With a crucial deadline approaching in an antitrust lawsuit challenging Paramount’s $111 billion acquisition of Warner Bros. Discovery, Rob Bonta, the California attorney general spearheading the opposition to the deal, spoke at The Atlantic Festival in New York.
Paramount, he said on Thursday during a panel discussion, was responding to “a straight-up, black-and-white, bread-and-butter, meat-and-potatoes antitrust case” by threatening to leave California.
Twenty-four hours later, Mr. Bonta was calling the other 11 states party to the suit and striking a different tone. He feared Paramount was going to follow through on its threat, according to two people familiar with the call, and said it was time to settle.
On Monday, the two sides announced a settlement that eliminated the last significant obstacle to a deal that would unite two iconic movie studios, the HBO Max and Paramount+ streaming services, and CNN and CBS News. They will all be under the control of David Ellison, the tech scion who has become a major player in entertainment and news.
The seeming about-face disappointed some of Mr. Bonta’s allies among the attorneys general and in Hollywood, many of whom were pushing for far-reaching concessions from Paramount — a sale of CNN, for example, or a commitment to spending more on TV production.
The settlement, however, was driven by pressures building for months. The states’ case was far from a legal slam dunk. Paramount’s relocation threats had terrified Californians, and worried other prominent state Democrats, including Gov. Gavin Newsom, who were leaning on Mr. Bonta to settle, according to two people familiar with the settlement deliberations.
Mr. Ellison was under pressure, too. Paramount had agreed to pay Warner Bros. Discovery’s shareholders $7 million a day if the deal did not close by Oct. 1.
“There are times when you think it ain’t ever going to happen, and there are times when you think, ‘Hey, maybe this could happen,’” Mr. Bonta said at a news conference on Monday. Seeing an opportunity to “resolve a case in the boardroom rather than the courtroom,” he said, he seized the moment.
“Courtrooms,” he added, “always have risk.”
Mr. Ellison, by contrast, struck a triumphant note in a memo to Paramount employees, in which he said he expected the deal to close within two weeks: “This is an exciting moment for our company and our industry,” he wrote.
Mr. Bonta had said for months that he would accept a settlement from Paramount only if it included “structural remedies,” legal jargon for a measure that breaks up a company or forces it to sell certain assets.
Instead, CNN and CBS would be monitored by an editorial independence board. Paramount pledged to distribute 30 movies in theaters annually, while spending an additional $1.5 billion on films over the next five years and boosting the number of movies made in America. Only if Paramount fails to meet those conditions would it be forced to sell some relatively minor assets, like its stake in the Miramax film studio.
For Mr. Ellison, the states’ lawsuit was the last battle in a hard-fought campaign in which Paramount beat out Netflix for Warner Bros. The deal stands to make a Hollywood heavyweight out of Mr. Ellison, who is backed financially by his father, Larry Ellison, the billionaire co-founder of Oracle and a friend of President Trump’s.
The father-son pair had already been building a media empire: Their purchase of Paramount last year gave them a storied studio backlot and an entertainment arsenal that includes “The Godfather” and National Football League games.
The possible acquisition of Warner Bros. Discovery alarmed Hollywood, where the industry was already reeling from the erosion of cable TV, the rise of streaming and the exodus of production to other states and overseas. A merger of the two entertainment companies very likely means layoffs — Mr. Ellison has promised shareholders that the combined companies would find $6 billion in savings.
In February, Mr. Ellison met with some of the attorneys general, including Mr. Bonta, Letitia James of New York, William Tong of Connecticut and Phil Weiser of Colorado, to make the case for the deal, according to two people familiar with the meeting. Mr. Ellison downplayed fears that he would shift the tenor of CNN’s coverage to the right, the people said.
Meanwhile, the company won approval for the deal from regulators around the world. In June, the Justice Department issued an unusually detailed statement declaring that the deal was unlikely to harm competition.
Mr. Bonta, who said the Justice Department’s approval process was flawed, sued to block the deal in July. Eleven other attorneys general, including Ms. James, Mr. Tong and Mr. Weiser, joined the lawsuit. The Writers Guild of America filed a separate antitrust suit, saying the merger would cause harm to writers. By the end of July, Mr. Bonta had won some early courtroom victories, and the dual challenges were moving toward a full trial set to start in March.
Paramount had no desire for things to get that far. In mid-August, Mr. Ellison told his executives that he was considering moving the company out of California if there was no progress toward resolving the state lawsuit before Oct. 1.
Mr. Bonta publicly dismissed Paramount’s threat to leave the state as “blackmail.” In late August, he walked away from settlement talks in the case, after he accused Paramount of leaking confidential details to the press. (Paramount denied leaking.)
But the possibility that Paramount would relocate worried some of the state’s other prominent political and industry players.
The Directors Guild of America and the International Alliance of Theatrical Stage Employees, which represents more than 170,000 entertainment industry technicians, artisans and craftsmen, wrote to Mr. Bonta and Mr. Ellison urging settlement talks and expressing concern about the jobs that could be lost amid prolonged litigation.
Mr. Newsom also privately expressed reservations, according to three political and entertainment industry sources. The merger would cost jobs, he pointed out, but so would inaction. Left to fend for themselves separately, Paramount and Warner Bros. were likely to wither, he said. And a deal, he added, could allow Mr. Bonta to secure some protections that he would not have gotten had he waved the merger through.
Mr. Bonta’s antitrust case was not a sure thing, either. It had to argue that it was a problem for two legacy studios to merge despite competition from tech behemoths like Amazon and Netflix.
With both sides still far apart, settlement talks picked up again in September. Mr. Ellison met with Mr. Bonta on Sept. 11, and the attorney general’s staff left unhappy with the deal on offer from Paramount, said two people familiar with the discussions.
Still, negotiations between Mr. Bonta and Mr. Ellison continued, according to two people familiar with their talks. Mr. Newsom huddled separately with both sides, reminding both the attorney general and Mr. Ellison, a native Californian, how much the state had at stake.
On Friday, Mr. Bonta set up a call with the 11 other states party to the lawsuit, two people familiar with the conversation said. He wanted their support for the deal he had negotiated with Paramount.
But the attorneys general were not all ready to settle. Mr. Tong said on the call that he did not see a reason to settle and recommended a full spinoff of CNN and CBS News. Mr. Weiser, the attorney general for Colorado, went in the other direction and said he did not want the government to be involved in the operations of a news outlet by creating a monitor for CNN and CBS News.
Ms. James had her own concerns. During a face-to-face meeting Friday in Los Angeles, she told Mr. Ellison that she would not agree to a deal without a sign-off from the Writers Guild of America, which was pushing for guarantees around TV production, job protection for journalists at CBS and improved terms for writers.
Though Mr. Bonta had encouraged his fellow A.G.s to sign on to the deal by Friday evening, Ms. James and others pushed to keep negotiating over the weekend.
The Writers Guild and Ms. James won some concessions, including $17.5 million in contributions to the guild’s health care fund. But Mr. Ellison refused to budge on other demands, including the TV production guarantee.
On Sunday night, the Writers Guild grudgingly agreed to terms with Mr. Ellison, prompting Ms. James to agree to the deal, two people familiar with the negotiations said. The other holdouts, including Mr. Tong, also reluctantly signed off. It would be very difficult to litigate without California, which had the resources and standing to continue the fight.
When the terms of the deal began leaking out over the weekend, many in Hollywood were apoplectic. Even Mr. Bonta, who praised the settlement in a news conference the next day, stopped short of endorsing the outcome.
“I want to be clear about something right up front: This settlement is not a vote of support for this merger,” Mr. Bonta said. “It is not a blessing.”
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