Paramount’s Melrose Avenue lot sits at the center of David Ellison’s reported threat to move the company out of California if the Warner Bros. Discovery antitrust dispute is not resolved.
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David Ellison’s $110 billion Warner Bros. Discovery takeover has won every regulatory clearance required to close. But a coalition of 12 States has transformed what looked like a regulatory victory lap into a high-stakes legal standoff—one that could soon cost Paramount roughly $7 million a day and deepen an extraordinary confrontation between Hollywood and its home State.
In the third and final installment of a series analyzing the effects of the “Blue States” lawsuit seeking to derail the Paramount – Warner Bros. Discovery (WBD) mega merger, we focus David Ellison’s threat to move Paramount out of California should he fail to reach a settlement with Rob Bonta that would salvage the WBD acquisition. How real is the threat? Is Ellison simply posturing to drive a settlement? And if Ellison were to follow through on that promise and move Paramount’s operations out of California, what impact would that have on a state and an industry already struggling to recover from the COVID-19 pandemic, the “double strikes” of 2023 and the ongoing migration of film and television production out of California?
Ellison’s California Threat
Against the backdrop of the ongoing litigation filed by a coalition of 12 Democratic Attorneys General seeking to block the Paramount – Warner Bros. Discovery mega merger came an extraordinary recent report: Ellison is considering taking Paramount out of California.
Axios, Variety and TheWrap all reported this month that Ellison told senior Paramount executives that he was prepared to relocate the company if the dispute with Bonta could not be resolved. Tennessee has been reported as one possible destination, with Texas and Georgia also mentioned.
There is no public evidence that Paramount has formally committed to relocating its headquarters, studio operations or workforce. The reports describe internal deliberations and threats, not an executed relocation plan.
That distinction is important.
Moving Paramount’s corporate headquarters out of California is one thing. Moving the company’s operations and its film and television productions out of state is quite another.
Paramount’s Melrose Avenue studio lot is embedded in Hollywood’s production infrastructure. Warner Bros.’ Burbank operation is even larger and deeply intertwined with Southern California’s labor force, vendors, soundstages, post-production facilities, agencies and creative community. Recreating that ecosystem elsewhere would be expensive, disruptive and slow.
Ellison reportedly told senior Paramount executives he was prepared to relocate the company, mentioning Tennessee, Texas and Georgia as possible destinations.
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Ellison’s threat is therefore more credible as a warning of incremental migration than as an overnight evacuation of Hollywood.
Future corporate functions can move. New soundstages can be built elsewhere. Productions can increasingly be reallocated to Georgia, New York, New Jersey, Canada, Britain, Australia and other tax incentive-rich jurisdictions. Employment growth can happen outside California even while the studio gates remain in Los Angeles.
That is precisely why the threat has political force.
Current Status of the Entertainment Industry
Heading into the final months of 2026, the entertainment industry is still dealing with the aftershocks of a historic period of disruption. COVID-19 initially halted production and accelerated consumers’ migration from traditional television toward streaming. The subsequent streaming boom prompted studios to spend aggressively on content and compete for subscribers, but that expansion ultimately proved economically unsustainable. By 2023, studios had begun sharply reducing production and prioritizing profitability over subscriber growth—just as the simultaneous WGA and SAG-AFTRA strikes effectively shut down Hollywood for months.
Three years later, production has not returned to pre-pandemic levels. Studios are green-lighting fewer television series and films, exercising greater discipline over production budgets and increasingly concentrating investment around established intellectual property and projects capable of attracting meaningful audiences. At the same time, traditional entertainment companies face intensifying competition for consumer attention from YouTube, social media, gaming and other technology-driven platforms, while streaming growth is maturing and consumers remain increasingly price-sensitive. The result is an industry that is smaller, more cost-conscious and increasingly focused on consolidation, profitability and monetization of premium intellectual property across multiple platforms.
Los Angeles has been particularly affected: on-location production declined 16.1% in 2025 and remained down 12.7% year-over-year during the second quarter of 2026.
California’s Hollywood Paradox
California is already fighting to stop entertainment production from leaving.
Los Angeles-area on-location production finished 2025 down 16.1% from 2024, according to FilmLA. In the second quarter of 2026, permitted production activity remained 12.7% below the comparable year-earlier period.
The reasons extend well beyond California taxes or regulation. The streaming boom ended. Studios cut spending. The 2023 strikes disrupted production. COVID-19 altered workflows. Los Angeles suffered devastating fires. International production hubs have become more sophisticated. States including Georgia and New York, and countries including Britain and Canada, offer aggressive financial incentives.
Governor Gavin Newsom’s administration expanded California’s Film and Television Tax Credit Program from $330 million to $750 million annually to slow production losses.
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California has responded by dramatically expanding its Film and Television Tax Credit Program from $330 million to $750 million annually. The Newsom administration says the first year of the expanded program awarded 170 projects expected to generate approximately $6.6 billion in direct California production spending and nearly 35,000 cast-and-crew jobs.
That creates an uncomfortable political juxtaposition.
One arm of California government, led by Governor Newsom, is spending hundreds of millions of dollars to persuade entertainment companies to produce more content in the state. Another faction, led by Bonta, is attempting to block the largest Hollywood merger ever because he believes the combination would reduce competition, content output and employment.
Those positions are not logically inconsistent. Antitrust law protects competition, not individual corporate headquarters, and California can reasonably argue that preventing excessive concentration protects Hollywood’s creative economy over the long term.
But Ellison is exploiting the tension.
If Paramount were to move meaningful employment or future investment elsewhere, the political optics would be punishing: California could find itself subsidizing productions to bring jobs back while one of Hollywood’s foundational studios shifts jobs away amid a dispute with the state’s own attorney general.
The stakes are amplified because the industry’s problems are deeper than one merger. The traditional studios are competing not merely against one another but against Netflix, Amazon, Apple, YouTube, TikTok, gaming and an increasingly fragmented universe of digital entertainment.
That is the larger economic question beneath the Paramount case: whether antitrust markets built around theatrical distributors and cable networks still capture the competitive reality of 2026.
The United States Department of Justice concluded they do not support blocking this merger.
California and 11 other States have reached the opposite conclusion.
A federal judge will now decide which view the Clayton Act permits.
The September Endgame
The immediate future of the Paramount – Warner Bros. Discovery merger turns on three clocks.
The first runs toward September 30, 2026, after which Paramount’s purchase price begins increasing every day.
The second runs toward March 2, 2027, when the antitrust trial begins.
The third runs toward June 1, 2027, the outside date in Paramount’s agreement not to close while the State litigation remains unresolved, although the merger agreement itself has a March 4, 2027, termination date subject to an automatic extension to June 4, 2027.
A Supreme Court intervention sought by Iowa and Montana could scramble that calendar, but it should not presently be considered the most probable outcome. Their original-jurisdiction theory is novel, and the Court need not agree to hear the case at all.
Nor can Paramount simply close on October 1, 2026, and dare California to unwind the transaction. It has contractually agreed in the litigation not to do so.
That leaves settlement as the only realistic path to a near-term closing.
The economics overwhelmingly favor one. Paramount has cleared every regulatory condition required by the merger agreement. WBD shareholders have approved the sale. The federal government conducted an extensive investigation and declined to sue. Foreign regulators have cleared the deal. Every day of delay after September costs Ellison’s company millions.
But those same facts strengthen Bonta’s hand.
Rob Bonta’s leverage is greatest before the deal closes, because the divestitures California has signaled it wants become far harder to obtain once WBD is acquired by Paramount.
The San Diego Union-Tribune via Getty Images
The attorney general knows Paramount wants a settlement much more urgently than California needs one. He also knows that once the transaction closes, structural remedies become considerably harder to obtain. If California believes divestitures are necessary, September may represent its moment of maximum leverage.
The result is an unprecedented “game of chicken” between Bonta and Ellison.
That is why the breakdown in negotiations matters more than the increasingly theatrical political rhetoric surrounding the deal.
Ellison can threaten Tennessee. Iowa and Montana can invoke the Supreme Court. Bonta can accuse Paramount of gamesmanship. Paramount can accuse the states of applying outdated antitrust theories to a transformed media marketplace.
Ultimately, however, the dispute comes down to price—not merely the $31 Paramount has agreed to pay for each WBD share, but the additional price Ellison is willing to pay to California for the ability to close.
Beginning October 1, the answer will get $7 million more expensive for Paramount with every passing day that the Warner Bros. Discovery deal has not closed.
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