Paramount Skydance has reached a settlement with 12 US states, including California, resolving an antitrust lawsuit that threatened to block its $110 billion acquisition of Warner Bros. Discovery. The agreement, announced by California Attorney General Rob Bonta, clears the final major regulatory hurdle for the merger, which would combine two of Hollywood’s most historic studios, streaming platforms, and news organizations under the leadership of Paramount CEO David Ellison.
The settlement includes financial penalties for failing to meet annual film release targets and the creation of independent editorial boards to oversee CNN and CBS News, addressing concerns over editorial independence. Shares of both Paramount and Warner Bros. Discovery rose following the news, with Paramount gaining 8% and Warner Bros. Discovery climbing 10%.
Paramount agreed to release at least 30 films annually for the first two years of the merger, increasing to 32 films per year for the following three years, or face a $30 million penalty per missed film. The penalties would be directed to Hollywood union health care and retirement funds. Additionally, Paramount pledged to invest $1.5 billion in US film production over five years, with further commitments tied to state-level tax incentives in California and New York.
The merger, which would create one of the largest media conglomerates in the world, was previously delayed by a ticking fee of 25 cents per share per quarter for Warner Bros. Discovery shareholders if the deal did not close by September 30. The settlement also includes a moratorium on asset sales, including a potential divestment of Miramax, which had been discussed as a concession.
Key concessions in the settlement:
- Film release targets: 30 films/year for two years, then 32 films/year for three years, with penalties for non-compliance.
- Editorial independence: Independent boards for CNN and CBS News to prevent corporate interference.
- Production investment: $1.5 billion commitment to US film production over five years.
- No forced divestments: Paramount will not be required to sell cable channels, including CNN, TBS, HGTV, or Food Network.
The agreement follows months of legal and regulatory challenges, including a 38-page antitrust complaint filed by the states in July, which argued the merger would “extinguish competition” in Hollywood. The lawsuit, led by California, had been scheduled for trial in March 2027, but the settlement removes this obstacle.
Paramount’s bid prevailed over a rival offer from Netflix, which had proposed acquiring Warner Bros. Discovery’s studio and streaming assets for $27.75 per share, compared to Paramount’s $31 per share agreement. The merger would unite iconic franchises such as Batman, Harry Potter, Top Gun, and Barbie under a single corporate umbrella, alongside streaming services Paramount+ and HBO Max.
Reactions and next steps:
California Attorney General Rob Bonta emphasized that the settlement was not an endorsement of the merger but a pragmatic resolution to avoid prolonged litigation. He stated, “This settlement is not a vote of support for this merger.” Paramount CEO David Ellison expressed gratitude to Bonta and the attorneys general, as well as labor unions, for engaging in “good faith” negotiations.
The agreement must still receive final approval from a federal judge, though sources indicate the process is expected to move quickly. The merger is now poised to close by the original target date of September 30, avoiding the financial penalties tied to further delays.
Background and implications:
The merger represents one of the largest in Hollywood history, combining assets valued at over $110 billion. The combined entity would control a vast portfolio, including:
- Film studios: Paramount Pictures and Warner Bros.
- Streaming services: Paramount+ and HBO Max
- Television networks: CBS, CNN, TBS, HGTV, Food Network, and Comedy Central
- Sports and entertainment properties: Rights to franchises like South Park and Bugs Bunny
Critics, including some state attorneys general, have raised concerns about the potential for reduced competition in film, television, and streaming markets. Proponents argue the merger will create a more competitive global media giant, capable of challenging Netflix and Disney. The settlement’s film release targets and editorial safeguards were designed to address these concerns while allowing the deal to proceed.
The resolution of the antitrust lawsuit marks a significant step forward for the merger, though long-term impacts on the industry remain uncertain. Analysts note that large media mergers have historically faced challenges in delivering promised synergies, with some citing past failures in the sector.