Federal Judge Blocks Paramount-Skydance, Warner-Discovery & DC Studios Merger

[00:00:00]David Ellison, you have been verbally laying out your case to the public for the past 4 months. Now, it is time for you to lay out your case legally.

[00:00:12]Something that I'm pretty sure you don't know how to do.

[00:00:16]What is happening, my beautiful geek culture? As always, I'm your boy O. And today, a federal judge has just blocked the Paramount Warner Bros. Discovery merger, citing a law. We got to talk about this because I feel that the AG is laying out a good case. You know what that means? Things are about to get a little bit spicy, baby. First up, John Campea and the merits on why this merger was paused.

[00:00:49]All right.

[00:00:50]>> So, the Paramount Warner Bros. merger has been temporarily halted. This is all based on something known as Section 7 of the Clayton Act.

[00:00:59]>> Law.

[00:01:00]>> And the Clayton Act of 1914 specifically, this is the main kind of law that gets brought up in all these types of cases.

[00:01:07]>> The main law.

[00:01:10]>> Section 7 of the Clayton Act is the entire legal foundation for this lawsuit. Section 7 strictly prohibits >> Prohibits.

[00:01:16]>> corporations from acquiring the stock or assets of another company if the effect of that merger may be substantially to lessen competition or to tend to create a monopoly. In this specific trial, the plaintiff states, that's the New York, California, and the others, are using the Clayton Act to argue that combining two of the big five Hollywood film studios, Paramount and Warner Bros., will create an illegal concentration of market power under the legal framework established by the act.

[00:01:46]The court looks at metrics like the combined market share and the HSHSHHI, commonly referred to as the Herfindahl-Hirschman Index.

[00:01:56]>> Herfindahl-Hirschman Index >> advantage because the initial data indicates that a post-merger market share of 27% and a massive spike in the market concentration, that's the HHI.

[00:02:08]Without going into all the numbers, just know this.

[00:02:12]The Clayton Act says you don't want to see an H an HHI going over 200.

[00:02:17]>> 200 >> The result of this merger puts it over 350.

[00:02:22]>> Pause.

[00:02:24]So, the cap is 200.

[00:02:28]However, if these two studios merge, it would be 300 in their results.

[00:02:38]Illegal, baby. Let's continue.

[00:02:40]>> So, that's a problem for the merger.

[00:02:44]It allows the judge to presume uh the Clayton Try this again. In market concentration, the Clayton Act allows the judge to presume that the merger is unlawful, shifting the burden to the studios to prove that their consolidation won't harm the theatrical distribution marketplace. Now, this >> Time to lay out their case.

[00:03:04]>> Reading through the judge's order, that like I did this morning, the judge, and I'm going to be basic here, basically stated that they granted the motion because they believe it is likely that the states will win on the grounds of their case.

[00:03:32]>> Oh, wow.

[00:03:33]>> Basically speaking, >> Check the meter.

[00:03:35]>> said in their ruling that after looking at all the arguments that Paramount presented, that the states presented, the judge believes that the states are likely to prove that this merger will in fact violate the section 7 of the Clayton Act.

[00:03:56]And if it does, this merger is dead.

[00:03:59]>> Mhm.

[00:04:01]RIP. Now, something that I have noticed that is different from the DOJ in this lawsuit is the fact that the state attorney general is citing law.

[00:04:17]The DOJ, on the other hand, didn't cite anything.

[00:04:22]They just said no scrutiny or week and a half, 2 weeks at best. Oh, the merger is good to go.

[00:04:29]Now, let me tell you something.

[00:04:32]This is what David Ellison was afraid of.

[00:04:36]Okay, this is what he was afraid of. He did not want anyone to challenge the merger simply because he knew that the merger was violating the law.

[00:04:47]Okay, now that the California AG is bringing this case forward, we can hear how it's going to violate the law.

[00:04:57]David Ellison doesn't want us to hear that.

[00:05:00]All right. However, I've been telling you guys since day one that the merger between Paramount and WBD was not legal. I said, "Listen, this thing is a monopoly." Everybody tried to convince me that Netflix owning WBD would be a monopoly. No, it's not.

[00:05:21]Why? Because Netflix does not own a theatrical movie business.

[00:05:26]All right. In other words, Netflix would be a new player in the game.

[00:05:31]All right, not absorbing another player.

[00:05:34]And I know many of you are going to have questions about how Disney was able to buy Fox. Disney bought a portion of Fox, not Fox as a whole.

[00:05:49]Fox News is still its own thing. Fox Sports is still its own thing.

[00:05:55]Okay, they bought a portion of the studio.

[00:05:58]Not the studio in its entirety.

[00:06:01]All right.

[00:06:02]If Paramount buys WBD, they will own two mega studios, two mega streaming services.

[00:06:13]Okay, and not to mention two mega news channels.

[00:06:20]Okay.

[00:06:21]That is a monopoly, ladies and gentlemen. Now look, I know that is not what you want to hear, but it is the law.

[00:06:30]They are citing law.

[00:06:33]You cannot argue with law.

[00:06:36]If you are, then the best that I can tell you is don't live in America because we have laws.

[00:06:45]And as citizens, and if you're a business owner, you must obey those laws.

[00:06:52]They are there for a reason.

[00:06:54]And I understand a lot of you may be how could I say this, furious at the fact that the AG brought this case forward, but you have to understand this.

[00:07:05]That is his job.

[00:07:07]It's his job to enforce the law. It's his job to make sure people like me and companies like Paramount is abiding by the law.

[00:07:19]Okay.

[00:07:20]If we do not have attorney generals, then our system of our laws collapse.

[00:07:29]Okay, we have to be able to enforce those laws.

[00:07:33]And that is what the AG is doing. The DOJ, on the other hand, has proven to us that the Ellisons indeed have a backhand deal with that of the president.

[00:07:48]These people has more >> [music] >> back channels than Harriet Tubman's underground railroad. Okay, there's a lot going on now. A lot of things is happening. There is no way that this merger should have been approved if we go by the law that has been established since Let's go back 1914.

[00:08:13]1914.

[00:08:16]Okay, that is over 100 years.

[00:08:19]That is crazy.

[00:08:21]>> [laughter] >> And as I told you before, the burden now falls on Paramount Sky Dance to prove that they're not breaking the law, which I know they're not going to be able to do because they know that they are clearly are.

[00:08:38]Okay.

[00:08:40]This is the nightmare that David Ellison did not want to be in.

[00:08:46]And think about this, if the deal does not close by the end of October, David Ellison will owe Warner Bros.

[00:08:55]Discovery like three or four billion dollars.

[00:09:00]Okay. That's a whole lot of money.

[00:09:04]And at this point, if Paramount walks away, then they will have to give WBD an additional seven billion dollars.

[00:09:15]Okay.

[00:09:16]So, right now, I feel that Paramount may have trapped themselves in a situation that they cannot get out of without costing at least 13 billion dollars.

[00:09:28]Mhm. Waste of time. Now, as for Warner Bros., many people are saying that the studio will be broken down into pieces. If you ask me, that is what's best.

[00:09:41]Let somebody buy DC Studios. Let somebody buy New Line Cinema. Let somebody buy Warner Brothers themselves, CNN, etc., etc. Hey, if the studio is non-existent, it's their fault.

[00:09:57]Make sure you subscribe, and make sure you like, and always remember, let the love on turn rule.

[00:10:04]That means let the good times roll. But, in the comments below, let me know, do you understand now why the merger has been paused? I get it. Many people are trying to make this political, but in reality, it is all about law.

[00:10:18]Let me know in the comments below.