Paramount and Warner Bros. Discovery are at the altar -- but can't tie the knot quite yet.

The two companies remain tethered to one another as a federal court considers claims that their $81 billion deal violates antitrust law. The case could stretch well into next year.

Last week, Paramount said it wouldn't proceed with the merger until June 1, 2027, or until legal challenges from 12 states, led by California, and from the Writers Guild of America, are resolved, whichever comes first.

The parties are expected to begin negotiating a trial schedule in the coming days. Paramount has pushed for a November trial, while California Attorney General Rob Bonta told The Wall Street Journal he favors a January start date.

The predicament has put Paramount and Warner in corporate limbo. Rather than preparing to combine the companies, Paramount's attention will be dominated by discovery, depositions and defending the merger in court, leaving integration plans largely on hold. Meanwhile, competitors continue investing, acquiring rights and expanding their businesses.

The merger terms restrict Warner's ability to operate independently. The company can't pursue significant acquisitions, asset sales or certain content and distribution deals without Paramount's consent. Even creating executive positions requires signoff from Paramount.

Warner executives say the restrictions haven't materially affected the company's operations, noting HBO Max continues to grow and the company's television and movie studios remain among the industry's strongest creative destinations.

The longer the litigation drags on, the more expensive it becomes. Paramount has already received approvals from the Justice Department, the European Union and several other key territories, including China.

Paramount must keep the deal's financing intact while preparing for potentially billions of dollars in ticking-fee payments to Warner shareholders beginning in October. Paramount agreed to pay $650 million per quarter if the deal is delayed, a gesture meant to convey its interest in closing the merger quickly and its confidence in a smoother path to approval than rival bidder Netflix might have been able to offer.

If the deal falls through, Warner would also receive a $7 billion breakup fee.

"As the delay lengthens, financing costs, integration risk, transaction expenses and lost strategic flexibility become increasingly tangible," said Barak Orbach, a law and business professor at the University of Arizona.

The legal holdup also postpones the promised cost savings and strategic moves that formed much of the financial rationale for the deal. Paramount has told investors it expects $6 billion in annual synergies within three years of combining operations. Those savings can't begin until the transaction closes.

At the same time, both companies remain tied to a television business that continues to shrink as advertising revenue and pay-TV subscribers decline, leaving executives to manage businesses they had hoped to remake together by cutting expenses and increasing distribution fees through newfound size and stature. The combined portfolio would include CBS, CNN, MTV, Discovery, Food Network, TNT and Comedy Central.

The delay has potential implications across Hollywood.

Paramount has said it wanted to increase production of movies and TV shows, a strategy that would require buying more projects from outside producers. Until the deal closes, one executive said, Hollywood effectively has one less major buyer.

Warner has been through this before.

When AT&T agreed to buy what was then Time Warner in 2016, the companies spent roughly 20 months in merger limbo while the Justice Department challenged the deal in court. Executives later said the prolonged legal battle hampered the company's ability to compete, particularly as streaming rivals accelerated their investments.

The mood inside Paramount is one of urgency: Chief Executive David Ellison pushed aggressively to merge with Warner soon after his Skydance acquisition of Paramount closed last year.

"They had a belief this was the fastest way to get to scale. Now they are in a multiyear acquisition mess," said LightShed Partners analyst Rich Greenfield.

At Warner, by contrast, the prevailing sentiment among some employees is unease.

"This is a horrible situation to be in. Nobody knows whether they are keeping their job," Greenfield said.

Rival companies already might sense an opportunity. Last week, Warner sued Amazon.com after the company's entertainment division hired a senior HBO Max marketing executive who was still under contract. Warner alleged Amazon attempted to recruit at least one other executive as well.

Amazon declined to comment.

Write to Joe Flint at Joe.Flint@wsj.com

(END) Dow Jones Newswires

July 27, 2026 05:30 ET (09:30 GMT)

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