get the same. So, but, you know, that's why the mergers also happening because, you know, David Ellison says that he needs scale to compete with, you know, Netflix. So it works kind of both ways. This lead lawyer, Jeffrey Weinberger, he's gone up against the lead lawyer for the Paramount Coalition, Beth Wilkinson. They went up against each other in the Microsoft Activision case and she won. She got that deal essentially through. And now we can argue about whether that was a beneficial deal or not. But what do you know about this lead lawyer for Paramount, Beth Wilkinson? Fascinating figures. She seems to be now involved in almost every big industry case. She's in the Tanga next star merger. She's representing Disney in this FCC fight they have with the government. She was involved in the NCAA litigation that got that that led to athletes having much more rights there. She did the infamous Dan Snyder report for the Washington commanders that got him fired. Yeah, I mean, I think her real specialty is trials though. And that's why she was brought on board. As soon as Paramount made the decision that they were going to go to trial, they brought in Beth because, you know, she is an expert when it comes to kind of the the nuances of handling a trial of, you know, guiding witnesses to testify of cross examination of procedure and all that. But you know, they have a slate of many different lawyers and it's to be due. Okay, so I want you to explain to people because they don't really realize this. Okay, Beth Wilkinson, Jeffrey Kessler, David Gelfand, Paul Clement, these are all a list lawyers and they bring their entire firm and apparatus and 20 different associates with them. These are all also $2,000 an hour, $2,500 an hour lawyers. How much is Paramount going to spend per month on this case? It's crazy. Estimate. Ballpark. I mean, they're probably spending, you know, $10, $20 million a week on this. I mean, it's just no, no, no, that can't be that much. But like when I was a when I was a litigator, the estimate was you spend a million dollars a month if you go to trial. That was 20 years ago. Right. I mean, they are they are sparing no expense. They've already said they spent $100 million on legal fees. Yeah, I mean, and it's going to it's going to grow. I mean, it's it's it's funny. I mean, just how much legal talent they've amassed for this. It's it's like, you know, you're getting a divorce. You speak to every divorce attorney in town. So you're you're you're, you know, soon the BX can't have their own. And it's almost like they're collecting anti-trust superstars. Matt, they're almost like your Dodgers bringing in scubul, you know, it is the Dodgers. They're the Dodgers of anti-trust lawyers. And they're going up against the Tampa Bay rays of the state attorney generals. The assisted attorney general probably makes what 200 300 thousand a year. Yeah, not probably maybe a little more, but not that much more. Oh god, hilarious. I know. And then there's still no guarantee they're going to win. All right. So I want to talk about the timing here because that's the big issue. You've got this trial set for March. The ticking fees are going to kick in October one. So 650 million every quarter. You've also got this June 4th deadline. If they don't close this deal by June 4th, our guy, David Zazloff at Warner Discovery, he can cancel the deal, take a $7 billion termination fee and figure out what to do next with his company. Maybe go forward with the split that he wanted. He never liked the elephant, never wanted to sell to them. He said that he preferred Netflix from the beginning. Ultimately he had to sell to the Ellicons because they offered more money But is David Zazloff sitting there counting the days until he gets to put this company up for sale again or Is he going to make some deal with them and he knows that his stock price is going to crater if the deal falls apart and he's You know so pregnant with this deal now that he wants it to close and he will get his 800 million dollars and this is So he will do whatever it takes to get worn or discovery sold here. I expect he'll get a call before the The June 4th outside day comes up You know, they'll want to amend the agreement so that they have some more time the question is really what's he going to demand For that. I mean he could at least demand higher ticking fees less restrictions You know, maybe a bonus for himself A bonus for himself. We know that's what it's going to be. Yeah. Yeah, he'll get the plane. He'll get some bonus He'll get his kids summer camp bought by you know some patron of the Ellicons Something will happen. I mean the other the other thing that could happen is that you know This just all plays out and the closer we get to into the the date His leverage goes up You know who knows maybe we'll see Netflix or re-enter the picture like start making noise about how They might re-enter bidding. I mean they couldn't beat Ellicons offer the first time but you know with you know the $7 billion termination fee difference and the and if it looks like the the The merger is going to be blocked. They can make a credible case that That you know it would be you know the best fiduciary duty of of you know David Zazlove to take you know their deal so no guarantee by the way that the government wouldn't try to block that as well Oh, yeah, of course of course, but we're just talking about about David Zazlove's position here and you know what he might want And I expect that that you know some of this Will be worked out beforehand before it even gets to June 4th and because of the delay are they going to have to go back To some of these regulatory bodies that have approved the merger and reopen the case There's been some chatter about how in January February They will have to file additional paperwork and get and basically Re-approve this deal is what's going on there? Yeah, I mean this was from Paramounts on words You know when they were trying to make the case that this trial should happen in November rather than April, you know, they made the point that if the deal doesn't close and by February by I think like the week after The Super Bowl They have to resummit their paperwork to the DOJ And that they have to resummit paperwork, you know throughout regulatory bodies across the world So so yeah, I mean there's no there's nothing to but you know To be me to believe that the outcome will be different But it's just a big hassle for them and if there are political regimes that have changed around the world who knows like maybe Maybe they'll you know That there'll be some minds that have changed well. We're having an election in November right so the contours of the US Congress could change Yeah, and I honestly I think that's been one of the under you know discussed points like why did Uh, Paramount want this trial that happened in November Well, you know, if you look at like what they've been talking about this past week. Oh, this is all political Well, what is happening in November the midterms are happening in November So maybe they thought that we get past the midterms and the the political temperature were cool And then that the states would drop their case That's one theory that I've been Banding about in my mind the last few days Well, or the Democrats get more power in Washington and are more emboldened to hold hearings Or make this a much bigger deal now that they get a little bit of power Well, I think what you know one of the things that's going to happen is you know The the the environment around this merger changes You know, I almost think that you know How this is going to play out has less to do with the merger itself and and the you know the procedural posture of this case And some of the you know other stuff that's happening around This you know whether it's the politics and who who holds the levers of control, you know whether you know AGs are feeling their oaths or whether they feel like they need to You know step up and in the in in the vacuum of less you know federal inter intervention Whether it's you know the jobs fronts whether it's you know the the industry's health You know the box office, you know, I think that there's a lot of things Yeah, we've talked about that things could change a lot in this industry in six seven months And we're also going to get a new governor I mean, there's been some reporting in the journal that Gavin News and the current governor Doesn't like that paramount is being challenged here. But we don't know what Javier Bissera the incoming likely governor Is going to say about this stuff. Yeah, absolutely. So I think that you know basically You know, not much is going to change in terms of you know Whether this merger is anti-competitive or not. Yeah, they'll be collecting evidence and going through discovery and all that But you know some of the kind of environment to the weather around around this case it may change Yeah, speaking of strategy, what did you think of Ellison's big New York Times piece his op-ed where he paints himself as Mr. Down the middle just trying to get his big merger done. He's going to be a responsible steward of CBS news and CNN and everybody should just calm down and let this deal go through. Yeah, I don't I just don't think it's gonna have that much of an impact Maybe he got tired of you know, there were there were some op-eds You know going the other way a week or two ago. Oh, yeah, I mean he and he's had his surrogates out there Yeah, are you manual Adam Aaron our guy and My take on this is I thought it was smart You know to do that to at least put it out there that that this is in my view a political witch hunt now Obviously he created the political situation here by jumping into bed with Trump and going all in on that and you know Sitting next to him at the UFC match and everything that he did that caused the Democrats to be outraged by this and What he didn't mention in the op-ed is His actions since he's owned CBS news have not been down the middle He put Barry Weiss in charge of CBS news and she is an open Ideal log. She is very pro-Israel She is very strong political beliefs that she is espoused both in her New York Times column And at the free press so mr. Down the middle has shown himself to be Kind of not down the middle in his hiring here That was not mentioned. I yeah, I don't I don't know about the strategy I think that if if it is about politics then then maybe the best reaction is to is to kind of lay low and and cool the temperature a little bit If it is about politics though, and maybe maybe that maybe what the strategy is to is to rile up You know D.C. The Republicans in D.C. So that maybe they start talking about You know federal preemption of state of state AG actions and stuff like that Well, and if this is all about CNN and you have the state of California and these 11 states Trying to prevent somebody from owning a particular news outlet. That's the first amendment issue It really is like if the if the government should not be able to dictate who has the Power over a news network Right Yeah, at least for speech-related reasons if there are legitimate antitrust or legitimate business reasons for it fine But if this truly is this is obviously why he did this op-ed if this truly is a politically motivated action to prevent a Trump aligned billionaire from owning CNN That's a that's a first amendment issue in my view absolutely, but there's you know I think that that you know CNN and who controls it is is certainly a factor maybe a key factor in what we're seeing But it's not the only factor and and so they're playing it up and I understand the strategy for for for doing that But I think that you know the states will we'll say that this isn't just about CNN Yeah, oh they already have and you know whether that we believe them is another matter. That's for the judge This episode is brought to you by Accenture When your advertising operations fall out of sync campaign slowdown insights get buried and opportunities get missed That's why Spotify and Accenture are working together to reinvent the rhythm of ad sales using automation Analytics and smarter workflows to simplify campaign delivery and access better data across the business The result less time spent on operations more time connecting brands with the moments and fandoms that matter most To learn more check out Accenture.com/spotify All right, so you wrote a piece for Puck this past week about what's going on As we all wait for this to happen, which is everyone in town is in limbo Everyone's thinking you know, I've talked to people constantly What's going to happen to my job? What's going to happen to my company? I see my counterpart at Paramount. I know that that person is aligned with Ellison They're probably going to take my job and people are looking elsewhere and we had Amazon get sued by our guy, David Zazloff, and Warner Discovery, because they hired an HBO marketing executive, and there were others as well. I know they went after Franny, who runs the content at HBO. They went after a bunch of other people, and this to me was a warning shot. Don't you dare try to break your contract before this deal closes. We are looking and we will sue if you do that. - Yeah, I think that these people tend to be overlooked in the whole process. We tend to kind of think of this as kind of a new story about the merger without necessarily thinking about the people involved. There are people who are working at this company that are wondering whether they will still have a job in the years time. - Of course, I mean, I hung out with a friend of mine who's a Warner's exact last week, and she was saying the exact same thing. Everybody is speculating as to what's gonna happen. And now that we have this delay, it's just like, ugh, more uncertainty. Why shouldn't they be able to jump around? What is the current state of the law on non-competes and breaching your contract to jump to arrival in California? - So this is a really kind of tricky issue, because in California, it's very anti-non-competes. It's very employee-friendly. It likes the mobility, but that being said, they're having some courts in the past few years that have-- - Yeah, the Fox Netflix case. They found that the contract you have, if it's a fixed term and you are an executive at an entertainment company, you have to stick to your fixed term contract. - Right, but it can't be a one-sided fixed term contract. It can't just be, you have to stay here and we can fire you if you want at some point. So it has to be like a bargain, you're getting a security. You sign that deal for four years. You know you're going to be paid for four years no matter what. Some companies have tried to get away with. You agree to stay here for four years, but we can fire you whenever we want. - Right, and those are not okay. - Right, right. - So everybody should be looking at their contract today to find out what it actually says. - So when it comes to this merger, there's a lot of things going on here. One is that the merger agreement itself, which I pointed out in my Puck's story, kind of compels Warner Bros. to enforce these restrictions. They, you know, apparently believes that it's buying a certain workforce. - They don't want everybody with one foot out the door. - Exactly, you know, so if Amazon starts recruiting and poaching their employees, you're right. That this is a warning signal to everyone else. Don't even dare try to, you know, poach executives from us. - I think it's a worst move. - Yeah. You know what? You know it's also good for keeping employees, retention bonuses. - But it's hard for them to do anything in the midst of this merger because, you know, their new, their future corporate parent is coming in, but they can't exert any control. They can't, you know, really adjust too much, you know, compensation and all that. So it's a really difficult situation. And, you know, I guess one of the reasons why Paramount, you know, wanted this trial to happen soon or rather than later was because there are so many people who are wondering about the future. So that's probably their best point about why things should move. And it sucks for Peter Friedlander at Amazon. He's the head of TV and he was trying to build a team and go and after great people that are at this company that is just subject to chaos all the time. And he couldn't hire the people he wanted. So he had to promote from within. - Yeah, yeah, absolutely. I mean, I think that everyone should be able to work wherever they want. - Then again, you do sign a contract. I don't want to like-- - You sign a contract with one company, but then another company comes on and just know guarantee that you're gonna, you know, work there in the future. So at that point, I think I don't know. - No, there's no loyalty. Everybody will screw you. Get what you can while you can. That is my philosophy. All right, so everybody keeps asking me and I'm sure you get this all the time. How long is this gonna go? What's gonna happen? Is there gonna be a settlement? Like give me your state of the case and the posture right now. - Okay, well, you know, like I said, I think that the settlements could kind of turn on stuff that happens nothing inside the case itself. It could turn on the letter. - The election. - Right, one thing that I haven't seen, many people point out is this integration with the writer's guild case. Because let's say the states decide that they, you know, will accept a scene and a divestiture and they will settle with, you know, paramount and everything like that. Well, the writer's guild case is still going forward and the stipulation kind of covers them. The injunction covers them. So that really complicates a settlement here. - So it's gotta be a global settlement that makes the writer's guild happy too. - Yeah, it really does. And so, you know, paramount like find some its selves in precarious position here because it's getting very late in the calendar. And they have to, you know, negotiate with multiple different parties here. - But the writer's guild can't stop a merger. - Well, right now, they agreed to kind of-- - Oh, they agreed because they agreed to consolidate the cases. - Because of the stipulation, they agreed that they wouldn't consummate the merger until five days after a merits decision in both of these cases, not just the state AG case, but the writer's guild case as well. So when everyone starts talking about, you know, the state's, you know, potentially settling it, what they're missing is the fact that, you know, the writers too have a big say in what's gonna happen here. And so nobody should forget them. That being said, it would not surprise me if, you know, there's a settlement down the line. Plus, we don't know how long these decisions are gonna take. That's the crazy part. This judge could sit on the matter for a couple weeks and then if Paramount doesn't like the result that they get, they have to appeal. It has to be taken by the nice circuit. They have to hear argument. They have to issue their ruling. This could go on a year. - Yeah, I mean, that's the crazy part for me, you know, it's not the fact that they delayed this thing. It's that they can't really guarantee you, like how fast the judicial process happens. I mean, once the judge rules, I'm sure it is going to be all sorts of emergency motions, you know, it might actually get to the Supreme Court much quicker than people think. - And do you think the Supreme Court would be inclined to take this case? - Well, I think they're going to have to make a decision one way or another on the emergency motion whether to stay the judgment or not. - But they take so many, they take so few cases. - Right, right. But what I'm saying is that there could be a decision on the so-called shadow docket. Like even if the case isn't, you know, addressed on its merits or, you know, the big issues, there might be a decision there right away whether to stay the judgment. That being said, you know, this is a big case. I certainly could see the Supreme Court taking it. But the question is, you know, how fast is this going to move? You know, if the trial is going to happen in March, you know, the judge is hardly guaranteed that she will come out with a decision the following month. She seems to not really care that the Ellison's are having to pay a billion dollars before this trial even starts. - Yeah, like I said, like I joke to in my column, you know, this is not monopoly money. This is real money could go ahead. - I know, but you know what, like I've been before judges that do not care about the money being spent on either side. That's not their, it's just not their job. Their job is to adjudicate. And if they feel that it takes a certain amount of time, they're gonna take it. So Eric, you've read all the papers, like give me your assessment of the arguments. Do you think this is an appropriate definition of three markets in Hollywood? - Well, I'm certainly a little bit skeptical of the markets that I see defined here. It does seem a stretch, you know, kind of borderline case here. It's not surprising to me that I love other jurisdictions kind of past making a challenge here. So, you know, the states have a job in front of them in terms of, you know, convincing the judge that these are real markets and that, you know, they haven't left anyone out and that there are, you know, bad competitive effects to, you know, what we see here. Right now, I'm a little kind of iffy on the merits case of the side, but we'll say, we'll say. I mean, I have an open mind about it too. It'll be hilarious if they bring in the heads of Amazon's film studio and Lionsgate's film studio to talk about their massive big budget hits this year, Project Hail Mary and Michael to bring, to go in and they'll get to brag in front of all of Hollywood. We made a billion dollar movie, we're Lionsgate. - Yeah, I think that part of the promotional tour for any actor might be getting involved in this trial and, you know, you know, paying themselves back. That's a good idea. Everyone should be fine. be calling their publicists, get me into this trial, everybody's going to be watching. Exactly. Thank you, Eric. My pleasure. We are back with the call sheet. Greg, where are you on Ted Lasso? I don't think we've ever discussed Ted Lasso on the show. I watched season one in the pandemic. I enjoyed it. And then I kind of fell off in season two once we got out of the pandemic. It's just like a little too, it's a little too sweet and hopeful for my, for my dead heart. Yeah. I did on the first two seasons and then by the third, it's just like, what is going on here? The episodes were so long, it stopped being a comedy. It was just all about trying to make you cry, like not for me. But a lot of people are into Ted Lasso. Yes. It was shocking. In 2023, I remember this, Ted Lasso was the number one streaming original in all of streaming in the US. Last time a Netflix show was not number one, it got to 16.9 billion minutes viewed according to Nielsen. And kind of amazing. I mean, Jason Sudega said they were going to end the show there. Amazingly, a year or two later, the, the, he had an epiphany that he had another idea for season four that may have coincided with a dump truck of money being backed up to his house. Yeah. Now he's back. Ted Lasso is back to, I believe, coach, a women's team now in England. Yes. Reviews came out today. Not great. Oh, really? Is that right? Yeah, the reviews have not been good. I've, I had heard from people at the studio. It's made by Warner Brothers. They are also very interested in NBC gets sort of a passive interest in it because remember Ted Lasso was a character that popped up on NBC Sports. So they get free money from Ted Lasso because of that. But I had heard that it wasn't great and that everybody was just sort of going through the motions to get Apple another season, but they got it and it's here and it's going to be big. The question is, is it going to be the biggest show of 2026? What say you over under on 16.9 billion minutes view? That's such a, that, that number means nothing to me. I feel like I haven't, we're not deep enough into like the streaming world where like those numbers mean anything. I know. How is it really measured? It's 16 billion views and how long? Yeah. There are actually two different questions for the year it would be, but they're two different questions because obviously we're at a different place in the streaming wars this year than we were in 2023. So 16.9 billion minutes views may not be the biggest show of the year. In fact, for the first half of the year, Neilson said that stranger things was the biggest show of the year. Well, your question is basically will season four outperform season three. That is ultimately my question. And my, my prediction is no. I think that season three turned off a lot of people and it'll be big. It'll probably be the number one show on Apple by a long margin. But I do not think that season four will match season three. I probably would agree with you. I don't know. Maybe the World Cup is going to help Americans fall back in love with soccer and they're going to want to dive back into Ted Lasso. They definitely got to take us into the World Cup conversation query whether they paid for that placement during the halftime show. Not sure about that one. But I just feel like, you know, we've seen decay on these shows across the board this year. Lots of shows have not performed up to their previous seasons and there's just not as much good will. Also, it's been three years. People kind of forget the only thing that the only thing on the other side is that Ted Lasso is remarkably durable on Apple. It is still even before this new season. It was still in the top 10 like years after it premiered. Yeah. It's a real cult. People who love Ted Lasso really love Ted Lasso. Even if it maybe doesn't reach the levels of season three, I bet you it'll be close. Maybe. And now they've got more episodes. The way Nielsen judges things, they go all of the show. They judge all the show. So it was, you know, 24 episodes before I believe. You mean 24 total? 24 total. Yeah. Maybe people will rediscover that, you know, the first seasons or rewatch it. So I don't know, but I think that this season will not match the previous season, but it will probably be top 10 for the year. Yeah, I agree. All right. That's the show for the day. I want to thank my guest Eric Gardner, producer Craig Horoback, artist Jesse Lopez and Stefano Sanchez. And I want to thank you. We'll see you one more time this week.