Updated Version 6 - Paramount Reaches Settlement with U.S. States, Paving the Way for Warner Bros. Merger Completion

Update on sources; details of the settlement agreement supplemented, along with specifics regarding the Writers Guild settlement

Jody Godoy/Deborah Mary Sophia

Reuters, September 21 - Paramount-Skydance reached a settlement on Monday with California and 11 other states, after those states filed a lawsuit attempting to block its $110 billion acquisition of Warner Bros. Discovery. This move paves the way for one of the largest media mergers in history.

California Attorney General Rob Bonta stated at a press conference that the settlement includes shifting more film production to the U.S., with at least an additional $300 million invested domestically each year, and an agreement to gradually increase annual film releases after the deal closes.

Bonta said the company will produce 30 films per year for the first two years after the deal closes, and 32 films annually for the following three years. Among these, at least four per year must be independent films, and at least 20% must be blockbusters.

According to Bonta, under the settlement terms, Paramount will also establish an independent editorial committee to ensure the editorial independence of CBS and CNN.

This settlement draws a line under months of regulatory and legal battles, with the transaction set to significantly increase concentration of power in Hollywood’s film, TV, streaming, and news businesses.

By securing concessions aimed at protecting newsroom independence and maintaining the scale of film production, Paramount appears to have alleviated some concerns, bringing the two companies closer to completing the merger—which will create one of the world’s largest media and entertainment groups.

On Monday, Paramount (PSKY.O) shares rose more than 8%, while Warner Bros. Discovery (WBD.O) shares soared over 10%. Reuters reported on Friday (link) that Paramount and the states could reach a settlement as early as this weekend.

Although Trump administration regulators had already approved the deal, a coalition led by California Attorney General Rob Bonta, comprising 12 state attorneys general, filed a lawsuit in July (link) to block the merger, arguing that the deal would weaken competition and create a media giant capable of raising movie and television prices.

Earlier this year, both companies said the merger would save $6 billion through cost-cutting, measures that could impact jobs in Hollywood and the CNN and CBS newsrooms. The newly combined company is expected to take on $80 billion in debt.

Reaching a settlement with the states will help Paramount avoid paying a $7 million per day “delay fee”—which would be owed to Warner Bros. shareholders if the deal isn't completed after September 30.

A source told Reuters that the Writers Guild of America (link), which had previously filed a lawsuit to block the transaction on the grounds that it would lower writers’ pay and worsen working conditions, has reached a settlement with Paramount.

The union had warned in July that the combined entity resulting from Paramount and Warner Bros. would "have both the incentive and ability to suppress writers’ compensation and reduce output to lower costs."

The source said the settlement includes a $17.5 million healthcare fund and protections for CBS and CNN employees.

The Writers Guild of America did not immediately respond to Reuters’ request for comment on the settlement agreement.

Antitrust regulators in other global jurisdictions, including the European Union and the United Kingdom, have already approved the deal.

The approval of the Paramount-Warner Bros. deal indicates that, as companies scale up to compete with Netflix (NFLX.O) and Walt Disney (DIS.N), regulators may be taking a more open stance toward media consolidation. This has also raised new questions about market concentration in news, sports, and entertainment.

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