Time is of the essence for Paramount Skydance Corp., who is taking opposing state attorneys general directly to trial in hopes for a quick resolution on its antitrust lawsuit – a decision that could postpone its $111 billion merger with Warner Bros. Discovery Inc. until potentially next June.

The case, brought to the U.S. District Court for the Northern District of California by Attorney General Rob Bonta and 11 other states, would have a chance to play out fully in court instead of delaying through legal motions and preliminary hearings. Paramount

has agreed not to close the merger until June 1 of next year, or five days after a decision has been made, whichever comes first. The deal would be further blocked if the court rules in favor of the states, pending an appeal.

Despite having cleared approvals from the European Union and the U.S. Department of Justice, the deal seems to be struggling in its native Golden State. The agreement to go to trial came after U.S. District Judge Araceli Martínez-Olguín already issued a four-week restraining order, an extension from her previous order of two weeks.

However, both sides are viewing the agreement as a victory. Bonta called it a “critical success” in a statement, while Paramount said it was “a significant win” since it established “a direct path to a trial.”

The stock performance for David Ellison’s entertainment conglomerate, on the other hand, is less optimistic. Paramount’s stock dropped to its lowest within 52 weeks on Thursday at $7.66, an approximate 40% loss compared to a year ago.

Reasons for trial

Paramount believes going to trial is the quickest way to push the deal across the finishing line, according to The New York Times citing people familiar with the matter.

The original merger statement, reached in February, includes a “ticking fee” that applies if the deal stays open past Sept. 30 this year. That means stretching the deal would financially drain Paramount. It will need to pay Warner Bros. Discovery shareholders $650 million per quarter, or approximately $7 million a day.

With the attorneys general demanding a permanent stop to the merger, Paramount seems to think that reaching a negotiated settlement is “highly unlikely,” Court Stroud, a professor of integrated marketing at New York University, told the Business Journal.

“David Ellison and his team likely believe the fastest path to closing is letting a court rule, rather than litigating restraining orders and injunctions every few weeks,” Stroud said. “They’re gunning for the earliest possible trial date, betting that a quick, decisive win is cheaper in the long run than a slow war of attrition.”

Though Paramount has seemingly swiped the deal from Netflix Inc. in February, the tug-of-war over Warner Bros. Discovery might not be over yet, Stroud said. If the transaction collapses, Netflix or another bidder might still re-emerge to pursue the HBO owner’s attractive intellectual property depository.

The ongoing saga

The merger is poised to shake up the status quo in the global media and entertainment industry. If passed, it would combine two legacy studios that have long counted among Hollywood’s “Big Five,” premier streaming services HBO Max and Paramount+, and dominant news outlets such as CNN and CBS News.

The states argue that the deal would lessen competition in film distribution, anticipated blockbuster film distribution and licensing cable TV channels. Specifically, the suit claims that if the merger comes to pass, it will take up 30% of the blockbuster film distribution sector. The combined entity would join ranks with The Walt Disney Co., NBCUniversal Media and Sony Pictures Entertainment Inc. to control as much as 93% of that market, according to the suit.

Some analysts, however, pointed out that streaming is the real prize Paramount wants. Paramount argues that if the merger is completed, the combined entity would strengthen competition against massive streaming and technology platforms “who have harmed the market for theatrical exhibition and jobs in the entertainment industry.”

The combined entity would still rank below Netflix, Disney and Amazon Prime by Amazon.com Inc. in streaming, Granderson des Rochers attorney Corey Martin told the Business Journal in July.

“I do not really, in any way, shape or fashion, see the combination of these two companies as one that would have such a large market share that it would have adverse consequences to consumers,” Martin said. “Paramount was not pursuing Warner Brothers Discovery because they wanted to have a larger footprint in theatrical distribution. They’re paying a significant premium … to get access to the library.”