Paramount Skydance’s $110 billion merger with Warner Bros. Discovery will move forward as the company settled Monday with a group of state attorneys general that sought to block the deal on antitrust grounds.
The lawsuit, brought by a group led by California’s Rob Bonta, was previously set to head to trial in March and would have left the deal in limbo through mid-2027.
Details of the agreement have yet to be made public. However, sources told Reuters that the settlement includes the creation of independent editorial boards for CNN and CBS and also stipulates a $30 million penalty per film if Paramount falls short of CEO David Ellison’s pledge to release 30 movies annually.
Spokespeople for Paramount and Bonta did not immediately respond to requests for comment.
The acquisition would bring together two storied film studios, Paramount and Warner Bros. Discovery; a portfolio of TV networks; broadcast network CBS; and two popular streaming services in Paramount+ and HBO Max.
The deal previously won approval from U.S. and other international regulators, and Paramount had told investors it expected to close the deal by Sept. 30.
However, California and 11 other states filed suit in mid-July seeking to block the merger, citing antitrust concerns in film and pay TV.
In July, Paramount agreed to delay the merger until June 2027 while the legal challenge played out. That delay would have proven costly for Paramount.
As part of the merger agreement, Paramount agreed to a so-called ticking fee that would have kicked in after Sept. 30 and meant an additional 25 cents per share, per quarter to WBD shareholder until the transaction closed. The fee would have added an estimated $650 million per quarter in cash value to the deal.
The Writers Guild of America sued to block the merger, too, citing “specific harm to writers.” Many creatives throughout Hollywood, including actors, directors, producers and other crew members, penned open letters opposing the deal.
California, the entertainment hub of the U.S., has suffered job losses after the industry shifted dramatically following the pandemic, as streaming has disrupted the traditional linear TV business and the theatrical film pipeline. Hollywood, as a result, is shooting fewer pilots, taking advantage of tax incentives in other states and countries and greenlighting fewer productions overall.
One big sticking point around the deal for industry insiders is the fact that mergers in the past have drastically decreased the number of films released annually. The most recent example was the 2019 merger between Disney and 21st Century Fox. In the decade before Fox was acquired, the studio released between 13 and 23 films each year, while Disney put out between nine and 13 films. Since 2019, the highest combined release from the merged company has been 16, according to data from Rentrak.
Theater owners and longtime industry players were skeptical that Paramount could deliver on Ellison’s annual 30-film promise. After all, in the past 25 years, no studio has put out more than 25 wide releases in a single year. Ellison offered three-year contracts to cinema operators and at least one exhibitor signed that contract, which allowed the cinema chain to sue Paramount for monetary compensation if it did not fulfill its promise.
