LOS ANGELES — Paramount Skydance has reached a settlement agreement with California and 11 other states that sued two months ago to block the company’s $110 billion merger with Warner Bros. Discovery, paving the way for a blockbuster unification of two Hollywood giants.
California Attorney General Rob Bonta announced the settlement at a Monday news conference in Los Angeles and said the deal would help boost local jobs and domestic movie production. But the court-enforceable agreement, the terms of which extend for up to five years, falls far short of the states’ original goal of preventing a merger they had called unlawful.
“I don’t think these two companies should merge, but that’s not something we are focused on with our resolution here,” Bonta said. He said the settlement resolves the antitrust concerns “at the heart of our lawsuit.”
To move forward with the merger, Paramount agreed to spend at least $300 million more per year on production in the United States and to produce at least 30 movies in each of the next two years, and then 32 movies in each of the three years after that. It will also establish a board of journalists to ensure the editorial independence of CNN and CBS.
The decision is the latest twist in Paramount Skydance’s pursuit of Warner Bros. Discovery, a deal that would make the conglomerate one of the largest and most powerful companies in the entertainment business. In an internal memo to employees obtained by The Washington Post, Paramount chief executive David Ellison said that with the settlement, the company was tentatively planning to close the deal in about two weeks.
The deal would combine the Paramount and Warner Bros. studios, the TV giants CNN and CBS, and streaming services HBO Max and Paramount+.
It would also put Ellison, the son of billionaire Oracle founder Larry Ellison and an ally of President Donald Trump, in charge of one of the most powerful companies in U.S. media. Warner Bros. initially agreed to sell most of its assets to streaming giant Netflix, spinning off CNN and other cable properties into a separate company, but Paramount Skydance launched a successful hostile bid that eventually led Netflix to abandon its plan.
The deal was cleared by the Justice Department in June. But one month later, a federal judge paused the merger after an antitrust lawsuit was brought by 12 Democratic state attorneys general, led by California. Bonta argued at the time that the deal would concentrate too much power in the hands of one company, leaving consumers worse off, and pledged the merger would never see “the light of day.”
Not all states were satisfied by the settlement. Connecticut Attorney General William Tong said he had wanted the full divestiture of CNN and CBS.
“We wanted to save ethical and independent journalism and news. We fought aggressively for that remedy,” he said in a statement. “I am deeply disappointed that we could not do more.”
Asked about Connecticut officials’ statement and concerns about the deal among the states involved in the lawsuit, Bonta said “everybody signed on to it — all 12 states. It’s unanimous.”
As part of the settlement, Paramount and Warner Bros. are required to continue negotiating their cable packages separately for the next five years, a move Bonta said would “mimic them being separate companies, even post-merger.”
Bonta sought to preemptively tamp down criticism of the settlement. Speaking to reporters in downtown Los Angeles on Monday, he emphasized the upsides for the film industry and Hollywood jobs. He said that “settling this case doesn’t change who are” and noted other cases his office has brought against large companies and the Trump administration.
His comments reflected concerns that the settlement could be seen as a capitulation.
Lina Khan, a former chair of the Federal Trade Commission under President Joe Biden, said over the weekend that news of an impending settlement was “troubling.”
In a statement, Gov. Gavin Newsom (D) praised Bonta for reaching a settlement rather than “spending years fighting in court and putting thousands of California jobs at risk.” A person familiar with the situation who was not authorized to speak on the matter said Newsom played a crucial role in getting the two sides to come to an agreement.
“We are grateful to Attorney General Bonta and his fellow AGs, as well as the WGA, for engaging in good faith to find a path forward to a resolution that serves all parties, and to Governor Newsom for his support throughout this process,” Ellison said in a statement.
In July, the states won a major concession from Paramount, which agreed to halt the merger until next summer to let the lawsuit play out. Such a wait would have been costly for Paramount, which would have had to pay Warner Bros. shareholders a “ticking fee” of about $7 million per day if the transaction was not finalized by the end of September. All the while, settlement talks carried on.
As part of the settlement, Paramount has also agreed not to sell or close the Paramount or Warner Bros. film production lots in Los Angeles County. The company had hinted at considering leaving the state while the lawsuit was ongoing.
Paramount Skydance has said the merger will benefit consumers and workers in the entertainment industry.
The Writers Guild of America, the union representing Hollywood screenwriters and many journalists, has also agreed to settle its lawsuit to stop the deal. Paramount is not permitted to lay off writers at CBS News Broadcast for five years and will pay $17.5 million into a health care fund.
In a statement, the group said it did not have the resources to pursue the lawsuit on its own without the backing of the states.
Earlier this month, Paramount said the lawsuits by the state attorneys general and the Writers Guild of America were the “only remaining barrier to closing this transaction.”
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