MICHEL MARTIN, HOST:
The $111 billion merger between Paramount and Warner Bros. is on hold. A federal judge paused the deal for 14 days after a dozen states filed a lawsuit against it. The states argue the merger would reduce competition and hurt the entertainment industry. The Justice Department has already approved it. For more on this, I'm joined by Brian Stelter. He's the chief media correspondent for CNN, which would become a part of Paramount if this deal goes through. Good morning, Brian.
BRIAN STELTER: Hi. Good morning.
MARTIN: So Paramount had already offered to voluntarily delay the merger when this ruling came down from a district judge in California. Can you tell us a bit more about the ruling and what strikes you about it?
STELTER: Right. This judge in Northern California - Araceli Martinez-Olguin - she says that the states are providing compelling evidence that this deal would substantially lessen competition in the theatrical market. Those are concerning words for Paramount because this judge is looking at the evidence the states have assembled and saying that this merger would harm competition. Now, Paramount's going to have a few weeks to convince her otherwise, but already, from the jump, she is seemingly inclined to be persuaded by the state's arguments. So this is going to be a really dramatic antitrust showdown.
MARTIN: How much of a setback is this for Paramount, even though this isn't the final word?
STELTER: This is a significant setback because Paramount has exuded confidence all along, ever since prevailing in the bidding war over Netflix back in February for those Warner Bros. assets. Paramount really needs to get bigger, and quickly. It is instrumental and incumbent on the company. It's really - you know, I don't want to call it existential, but it's really the company's entire strategy to get really, really big, buy Warner Bros. - which is six times as big as Paramount's market cap - and scale up.
Paramount says it needs to do that to compete with the likes of YouTube and Netflix and Amazon and Apple, but that's not what this antitrust case is really going to be about. The states have created an argument here that's about the theatrical market for movies and the cable TV licensing market. So essentially, Paramount wants to talk about streaming and scale in the technology industry, but these Democratic state attorneys general, they want to talk about movies and how they're distributed. And so the arguments are going to be about that.
MARTIN: So the next big step in this case is a hearing for a preliminary injunction next month. How significant would it be if that's granted?
STELTER: Right. That will really be the entire ball game here. I don't want to mix metaphors, but Paramount was already on the one-yard line.
(LAUGHTER)
STELTER: They're about to be complete with this merger. You know, they are so close to being done and taking over Warner Bros. Discovery. They've won all the approvals they need in all the markets around the world except for the European Union - that's probably coming tomorrow. And as you mentioned, they'd already secured approvals from the Justice Department in the United States.
Paramount has cultivated a close relationship with the Trump administration. But for every reaction, there's a counterreaction, and it does seem these Democratic states are reacting in part to what they believe might have even been a corrupt relationship there in Washington. Of course, Paramount has denied that. The Trump administration has denied that. But you have these Democrats in California, New York, New Jersey, other states, who feel like the federal government has dropped the ball and so they are picking it up and running with it. And I find that to be a really interesting dynamic we've seen all across the country during Trump 2.0.
MARTIN: So we only have about 30 seconds here, but Paramount has to pay more than $7 million a day to Warner Bros. shareholders if this isn't wrapped up by the end of September. Both companies have seen their stock prices fall. Do you think the leadership at Paramount's getting worried?
STELTER: Definitely getting frustrated. Time is of the essence. The clock is ticking for the reason that you just laid out. But the judge in this case is willing to move quickly. She has assigned that April (ph) 3 date. And essentially, in a case like this, the preliminary injunction phase is everything because if the judge agrees that the states are right, that this deal will be anticompetitive, if she puts an injunction in place in August, this deal will get delayed for many months.
MARTIN: OK.
STELTER: There will be a lengthy trial.
MARTIN: OK.
STELTER: That could be enough to kill the deal altogether.
MARTIN: That is CNN chief media analyst Brian Stelter. Brian, thank you.
STELTER: Thank you.
MARTIN: In a statement to NPR, Paramount wrote that the merger is, quote, "lawful and pro-competitive. We are confident the evidence will demonstrate that the state AG's antitrust arguments are without merit."
I want to mention Paramount and Warner are both financial supporters of NPR. Transcript provided by NPR, Copyright NPR.
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