California Gov. Gavin Newsom has voiced major concerns regarding the state's antitrust lawsuit attempting to halt Paramount's $81-billion takeover of Warner Bros. Discovery.

Newson said derailing the transaction could inflict further harm on Hollywood employment, according to a report by The Wall Street Journal.

In recent weeks, Newsom conveyed to individuals involved in the case that stopping the merger would negatively affect state employment, WSJ reported. While the California Attorney General's office acts independently, Newsom's administration has urged Attorney General Rob Bonta to pursue an out-of-court settlement.

WBD stock soared about 3.2% on Friday, its best single-day jump since December 2025, while Paramount Skydance (PSKY) shares rose 1.6%.

Divide Over Hollywood's Future

The disagreement highlights a rift between two of California’s most prominent elected leaders at a time when Los Angeles continues to suffer from severe consolidation, aggressive cost reductions, shifting consumer habits, and the transition toward streaming, according to WSJ.

Newsom, currently serving his second term as governor, holds no direct authority over the state attorney general's legal filings, leaving it uncertain whether his pressure will influence the litigation. Both offices declined requests for comment.

The lawsuit was initiated earlier this month by California, leading a coalition of 12 states. The action contends that combining the two media giants would stifle competition, leading to higher consumer prices, reduced quality, and a smaller overall output of film and television productions.

The state coalition's challenge stands as the most formidable hurdle to the deal, which quickly received approvals from both international regulators and the U.S. Department of Justice, according to WSJ.

Mounting Financial Stakes

The legal feud is escalating rapidly as both sides push for conflicting timelines. Paramount is asking for a trial beginning in November to expedite a decision, while state prosecutors are lobbying for an April trial start, according to sources familiar with the proceedings cited by The Wall Street Journal. A judge is anticipated to rule on the schedule shortly.

For Paramount, delays come with a steep price tag. Under the terms of the merger agreement, Paramount must pay $650 million per quarter in ticking fees if the acquisition fails to close by Sept. 30, stated WSJ.

WBD, PSKY Stocks: Retail View 

Retail sentiment on Stocktwits was ‘bearish’ for WBD and ‘neutral’ for PSKY stock, both with ‘high’ message volumes.

WBD stock has lost 8.8% year-to-date, and PSKY has fallen 41.2% in the same period.