Paramount Skydance defends Warner Bros. Discovery merger as lawsuits mount

Paramount Skydance’s Merger Pitch, Streaming Numbers and Legal Hurdles

Paramount Skydance used its second-quarter earnings call on Tuesday to deliver a simple message: the proposed acquisition of Warner Bros. Discovery is on track, and the company intends to close it. Chief executive David Ellison kept his opening remarks brief, telling investors that the combination would create a “stronger, creative-first company” with enough scale to challenge Netflix, Amazon and Apple, while benefiting consumers, theatrical exhibitors and creators.

That confidence is not shared by everyone watching the deal. Three separate lawsuits — filed by the Writers Guild of America, a Paramount shareholder and a coalition of 12 state attorneys general — allege that the merger would reduce competition and hurt talent and consumers. Ellison acknowledged the litigation but said Paramount Skydance remains convinced the transaction will be completed.

Behind the merger talk, streaming remains the operational engine. Overall revenue rose just 1% year over year in the quarter, but Paramount+ revenue jumped 16%, subscriber count climbed by 2 million to nearly 82 million, and streaming ARPU grew 12%. Chief financial officer Dennis Cinelli said ARPU for the ad-supported tier should keep rising as the company works to equalize monetization across subscription plans.

That effort centers on consolidating the ad technology stacks of Paramount+, Pluto TV and BET+, the last co-owned with Tyler Perry Studios. Ellison said the company is on track to converge the stacks by the end of summer, unifying audience data that has been siloed across the three services. Advertisers, he argued, will get a more complete view of audiences and better targeting. Upfront commitments grew by double digits, which Paramount Skydance described as its strongest upfront season since before the CBS-Viacom merger in 2019.

What the Earnings Call Reveals About the WBD Deal’s Odds

Ellison’s two-minute monologue was a deliberate signal: the company wants investors to focus on execution, not on the legal noise around the merger. But the gap between his framing and the lawsuits is the central tension of this story.

The Scale Argument vs. the Competition Argument

The deal’s core rationale is scale. Ellison argues that a combined Paramount Skydance and Warner Bros. Discovery would be better positioned against Netflix, Amazon and Apple, and that bigger means more creative output. The opponents’ argument runs in the opposite direction: consolidation among major studios would mean fewer competitors bidding for content and talent, fewer distribution choices for consumers and, in the WGA’s view, weaker leverage for writers. Both positions can be true at different levels of the market, which is why the litigation — rather than the company’s assurances — is likely to determine whether the deal closes on the current timetable.

Streaming Growth Carries the Narrative

The earnings details give the company a credible story independent of the merger. Paramount+ added 2 million subscribers and lifted ARPU 12%, and streaming revenue grew 16% against a flat overall company. The ad-tier ARPU push described by Cinelli suggests the company sees the biggest untapped value in advertising, not subscription price increases. The planned convergence of the Paramount+, Pluto TV and BET+ ad tech stacks is the mechanism for that: unified data should make inventory more targetable and give advertisers a reason to spend more.

Where the Legal Risk Bites

The three lawsuits differ in who they claim to protect — writers, shareholders and consumers — but they share a common premise that the merger reduces competition. A coalition of 12 state attorneys general gives the case political weight and raises the risk of prolonged review. If any court grants an injunction, closing could slip past the company’s expectations. If the deal is blocked, Paramount Skydance still has a streaming business growing in subscribers and ARPU, but it loses the scale argument Ellison used to justify the transaction.

Who Gains and Who Loses

Advertisers are the most concrete near-term winners if the tech stack consolidation works: a single view of audiences across Paramount+, Pluto TV and BET+ makes the ad inventory more valuable. Netflix, Amazon and Apple face a stronger rival in a merged entity, though they remain far larger. The WGA, the shareholder plaintiff and the state AGs are positioned as the counterweight, arguing the price of that scale is paid by creators, investors and consumers.

What Investors and Ad Buyers Should Watch Next

For investors, the earnings report offers two separate stories: a streaming business that is growing, and a merger whose timetable depends on courts. Both need watching.

• Track the three lawsuits. The WGA, shareholder and 12-state-AG cases all allege competitive harm. Any ruling that pauses the merger would lengthen the closing timeline that Ellison promised is on track.
• Judge streaming momentum on the disclosed numbers. Paramount+ added 2 million subscribers to reach nearly 82 million, ARPU rose 12%, and streaming revenue grew 16% — useful benchmarks when the company reports Q3.
• For ad buyers: verify the tech stack deadline. Ellison said the Paramount+, Pluto TV and BET+ stacks would converge by the end of summer. If that happens, test the unified audience data and ad-tier inventory in Q4 negotiations.
• Treat double-digit upfront growth as directional, not final. The company did not disclose the actual dollar value, so commitments should be measured against delivered impressions and pricing later in the year.