Paramount, Warner Bros., California—and the Corporate Flop That Is Somehow Still Being Workshopped
I wrote a book called Flopocalypse Now: Corporate America’s 100 Most Catastrophic Crashes.
One hundred disasters.
Crystal Pepsi.
Google Glass.
Products nobody wanted.
Companies setting enormous piles of money on fire.
Executives looking at ideas that should have been killed during the first PowerPoint presentation and saying:
“Let’s scale this.”
After finishing the book, I thought I’d seen everything Corporate America had to offer.
Then Hollywood said:
Hold my $14 Erewhon smoothie.
Because right now, Paramount, Warner Bros., and the State of California are engaged in what may be the most expensive game of “I’M TAKING MY BALL AND GOING HOME” ever attempted.
Except the ball is Hollywood.
And approximately 60,000 people would really appreciate it if the adults could stop yelling.
PREVIOUSLY ON: SUCCESSION — SACRAMENTO EDITION
Here’s the situation.
Paramount Skydance wants Warner Bros. Discovery.
Badly.
We’re talking about a deal valued around $110 billion that would combine two of Hollywood’s five major film distributors and create a company controlling close to one-third of U.S. theatrical movies and basic cable programming, according to California’s antitrust complaint.
Paramount’s argument is essentially:
Have you SEEN the competition?
And that’s not an entirely crazy point.
Hollywood isn’t simply five movie studios fighting over Friday-night ticket sales anymore. Traditional media companies now compete for attention with enormous technology and streaming businesses, video platforms, social media, gaming, and approximately 19 million TikTok videos of golden retrievers stealing sandwiches.
Paramount says combining with Warner would create a stronger competitor capable of investing more heavily in movies, television, theatrical releases and creative talent.
California Attorney General Rob Bonta and 11 other state AGs say:
Not so fast, Gordon Gekko.
Their lawsuit argues that putting these businesses together would reduce competition, potentially increase prices and ultimately mean fewer movies, fewer television shows and fewer choices.
So far, this is a legitimate antitrust dispute.
Complicated.
Important.
Possibly boring enough to make normal people suddenly remember they need to clean their gutters.
Then somebody apparently asked:
“How could we make this MUCH crazier?”
ENTER CALIFORNIA, CARRYING A GASOLINE CAN
California has a problem.
Hollywood is called Hollywood because…
well…
Hollywood is here.
This should be a considerable competitive advantage.
It’s like Hawaii having an advantage in the tropical vacation business.
Yet California has spent years watching film and television production migrate elsewhere.
Georgia.
New York.
New Jersey.
New Mexico.
Canada.
The United Kingdom.
Probably somebody’s garage in Romania by the time you finish this article.
Los Angeles production was already suffering badly before this corporate showdown. The Los Angeles Times reported last month that feature-film shoot days had fallen 20% year-over-year in the second quarter, while television shoot days dropped 30%. It also reported roughly 57,000 entertainment jobs lost over four years and more than 80 production-service businesses closed since 2022.
California has responded by dramatically expanding its film and television tax-credit program. The state says its first year of the expanded program awarded 170 projects expected to generate $6.6 billion in direct production spending and nearly 35,000 cast-and-crew jobs.
So California is simultaneously saying:
PLEASE COME BACK AND MAKE MOVIES HERE.
And:
WE ARE SUING ONE OF THE BIGGEST MOVIE COMPANIES HERE.
Again, those two positions aren’t necessarily legally contradictory.
But from a distance?
It’s fantastic corporate theater.
THEN PARAMOUNT FOUND THE NUCLEAR BUTTON
David Ellison apparently looked at this situation and said:
What if we threaten to leave?
Not leave the negotiating table.
Leave California.
The studio has floated moving its headquarters and potentially significant operations to places including Tennessee, Texas or Georgia. Ellison reportedly told associates he would prefer to remain in Los Angeles but is prepared to relocate if the merger fight isn’t resolved.
This is the corporate equivalent of your dad getting angry at Thanksgiving dinner and announcing:
“FINE. WE’RE MOVING TO TENNESSEE.”
Except Dad owns CBS.
And Nickelodeon.
And MTV.
And Paramount Pictures.
And he’s trying to buy HBO.
Thanksgiving has become complicated.
AND NOW WE ARRIVE AT MY FAVORITE PART: THE TICKING FEE
Because every great corporate disaster needs a detail that sounds completely made up.
Beginning October 1, Paramount is reportedly obligated to increase payments to Warner Bros. Discovery shareholders by approximately:
$7 MILLION.
Every day.
While the transaction remains delayed.
Seven million dollars.
Per day.
That’s approximately $291,667 an hour.
About $4,861 per minute.
Or roughly $81 every second.
I have now cost Paramount approximately $3,000 while you read this paragraph.
You’re welcome.
Paramount has asked the court to require California, the other plaintiff states and the Writers Guild of America to post a $1.88 billion bond to cover potential losses if Paramount ultimately wins the litigation. California argues that Paramount voluntarily agreed to delay closing the deal and therefore shouldn’t be entitled to such protection. A hearing is scheduled for September 24.
Somewhere there is an attorney billing $1,400 an hour who just whispered:
“Keep fighting.”
THE PEOPLE WHO DON’T HAVE $110 BILLION
Here’s where the Unknown Critic temporarily removes his novelty corporate-disaster hat.
Not the paper bag.
That stays.
Because underneath all the billionaire chess moves, antitrust arguments, tax incentives and corporate brinkmanship are thousands of ordinary people.
Editors.
Camera operators.
Production assistants.
Set decorators.
Costume designers.
Marketing people.
Writers.
Drivers.
Caterers.
Electricians.
Independent production companies.
Prop houses.
Restaurants.
Dry cleaners.
People who do not have a private jet standing by if things get uncomfortable.
L.A. County’s final economic analysis estimates that the merger could expose as many as 4,500 direct film and television jobs, plus 5,865 indirect jobs, with as much as $4.06 billion in business output potentially at risk.
And that’s the bizarre part of this story.
Everyone claims they’re protecting Hollywood.
Paramount says the merger will make traditional entertainment stronger.
California says blocking the merger protects competition and workers.
Politicians say they’re protecting California jobs.
The unions say they’re protecting creative labor.
Meanwhile, actual entertainment workers are standing in the middle asking:
“Cool. Does anybody know if I’m working Tuesday?”
WELCOME TO FLOPOCALYPSE MANAGEMENT THEORY
While researching Flopocalypse Now, I noticed something about legendary corporate failures.
They rarely begin with stupidity.
That’s what makes them interesting.
Smart people make them.
People with MBAs.
Consultants.
Research departments.
Financial models.
Lawyers.
PowerPoint decks containing arrows.
So many arrows.
The disasters usually begin when organizations become so convinced of their own strategy that they stop seeing the obvious danger directly in front of them.
That’s called hubris.
Corporate America calls it:
VISION.
Paramount may genuinely need scale to compete in modern entertainment.
California may genuinely have legitimate antitrust concerns.
Both things can be true.
But here’s another thing that’s true:
California cannot afford to lose Hollywood.
Not metaphorically.
Economically.
And Hollywood cannot afford another prolonged period where uncertainty becomes its primary export.
CALIFORNIA’S STRANGEST BUSINESS MODEL
Imagine owning the world’s most famous pizza restaurant.
For 100 years, everybody comes to your town for pizza.
Then other cities start offering pizza chefs huge incentives.
Your chefs leave.
Your waiters leave.
Your suppliers struggle.
Business falls 30%.
So you announce a giant program to bring pizza production back.
Then the largest pizza company in town threatens to relocate.
At some point, somebody needs to say:
GUYS. WE’RE LOSING THE PIZZA BUSINESS.
That doesn’t mean California should abandon antitrust law.
It doesn’t mean Paramount should get whatever deal it wants.
It means the cost of failure has become enormous for both sides.
Los Angeles Mayor Karen Bass has urged the parties to find a resolution, and settlement talks are now moving toward a court-supervised meeting in late October.
Good.
Bring coffee.
Bring lawyers.
Bring economists.
Bring lunch.
Lock the doors.
Nobody leaves until somebody says something more constructive than:
“Tennessee.”
THE UNKNOWN CRITIC’S FIVE RULES FOR NOT DESTROYING HOLLYWOOD
I don’t normally give $110 billion companies free consulting advice.
But I’ll make an exception.
1. Stop confusing leverage with strategy. Threatening to leave California may create negotiating leverage. Actually hollowing out one of America’s great creative ecosystems is something else entirely.
2. California needs to remember that industries can leave. History is full of cities that assumed their dominant industry was permanent. Ask Detroit how that worked out.
3. Bigger isn’t automatically better. Every corporate merger presentation contains the word “synergy.” “Synergy” is corporate Latin for “We’ll explain the layoffs later.”
4. Smaller isn’t automatically safer. If traditional studios become too weak to compete with technology giants, protecting five weakened competitors may eventually become a strange victory.
5. Somebody needs to remember the people. Not “labor.” Not “human capital.” Not “headcount.” People. The people who spent decades building the entertainment industry everybody is fighting over.
COULD THIS ACTUALLY BECOME A FLOPOCALYPSE?
Maybe.
Or maybe everybody eventually behaves like adults.
Paramount and California reach a settlement.
The merger proceeds with meaningful concessions.
Jobs stay in Los Angeles.
Production grows.
Hollywood stabilizes.
Everyone shakes hands.
The attorneys buy vacation homes.
Roll credits.
But if this ends with historic studio lots sold, thousands more entertainment workers displaced, billions in economic activity leaving California and Hollywood’s century-old geographic center permanently weakened?
Then I have unfortunate news.
I’m going to need to update the book.
Because Flopocalypse Now currently contains:
100 Corporate Catastrophes.
And I really don’t want to change the subtitle to:
101.
Printing is expensive.
THE CRITIC HAS SPOKEN.
The Unknown Critic is the paper-bag-wearing chronicler of humanity’s inexplicable ability to spend billions of dollars making avoidable mistakes.
His book Flopocalypse Now: Corporate America’s 100 Most Catastrophic Crashes explores 100 spectacular corporate failures—from disastrous products and technological face-plants to boardroom decisions that make you wonder whether anyone in the meeting was allowed to raise their hand.
If the current Hollywood showdown has taught us anything, it’s that corporate catastrophe isn’t history.
Sometimes you’re lucky enough to watch the next chapter being written live.
Until next time, I’ll be under the bag.