Paramount and 12 state attorneys general have agreed to a settlement, clearing the final hurdle for the $110 billion merger with Warner Bros. Discovery, TheWrap has learned.
The agreement, which is expected to be announced later on Monday, is an attempt to address concerns that the combination of the two historic studios would create a dominant force in the theatrical film and cable channel markets and have a devastating impact on the entertainment industry. Paramount has insisted the deal would lead to more opportunities and give it a better fighting chance against the tech giants.
The David Ellison-led media giant previously pledged to release 30 films theatrically per year, but California Attorney General Rob Bonta called on Paramount to deliver “structural” remedies, such as divestments of cable channels. Other terms that were under discussion over the weekend included a separation of the two companies’ studios for a period of time and safeguards for CNN and CBS News’ editorial independence.
The final terms of the settlement could not immediately be learned, but the company will reportedly avoid having to sell cable networks and may face financial penalties if it fails to reach the 30 theatrical film release goal.
Representatives for Paramount and Bonta did not immediately return TheWrap’s request for comment. News of the settlement talks were first reported by Bloomberg and The Wall Street Journal.
The move comes as the David Ellison-led media giant was gearing up for a March trial against the state AGs and the Writers’ Guild of America. Paramount had agreed to delay the closing until five days after the outcome of the trial, or June 1, 2027, whichever came earliest.
But starting Oct. 1, Paramount was also on the hook to start accruing a 25 cent per share ticking fee, which would’ve translated to a payout of $650 million per quarter or $7 million per day until closing, giving it extra motivation to settle quickly.
While both sides had expressed their willingness to reach an out of court settlement, Ellison also threatened to move the Hollywood studio’s operations out of California if a settlement wasn’t reached by the Oct. 1 deadline.
The Los Angeles Economic Development Corporation estimated that Paramount moving out of the state could’ve resulted in the loss of up to $21.2 billion in annual economic output, 57,980 full-time jobs and $1.17 billion in state and local tax revenues.
Meanwhile, an analysis ordered by the LA County Board of Supervisors estimates that the merger closing could put 4,500 local TV and film jobs and over 5,800 indirect or induced jobs from related small businesses at risk over the next three years. The economic impact of losing these jobs would be $1.26 billion in wages, $2.78 billion in economic value, $4.06 billion in total business output and $547 million in tax revenue, including $78.6 million in local taxes — most of which (63%) comes from property taxes.
Among those who publicly called for a settlement were California Gov. Gavin Newsom, Los Angeles Mayor Karen Bass and the Democratic nominee in California’s gubernatorial race Xavier Becerra, the Directors’ Guild of America and IATSE.
Cinemark and the CEOs of AMC Theaters and Regal came out in support of the merger, as did Lionsgate CEO Jon Feltheimer. Meanwhile, over 5,000 actors, including prominent names like Jane Fonda, Mark Ruffalo and hundreds of other A-listers, penned a letter opposing the merger. Also speaking out against the merger was SAG-AFTRA and Hollywood’s Teamsters union.
In addition to state AGs and the WGA, a Paramount shareholder and group of consumers filed a lawsuits to block the merger, though the latter was dismissed.
The resolution comes after Paramount already received clearance from Warner Bros. shareholders and regulators and governments representing 68 jurisdictions, including the U.S. Department of Justice and Federal Communications Commission, the European Commission and the United Kingdom’s Competition and Markets Authority.
In addition to the concessions in the U.S., Paramount agreed to terminate its stake in United International Pictures, an international film distribution joint venture with Universal Pictures, within 13 months. For a period of 10 years, it will also not directly or indirectly enter into any agreement or understanding with Universal to jointly co-distribute films in the European Economic Area (EEA).
During that period, it also won’t shift the distribution of Warner’s films from Warner’s existing distributor to the theatrical distributor used by Paramount, where that distributor also distributes Universal’s or Disney’s films in all UIP countries in the EEA.
Additionally, in the UIP countries where Paramount and Universal don’t share the same distributor, it won’t shift the distribution of Paramount’s films from Paramount’s existing distributor to the theatrical distributor used by Warner, where that distributor also distributes Universal’s or Disney’s films.
In the United Kingdom, Paramount also reached a “deed of covenant” with Secretary of Culture, Media and Sport Lisa Nandy that includes a commitment not to combine linear channels with its streaming services, to maintain the editorial independence of its news services and children’s networks and to provide more funding to Channel 5 to support high-quality news, original children’s programming and drama.
The commitments in the deed take effect upon completion of the transaction and remain in effect for five years. Commitments relating to Channel 5 will remain in effect until December 31, 2034, when Channel 5’s current public service broadcasting license ends.
More to come…
