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Paramount Skydance has clinched a settlement with 12 states that sued to block its $110bn takeover of Warner Bros Discovery, clearing the path for a deal that is expected to remake the Hollywood studio landscape.
Paramount announced a deal with the states, led by California, on Monday after it agreed to a handful of concessions following marathon negotiations through the weekend, according to people familiar with the talks.
But in a win for the studio behind the Mission Impossible, Star Trek and SpongeBob SquarePants franchises, it will not have to divest major assets as part of the terms, including the cable channels it owns.
The agreement removes the last major obstacle to a deal that has hung over Hollywood since Paramount usurped Netflix in the high-stakes sale of WBD this February, handing some of the most valuable and culturally significant film and television assets to a group that has struggled to find its footing in the streaming era.
It will also give Paramount control of two of the biggest news operations in the country at a time of deep political divide, with US President Donald Trump taking aim at outlets he views as critical of his administration.
The settlement includes a provision to create an independent editorial board for CNN and CBS, the two major news networks that would be combined under the control of Paramount chief executive David Ellison through the merger. The independent board, which Paramount will establish within the next six months, will be made up of five journalists, with the states requiring that no member of government have approval over the appointments.
Trump, who last week banned CNN from the White House, has frequently mentioned his friendly relationship with Ellison and his father Larry Ellison, the billionaire Oracle co-founder. In July Trump told CNN anchor Jake Tapper on air: “We’re trying to have CNN go on a normal path.”
The studio has also agreed to pay financial penalties if it does not distribute at least 30 films a year in theatres over the next two years and more than 32 films a year over the following three years. It was a condition industry titans previously viewed as untenable given the dramatic pullback in productions and drop-off in attendance at cinemas.
Paramount will be penalised $30mn for each film that falls short of those targets and it will be forced to spin off its Miramax independent unit if it does not ultimately reach those minimums.
“Our goal has always been to build a stronger Hollywood — one with more stories told, greater choice for consumers and stronger competition,” Ellison said. “Bringing Paramount and Warner Bros Discovery together will build that stronger Hollywood.”
Paramount agreed to keep its operations in California after threatening to move its headquarters out of the state. The stand-off over Paramount’s departure rattled top Democratic politicians in the state, who feared the potential fallout from the loss of one of the industry’s biggest players.
Hollywood has struggled to rebound from the streaming boom and bust as studios have greenlit fewer films and TV shows or moved productions out of the state in search of tax havens.
Industry insiders questioned whether Paramount would be able to meaningfully exit the state given the concentration of talent and competitors in the region. Top party leaders in the state, including governor Gavin Newsom and Los Angeles mayor Karen Bass, had nonetheless signalled their support for a settlement to avoid putting jobs in the state at risk.
Paramount committed to spending at least $300mn more per year on film and TV productions over the next five years in the US and cannot sell the combined company’s production lots in Hollywood as part of the deal.
“Hollywood of course has been reeling,” said Rob Bonta, California’s attorney-general. “This deal gives certainty about the future of production right here in LA, in California, in our country.”
Paramount faced its own looming pressure to reach a deal. Executives have been racing to secure a deal before October, when it would be forced to pay $7mn a day, or $650mn a quarter, to WBD shareholders to compensate them for delays in completing the takeover.