Paramount Skydance has reached a settlement with California and 11 other states challenging its $110 billion Warner Bros. Discovery acquisition, with the agreement calling for independent oversight of CNN and CBS and financial penalties if theatrical-release commitments are missed.
By yourNEWS Media Newsroom.
Paramount Skydance has settled an antitrust lawsuit brought by California and 11 other states seeking to block its $110 billion acquisition of Warner Bros. Discovery, removing one of the largest remaining obstacles to a combination that would bring two major Hollywood studios, streaming platforms and national news organizations under the same corporate owner.
The agreement includes the establishment of independent editorial boards for CNN and CBS and financial consequences if the merged company fails to honor Paramount’s commitment to release 30 movies annually, according to a person familiar with the settlement.
Under the theatrical-release provision, Paramount would face a $30 million penalty for each film by which it falls short of the 30-picture annual commitment.
The editorial boards are intended to provide an additional layer of independence for the news operations of CNN, currently owned by Warner Bros. Discovery, and CBS, which is part of Paramount.
Paramount Skydance and Warner Bros. Discovery had not immediately issued public comments detailing the final agreement Monday.
The settlement brings Paramount substantially closer to completing one of the largest combinations in the history of the entertainment industry. The transaction would place Warner Bros. Pictures and Paramount Pictures within the same corporate organization while also combining major streaming and television properties.
Warner Bros. Discovery owns CNN and HBO Max along with Warner Bros.’ film and television operations. Paramount’s properties include CBS, Paramount Pictures and Paramount+.
California Attorney General Rob Bonta led the coalition of 12 states that sued in July to stop the transaction. The states argued that combining the companies would reduce competition in film and television and give the resulting company increased power over pricing and content markets.
Federal regulators had already cleared the transaction, while competition authorities in other jurisdictions, including Britain and the European Union, had also approved the acquisition.
The states’ lawsuit consequently became one of the principal remaining regulatory and legal threats to closing the deal.
Settlement negotiations had accelerated in the days before Monday’s agreement.
Reports late last week indicated Paramount and California officials were discussing several possible concessions, including independent oversight of CNN and a binding commitment concerning the number of movies the combined company would release theatrically.
Additional proposals under discussion included as much as $1.5 billion in film and television production investment in California and a commitment to retain the companies’ studio properties in the state. Potential sales of certain cable channels were also discussed during negotiations. Those proposals were reported during settlement talks and should be distinguished from the terms confirmed Monday.
The commitment to produce 30 films annually emerged as a central issue because state officials had expressed concern that combining two major studios could result in fewer productions.
The settlement addresses that concern by attaching a direct financial consequence to a failure to meet the release target.
Paramount would owe $30 million for each movie below the annual commitment, according to the source familiar with the agreement.
The separate editorial-board requirement addresses another consequence of the transaction: placing CBS News and CNN within the same corporate structure.
Both networks would receive independent editorial boards under the settlement, a provision intended to protect their news operations from interference after the companies are combined.
The acquisition would also create a considerably larger competitor in streaming by bringing Paramount+ and HBO Max under one owner.
Beyond streaming and news, the transaction combines extensive film libraries, television networks, production facilities and entertainment franchises controlled by the two companies.
The settlement also helps Paramount avoid escalating financial penalties connected to delays in completing the acquisition.
Under the transaction’s terms, Paramount faces approximately $7 million in additional costs for each day the acquisition remains unfinished beyond Sept. 30, according to court filings related to the dispute. Paramount has argued that extended litigation could therefore impose substantial costs even if the company ultimately prevailed.
That looming deadline added urgency to settlement negotiations with the states.
The Writers Guild of America has separately opposed the combination, arguing that further consolidation in Hollywood could reduce employment opportunities, production and bargaining power for writers. That challenge remains separate from the agreement reached with the states.
The state settlement nevertheless removes the principal government lawsuit seeking to prevent the transaction from moving forward.
For Paramount, the agreement provides a path toward completing a deal that would substantially alter the structure of the U.S. entertainment business while imposing commitments intended to address concerns about film production and editorial independence.
For the states, the settlement replaces their attempt to stop the acquisition outright with enforceable conditions governing portions of the combined company’s future operations.
With federal and international regulatory approvals already secured and the 12-state challenge now resolved, Paramount has moved significantly closer to closing the Warner Bros. Discovery acquisition before the financial penalties associated with further delays begin accumulating.
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