Paramount and 12 US states challenging its $110 billion acquisition of Warner Bros. Discovery could reach a settlement as soon as this weekend, with independent monitoring of CNN’s content and commitments on theatrical film releases among the terms under discussion, according to people familiar with the talks cited by Reuters.
The negotiations could remove a major legal obstacle to Paramount’s plan to combine two of Hollywood’s biggest media companies. Paramount shares rose nearly 7% in after-hours trading following the report, while Warner Bros. Discovery gained 8.4%.
The case was brought by California and 11 other states, which sued in July to block the transaction on antitrust grounds. The states argue that combining the companies would create a media company with greater power to raise prices for movies and television content.
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The California Department of Justice declined to confirm whether settlement talks were taking place.
“We cannot confirm or deny whether settlement talks are occurring or their alleged substance,” a spokesperson said.
The potential agreement comes as Paramount faces a growing financial incentive to close the transaction. Under the merger agreement, the company must pay Warner Bros. shareholders a $7 million daily “ticking fee” for each day after September 30 until the deal closes. Paramount has argued that delays could result in hundreds of millions of dollars in additional costs.
CNN Becomes A Central Issue
The possible inclusion of independent monitoring for CNN highlights one of the more politically sensitive aspects of the proposed combination. The deal would bring CNN under the same corporate ownership as Paramount’s CBS News, alongside major entertainment assets including HBO, the “Harry Potter” franchise, “The Daily Show” and rights to NFL football games.
Lawmakers have previously questioned Paramount CEO David Ellison’s management of CBS News, including allegations that the network’s coverage was tailored to favor President Donald Trump. Those concerns have contributed to scrutiny over how CNN might be managed following a takeover.
The proposed independent monitoring arrangement would address concerns about editorial control, although the precise structure and powers of any monitor have not been disclosed.
Paramount has positioned the acquisition as a way to consolidate two major Hollywood studios and build a larger competitor to Netflix and Disney. The company would gain a much broader collection of film, television, and streaming assets through the combination.
The states, however, have focused on the potential impact of the merger on competition. California Attorney General Rob Bonta has said structural remedies, such as selling parts of a business, are more effective in protecting competition than commitments requiring a company to follow certain practices after a merger.
That distinction could become important in determining the final terms of any settlement. Behavioral commitments can allow a transaction to proceed while requiring the combined company to maintain certain practices, whereas structural remedies would reduce the assets or businesses controlled by the merged company.
Paramount Faces Pressure to Keep Movie Output High
Another potential settlement condition concerns theatrical releases. Ellison has previously pledged that the combined film studios would release 30 movies a year. The states are discussing a commitment on the number of theatrical releases as part of a potential settlement, according to the sources.
The issue matters because a larger Paramount-Warner Bros. company would control a substantial collection of Hollywood film assets. A commitment to maintain theatrical output could be intended to address concerns that consolidation might reduce the number of films reaching cinemas.
The Writers Guild of America has separately sued to challenge the transaction, arguing that the combination could reduce compensation and worsen working conditions for film and television writers. It was not immediately clear whether the union was participating in settlement discussions with Paramount and the states.
The deal has already cleared several federal regulatory hurdles. The Justice Department approved the transaction, while the Federal Communications Commission on Thursday approved Paramount’s request to allow foreign investors to hold substantial equity in the combined company, subject to restrictions on voting rights and influence over management and content decisions.
The FCC’s decision allows individual foreign investors to hold up to 20% of the equity and waives the usual 25% aggregate foreign ownership limit, while prohibiting foreign investors from holding voting stock or exercising control over Paramount’s content decisions or management.
The state lawsuit remains a separate obstacle. A federal judge has temporarily blocked the takeover pending a trial scheduled for March.
For Paramount, the timing of the settlement discussions has gained great interest because the company faces both the daily ticking fee and the broader costs of keeping the transaction alive while litigation continues. Paramount previously sought a $1.88 billion bond from the states to cover potential losses associated with delays if the court ultimately allows the merger to proceed.
A settlement is expected to address more than the immediate antitrust dispute. It could establish conditions under which Paramount proceeds with the acquisition while attempting to address concerns over competition, theatrical distribution and editorial independence at CNN.
For now, however, the discussions remain confidential, and no settlement has been announced. The terms under consideration show the breadth of the issues surrounding the proposed $110 billion combination, from Hollywood’s theatrical business to the future editorial independence of one of America’s major cable news networks.