Now that Paramount has won the bidding war for Warner Bros Discovery, attention has turned to whether the deal will receive approval from regulators – and, crucially, how long the regulatory review process will take.
For Paramount, it is important that the deal closes quickly. When Paramount struck its $110bn deal with the WBD board to acquire the studio in February, it was based on an agreed price of $31 per WBD share.
From September 30, the price that Paramount pays for WBD will increase each quarter by $0.25 per share until completion of the merger. If the deal fails to complete by March 2027, each party can walk away. If the deal fails to clear regulators, Paramount must pay a termination fee of $7bn.
Timelines and remedies
Most people think the deal will be approved, but there are big question marks over how long it will take – and what remedies Paramount might have to agree to to secure clearance. Already, Paramount has pledged that the combined studios will produce a minimum of 30 theatrical films annually, and to maintain release windows at a minimum of 45 days.
Numerous industry organisations have spoken out against the deal, with US exhibitor lobby group Cinema United saying that “studio consolidation historically leads to fewer movies being made”, and noting that Disney-Fox produce half the movies they did before their 2019 merger. It has also railed against likely job losses, and the increased leverage that Paramount-WBD would have over cinemas.
The International Union of Cinemas (UNIC), meanwhile, has called for the deal to have the “highest level of scrutiny by the relevant competition authorities, with legally binding commitments.”
Until recently, it was assumed that the deal would quickly win regulatory approval in the US given the close ties between President Donald Trump and Oracle founder Larry Ellison, the father of Paramount CEO David Ellison.
But last month, the head of the US Department of Justice’s (DOJ) antitrust division said that the deal will “absolutely not” have a fast track to approval because of political factors. The DOJ has already sent subpoenas in its investigation of the acquisition, seeking information on how the deal would affect studio output, content rights and competition among streaming services, as well as its impact on cinemas.
The deal also needs to secure approval by UK and European regulators, where it will be reviewed by the Competition and Markets Authority (CMA) and European Commission respectively. Opinions differ over how long these processes will take.
In both the UK and Europe, the deal is at the pre-notification phase with regulators. This sees each regulator gather information for the launch of a phase 1 investigation, which is expected to begin in the coming weeks. In Europe, a phase 1 investigation lasts a maximum of 25 days, and in the UK it is 40 days. Based on the findings, the regulator can then decide whether to proceed to a lengthier and more detailed phase 2 review, which can last many months.
Paramount is confident – and hopeful – that the deal will not need a phase 2 investigation, allowing it to close the transaction swiftly. To help speed things along in the UK and Europe, it has hired corporate advisory firm Brunswick and legal firm Latham & Watkins as its main advisors.
It is likely that phase one investigations will begin after WBD shareholders vote on the proposed merger with Paramount on April 23.
Streaming overlap
The core issue being investigated by regulators is consolidation among major studios, says Tommaso Valletti, professor of economics at Imperial College Business School, and a former chief competition economist for the European Commission.
“This will not be good for creators, actors, nor for distributors,” says Valletti, who adds that regulators will likely probe three areas: film production and theatrical distribution (fewer large studios may weaken cinemas’ bargaining position); streaming (the overlap between Paramount+ and HBO Max in the SVoD market); and TV and content licencing (the combined firm would control a very large catalogue and production pipeline).
Streaming is unlikely to be an issue for regulators. A combined HBO Max and Paramount+ would have around 200 million subscribers worldwide – about the same as Disney+/Hulu but behind market leader Netflix with 325 million global subscribers. In the US, Paramount+ and HBO Max together account for a 19% share of the SVoD market, below the threshold of DOJ concerns. Neither Paramount+ or HBO Max are market leader in most European countries.
“The streaming overlap is less acute than in a hypothetical Netflix-Warner Bros deal, because neither Paramount+ nor Max is the market leader in most European countries and arguably the combination provides a stronger counterweight to Netflix, the clear leader in streaming,” says M&A expert Kim Chua, a partner at OC&C Strategy Consultants.
Theatrical issues
Theatrical distribution is more of a problem. In the US and the UK, a combined Paramount and WBD would have just over a 25% share of theatrical box office based on 2025 figures, a regulator threshold for market concentration. United Cinema has said it would “consolidate as much as 40% of each year’s domestic box office in the hands of a single dominant studio.”
Paramount has said it sees $6bn in cost “synergies” in the deal. Alice Enders of Enders Analysis notes that the deal has led to concerns about the level of cost-savings and revenue raising measures that will be required to service Paramount’s debt. “These measures could be detrimental to the supply of films in the US, UK and other markets, and/or to the terms of trade of cinema operators,” she says.
Licencing impact
Licencing could be an issue too. Enders notes that the deal will raise concerns in the UK with pay-TV operators such as Sky and Virgin Media which licence content and channels from WBD and Paramount. “Comcast, the parent of Sky and disappointed suitor of WBD, has a strong interest in guarding against a detrimental effect on Sky of the Paramount/WBD merger,” she says, adding that the UK government will not want the deal to undermine strong pay-TV players such as Sky which have invested heavily in UK jobs and infrastructure.
“One could envisage that the concerned stakeholders in the UK – Sky and Virgin Media – would seek assurances that the post-merger contractual conditions they will face with a merged Paramount/WBD will be no worse than their existing contracts with Paramount and WBD respectively,” says Enders.
Political challenges
There are other concerns too, from politics to inward investment. Enders flags potential UK government concerns on the UK creative economy, where WBD has historically been a “significant and committed” investor in UK production, making series such as the upcoming big-budget Harry Potter adaptation and investing in infrastructure such as Warner Bros Leavesden Studios.
In the US, regulators are expected to examine whether combining two major news outlets – WBD’s CNN and Paramount’s CBS News –under one corporation harms competition. Also attracting attention is that the deal brings together leading kids channels Nickelodeon and Cartoon Network, as well as rival sports networks CBS Sports and TNT Sports.
Meanwhile, Paramount’s bid is backed by $24bn from the sovereign wealth funds of Saudi Arabia, Qatar and Abu Dhabi. Paramount has insisted that the foreign investment funds will be passive investors – without board representation – and would therefore not require a review by the FCC in terms of foreign ownership rules or the US government’s Committee on Foreign Investment in the United States (CFIUS) for potential national security risks. However, several Democratic politicians have issued calls for CFIUS to probe the deal, citing concerns that CNN and CBS News would be owned by foreign government investors.
Looking ahead
Still, Valleti says he expects the deal to be approved in the UK and Europe after a phase 1 investigation, without the need for a lengthy phase two probe in both the UK and Europe. “I don’t expect the regulators to do much on the side of creators because they rarely do so,” says Valleti, adding that Paramount is smaller than the largest studio player Walt Disney, and that the market still includes major other studios such as Universal and Sony. “That said, regulators may still look for targeted remedies, for example: commitments on content licensing, or behavioural commitments toward distributors and cinemas. A prohibition would be very surprising.”
Others differ on the timing, but not so much the ultimate result. Enders notes that the EU is made up of 27 member states, and the European Commission will examine each one as a national market for AV services, hearing from interested parties in the supply chain for cinema and pay-TV services. She says the clearance process for “seems certain to occupy many months of the competition authorities in the US, EU and UK”.
Chua adds: “Overall, although there is much detailed work to do, and potentially some remedies to put in place, I would expect that clearance in Europe and the UK is more likely than not, albeit after a lengthy review.”
No comments yet