Did California Attorney General Rob Bonta cave?
Paramount seemingly got over its final hurdle to securing the $110 billion acquisition of Warner Bros. Discovery without sacrificing too much. Notably, the company avoided the “structural remedies” that Bonta had initially sought, such as cable channel divestitures or a break-up of the combined company, so long as it complies with the outlined terms.
Bonta lauded the settlement, calling it pro-jobs.
“This is a court-enforceable settlement that addresses those concerns by providing more film production that protects Hollywood workers and their livelihoods that places guardrails, allowing for robust cable negotiations that protects competition and creates more choice for consumers about what this merger could mean for the industry.”
“Our shared aim was an outcome that best serves consumers, workers and — most importantly — the creative community so vital to the art of visual storytelling,” Paramount CEO David Ellison said in a statement. “We’re confident this agreement does exactly that, memorializing a series of commitments that include 30+ films annually and expanded U.S. film production to help revitalize our industry here at home.”
The Block the Merger group, meanwhile, blasted the deal. “This is a bad deal for the future of film, entertainment, independent journalism, and a strong democracy in this country. We are disappointed and angry that the interests of average Americans have been trampled to benefit oligarch billionaires,” it said.
But is it really that bad? The details are vast and complicated, and we pored over the 32-page document so you didn’t have to. The following breaks down all of the details of the consent decree between Paramount and a dozen state attorneys general that now clears the path for the media industry’s largest merger ever.
Theatrical commitments
Paramount has committed to producing 30 films a year for the first two years, and then 32 films for the following three years. All of them will be wide release films with at least half of them produced or jointly produced by Paramount.
The agreement goes a bit beyond the prior Paramount promise of 30 films a year, and the five-year time frame is longer than what the company had floated to the theater owners, which was closer to three years.
Paramount will also be held to its prior commitment to have a theatrical window of 45 days and hold its films back from streaming availability for 90 days. It’s also on the hook for supporting these films with an appropriate marketing budget.
Blockbusters were a big deal for Bonta, and 20% of those films each year will need to be a blockbuster, defined with a budget of $50 million, which will rise with inflation, and screen in at least 3,000 screens.
Local dollar commitment
The big stat that Bonta was able to crow about was the increased spending Paramount would commit to for U.S. productions. Paramount will need to spend at least $300 million a year on domestic productions, for a total of $1.5 billion over five years.
Bonta said that’s a significant increase from what Paramount is spending on local productions now, and he noted that only 5% of its films are made in the U.S.
Film catalogue preservation
Paramount will continue to make both its own and Warner Bros.’ catalog of films available for license by other exhibitors and streaming services, and will honor WB’s current terms and rental rates.
Tax credit triggers
An unusual element of the consent decree are concessions made by Paramount that only activate if the federal and state governments take action. In the event that an uncapped federal film tax credit is passed, then the company’s annual average production-day levels in the U.S. must be at least 20% of all film production for the first and second years, and 30% for the final three years.
If both the federal film tax credit and either New York or California pass their own uncapped film tax credit, that threshold will jump to 40%.
Bonta said he would sponsor legislation pushing for an uncapped tax credit. California’s existing credit is capped at $750 million.
A CNN-CBS News editorial board
Within 180 days following the deal’s closing, Paramount’s board of directors will establish an independent oversight board for CNN and CBS News.
The editorial board will be composed of five active or retired established journalists who have practiced journalism for at least 10 years. No more than two members may be affiliated with the same political party and they will serve terms of three years from the date of their appointment.
Notably, and likely what will have critics up in arms, is the fact that the Paramount board will choose the members. While no member of any government entity nor officer, director, shareholder, non-journalist employee or contractor of Paramount or Warner Bros. may be appointed, you can be sure there will be a lot of scrutiny on every selection.
The committee will ultimately report to Paramount’s board through a chief compliance officer.
Cable and Pluto TV commitments
During these five years, the combined companies must treat Paramount’s cable channels and Warner Bros.’ cable channels as separate entities with negotiating distribution agreements, unless a distributor like a cable company requests in writing a desire to work with both sides. Paramount will also not alter existing renegotiation schedules or use confidential affiliate fee data to influence the negotiations.
Paramount must also continue to operate and maintain the quality of the free, ad-supported streaming platform Pluto TV during the commitment period.
The studio lots, collective bargaining agreements and community investments
Under the terms of the settlement, Paramount and Warner Bros. must maintain operations of their respective studio lots. That assuages concerns raised when Paramount had threatened to leave and floated the prospect of getting rid of its Los Angeles facilities.
In addition, the company must honor all collective bargaining agreements. The company reached a separate resolution with the Writers Guild of America that includes a five-year layoff pause at CBS and a $17.5 million health fund contribution. Any employees laid off, displaced or otherwise terminated during the commitment period as a result of the merger will have the right to apply for any open positions.
The combined company has also agreed to commit $9.5 million each year for five years in workforce training and career development programs in film and television production communities at qualified educational institutions and film programs and community arts organizations. Within 30 days of closing, it will also establish a fund for purchasing independent films and make an annual contribution of $5 million.
Notably, the consent decree does not include a requirement for Paramount’s headquarters to stay in California, although Bonta expressed confidence it would remain here.
What happens if Paramount-WBD fails to comply?
An independent monitor and a committee of five states will be appointed to ensure the merged company complies with the settlement terms.
Failure to comply with the cable commitments could result in divestitures of BET, Comedy Central, VH1, Smithsonian, Destination America and Science channel within 120 days to a buyer approved by the state committee. In the event multiple parties bid, the state committee reserves the right to direct the sale to a buyer within 5% of the highest bidder’s price.
Failure to comply with the film commitments could result in a $30 million penalty for each film that misses the annual theatrical release goal, which will be split between the health care and retirement trust funds for the WGA, IATSE, DGA, International Brotherhood of Teamsters and other unions on film productions, the Motion Pictures & Television Fund and the National Association of Attorneys General Fund. The non-refundable contribution will be made within 60 days of the applicable year.
Failure to remedy the film shortfall could also result in the forced divestiture of the company’s stake in Miramax Studios within 12 months.
What about artificial intelligence?
There’s no mention of AI in the document, but Bonta said the requirements for big budget films and the focus on jobs would deter the company from just generating 30 films from AI. But he did concede that there could be lower budget films that employ generative AI.
“We want movies that put people to work,” he said.
The post Breaking Down the Paramount-Warner Bros. Merger Settlement | Analysis appeared first on TheWrap.
