Paramount Bends the Knee to Rob Bonta

Paramount Skydance agreed Monday to settle with California and 11 other states that sued to block its $110 billion acquisition of Warner Bros. Discovery, Inc.

The deal reportedly includes a “new board for CBS News and CNN to ensure editorial independence” as well as a $30 million penalty—90 percent of which would go to the company’s employees—for each movie Paramount fails to release as part of its promise to produce 30 films per year, according to CNBC. The studio will release 30 films in its first two years and 32 in the following three years. Additionally, at least 20 percent of its annual theatrical releases must each have budgets over $50 million. If it fails to meet the targets, Paramount would be forced to divest its 49 percent stake in Miramax Films. The agreement includes $9.5 million per year for workforce training and career development and for film programs and community arts organizations. Paramount will also increase its annual spending on domestic film production by at least $300 million. 

It’s a coercive settlement, reached under threat from state governments and labor unions. CNN reported that the Block the Merger Coalition, an alliance of Hollywood unions and advocacy groups, was set to protest the merger this week in New York and Los Angeles. For Paramount, the punitive settlement means it avoids a $7 million-a-day “ticking fee” owed to Warner Bros. shareholders—about $650 million a quarter—set to kick in at the start of October. The company would have been forced to pay the ticking fee until the merger closed. 

Regulatory bodies in 65 countries, including the U.S., had already approved the merger or chosen not to challenge it. Still, in July attorneys general of 12 states, led by California Attorney General Rob Bonta, filed an antitrust suit to block the proposed merger, alleging Paramount’s acquisition of Warner Bros. Discovery would create a monopoly. Seven days after the lawsuit was filed, a federal district court granted a temporary restraining order stopping Paramount from “closing or consummating” the merger. 

The merger would give Paramount 27 percent of the market share for theatrical releases, leaving 73 percent to its competitors. The Justice Department—which, under the Trump administration, has continued the same antitrust activism as in previous administrations—still found that the merger was “not likely to result in harm to competition or American consumers.”

The states’ focus on Paramount’s stewardship of its news networks makes clear that Bonta and the other attorneys general always intended to use antitrust law to prevent Larry and David Ellison—whom they view as allies of President Donald Trump—from controlling both CNN and CBS News. 

Despite the insinuation, CBS has shown no signs that new ownership has compromised its editorial integrity. Last October, CBS joined a slew of news organizations that refused to sign on to the Pentagon’s restrictive new press policies. On Monday, it issued a joint statement alongside ABC, CNN, NBC, and Fox News admonishing the president for barring CNN, MS NOW, and Politico from the White House. The network has declined to cover any presidential events until press access is restored for those outlets, according to The Washington Post. 

There is little support for Bonta’s assertion that a merger between Paramount and Warner Bros. Discovery would lessen competition or prevent CNN from reporting as it always has. 

Unfortunately, Bonta appears to have succeeded in jawboning Paramount’s leadership into settling rather than engaging in a long, costly legal battle.

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