States settle lawsuit over Paramount-Warner merger, clearing key hurdle for $81 billion deal

CHICAGO (AP) — Twelve states and Hollywood writers challenging Paramount’s buyout of Warner Bros. Discovery agreed to settle their lawsuits on Monday, effectively paving the way for the $81 billion mega merger to cross the finish line, with some new commitments from the company.

The blockbuster deal will still vastly reshape Hollywood — bringing together two of the “big five” remaining studios, key TV networks like CBS and CNN and streaming platforms HBO Max and Paramount+, as well as decades-old libraries with titles ranging from “Harry Potter” to “Top Gun.”

But among terms of Monday’s agreement announced by California Attorney General Rob Bonta — who led the states’ case — Skydance-owned Paramount pledged to increase film production in the U.S., commit millions of dollars to a fund to support workers displaced by the merger and create new monitoring of the editorial independence of the company’s news operations.

The settlement still needs a final sign-off by a judge.

Paramount CEO David Ellison welcomed the terms reached with both the states and the Writers Guild of America on Monday, which he said marks “complete clearance” for his company’s merger with Warner — reiterating that such a combo will “build a stronger Hollywood.”

Critics, however, decried the settlement terms as too weak and accused the state attorneys general of capitulating to corporate pressure. Many saw the litigation as the last guardrail from keeping a combined Paramount-Warner from becoming a reality.

Talks were contentious for months — and, despite new remedies announced Monday, Bonta and other top state prosecutors who sued said Monday that they still didn’t think the companies should merge.

Politics have also surrounded much of Paramount’s quest for Warner. Many eyes are on the billionaire Ellison family’s relationship with President Donald Trump and the future of assets like CNN, which the Republican administration barred from the White House over what Trump called unfavorable coverage.

The states’ settlement terms, explained

The coalition of states — which, beyond California, also includes entertainment heavyweight New York — sued to block the merger in July, alleging it would “extinguish competition” and lead to fewer choices for consumers, particularly movie theatergoers and cable customers.

In Monday’s agreement, the states said they had secured a handful of “court enforceable” commitments from Paramount — including pledges to increase domestic film production over the next five years by spending at least an additional $1.5 billion, or $300 million per year, and commit another $47.5 million to help fund training and career development for workers displaced by the merger.

Paramount also must make good on its promise to release 30 films each year for the next two years — and 32 films in each of the three years after that. If it fails to do so, the states say it will be required to divest from Miramax Studios and pay $30 million for each missed film toward health care and retirement trust funds associated with the Writers Guild of America and other industry unions.

When it comes to cable, Monday’s settlement orders the company to negotiate deals for current Paramount-owned and Warner-owned basic channels separately for the next five years, which the states say will help keep consumer prices down. The company must also form a new “News Editorial Independence Board” monitoring news operations at CBS and CNN.

Bonta said in a news conference in Los Angeles the settlement was about “protecting people’s careers, the lives they’ve built here in California, the livelihoods their families rely on,” while maintaining it was not a vote for the merger.

WGA also settles its challenge while warning of ‘damage to writers’

The Writers Guild of America, which filed its own lawsuit in July challenging the merger on the grounds it specifically harms Hollywood writers, separately confirmed that it settled its case, too — concluding that it couldn’t continue its legal fight alone.

“We continue to believe the merger will cause damage to writers and the industry at large,” the WGA said in a statement. The union maintained that as a nonprofit “with no backing from government enforcers,” the complex litigation would have cost millions of dollars.

Paramount previously agreed to delay its transaction well into next year so the challenges could make their way through court. But it soon called for a settlement — notably as it looked increasingly likely that the price tag for Warner could get a lot more expensive. Paramount had promised to pay shareholders “ticking” fee compensation amounting to $7 million each day the deal was not closed past Sept. 30.

Including billions of dollars in debt, Paramount’s buyout of Warner is currently valued at about $111 billion based on outstanding shares.

Others respond to deal

Over the weekend, a handful of lawmakers including Democratic Sens. Elizabeth Warren and Cory Booker urged the states to keep up their fight. Other critics decried the deal Monday while warning what further consolidation could mean in an industry controlled by just a few major players.

“Today, billionaires have yet again bribed, censored, and bullied their way to the top,” Alvaro Bedoya, senior adviser at the American Economic Liberties Project and a former commissioner of the Federal Trade Commission, said in a statement. “Layoffs will follow. People from L.A. to Atlanta will lose their jobs, small businesses will lose their contracts, your cable bill and movie ticket will be even more expensive.”

Bedoya claimed Bonta and California Gov. Gavin Newsom caved to pressure — particularly after Paramount reportedly threatened to leave the state amid the antitrust battle.

Paramount never publicly commented on a potential move from California, and Monday’s settlement doesn’t specify that its headquarters must stay in the state. But in response to online criticism of the deal, Newsom spokesman Izzy Gardon suggested that the alternative was the company moving to Tennessee. Over the summer, Tennessee officials wrote Ellison a letter encouraging Paramount to relocate there.

Newsom, meanwhile, said the deal was a win for workers and California’s creative economy.

“It protects California jobs while putting a safeguard in place to help preserve editorial independence for two of America’s most important news organizations,” Newsom said in a statement.

Connecticut Attorney General William Tong, whose state was among those filing suit, said his main goal had been to protect the editorial independence of CNN and CBS News and that he wanted to see a full divestiture of the two news organizations. The settlement instead includes an editorial board structure aimed at protecting their independence.

A week ago, Tong said, Paramount refused to agree to any editorial independence for the news outlets.

“We wanted to save ethical and independent journalism and news,” he said in a statement. “We fought aggressively for that remedy. I am deeply disappointed that we could not do more.”

Tong and others stressed that it was an uphill battle after the Trump administration decided against intervening. In June, the U.S. Justice Department released a lengthy statement supporting the merger.

“The complete abdication of the federal government’s enforcement role in this fight left states with one arm tied behind our backs,” Tong said.

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AP Writers Sophie Austin in Sacramento and Dave Collins in Hartford contributed. Sisak reported from New York.