Paramount Settles with California and 11 Other States to Clear Way for Warner Bros. Discovery Acquisition

Paramount Skydance agreed Monday to settle with California and 11 other states that had sued to block its $110 billion acquisition of Warner Bros. Discovery, Inc.

Key Terms of the Settlement

According to CNBC, the deal includes:

• A new board for CBS News and CNN to ensure editorial independence
• A $30 million penalty for each movie Paramount fails to release as part of its commitment to produce 30 films per year — 90 percent of which would go to the company's employees
• Film production targets: 30 films in the first two years, and 32 films in the following three years
• Budget requirements: At least 20 percent of annual theatrical releases must each have budgets exceeding $50 million
• Divestiture clause: If Paramount fails to meet targets, it would be forced to divest its 49 percent stake in Miramax Films
• Workforce and community funding: $9.5 million per year for workforce training, career development, film programs, and community arts organizations
• Domestic production increase: Paramount will increase annual spending on domestic film production by at least $300 million

Background and Legal Context

The settlement was reached under pressure from state governments and labor unions. CNN reported that the Block the Merger Coalition — an alliance of Hollywood unions and advocacy groups — was set to protest the merger this week in New York and Los Angeles.

For Paramount, the punitive settlement allows it to avoid a $7 million-per-day "ticking fee" owed to Warner Bros. shareholders — approximately $650 million per quarter — which was set to begin in October. The company would have been forced to pay the fee until the merger closed.

Regulatory Approvals and Legal Challenges

Regulatory bodies in 65 countries, including the United States, had already approved the merger or chosen not to challenge it.

However, in July, attorneys general from 12 states — led by California Attorney General Rob Bonta — filed an antitrust suit to block the proposed merger, alleging it would create a monopoly. Seven days after the lawsuit was filed, a federal district court granted a temporary restraining order preventing Paramount from "closing or consummating" the merger.

Market Share and DOJ Position

The merger would give Paramount 27 percent of the market share for theatrical releases, leaving 73 percent to competitors.

The Justice Department — which, under the Trump administration, has continued the same antitrust activism as previous administrations — still found that the merger was "not likely to result in harm to competition or American consumers."

Concerns Over News Network Independence

The states' focus on Paramount's stewardship of its news networks suggests that Bonta and the other attorneys general intended to use antitrust law to prevent Larry and David Ellison — viewed as allies of President Donald Trump — from controlling both CNN and CBS News.

Despite these insinuations, CBS has shown no signs that new ownership has compromised its editorial integrity:

• Last October, CBS joined a number of news organizations that refused to sign on to the Pentagon's restrictive new press policies.
• On Monday, CBS issued a joint statement alongside ABC, CNN, NBC, and Fox News admonishing the president for barring CNN, MS NOW, and Politico from the White House.
• The network has declined to cover any presidential events until press access is restored for those outlets, according to The Washington Post.

Analysis

There is little support for Bonta's assertion that a merger between Paramount and Warner Bros. Discovery would lessen competition or prevent CNN from reporting as it always has.

Unfortunately, Bonta appears to have succeeded in pressuring Paramount's leadership into settling rather than engaging in a long, costly legal battle.