Paramount Skydance is discussing a package of concessions with California officials that could include a $1.5 billion investment in film and television production in the state, as the company seeks to overcome one of the final legal obstacles to its proposed $110 billion acquisition of Warner Bros. Discovery.
The Wall Street Journal reported Sunday, citing people familiar with the negotiations, that Paramount and California Attorney General Rob Bonta’s office have discussed a range of measures that could form part of a settlement with California and 11 other states suing to block the deal.
The talks underscore the scale of concessions Paramount may need to offer to secure regulatory clearance for a transaction that would combine two major Hollywood studios and a broad portfolio of television networks and other media assets.
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Among the measures under discussion is a commitment to invest $1.5 billion in production in California, according to the Journal. The parties have also discussed keeping Paramount’s and Warner Bros.’ studio lots in the state rather than selling either property.
California believes the production commitment could provide a direct economic argument for allowing the merger to proceed, particularly as the state competes with other jurisdictions for film and television activity. For Paramount, such an investment could form part of a broader effort to demonstrate that consolidation would not come at the expense of the state’s production industry.
The proposed agreement could also include penalties if Paramount fails to meet an earlier commitment to produce 30 movies a year following the merger. One possible remedy discussed is the divestiture of Paramount’s stake in Miramax, the film studio behind movies including “Pulp Fiction” and “No Country for Old Men,” the Journal reported.
Other possible concessions include selling some cable channels and establishing a board to help protect CNN’s editorial independence after the merger.
The discussions remain confidential, and no settlement has been announced.
“Potential settlement talks are confidential. We cannot confirm or deny whether settlement talks are occurring or their alleged substance,” a spokesperson for the California attorney general told Reuters.
California and 11 other states sued in July to stop the transaction, arguing that the combination would create a media company with excessive power to raise prices for movies and television.
The lawsuit represents one of the last major hurdles facing Paramount CEO David Ellison as he pursues the acquisition. Reuters reported last week that Paramount and the states could reach a settlement as soon as this weekend, with independent monitoring of CNN content and commitments on theatrical releases among the terms being considered.
The breadth of the reported concessions points to the central challenge facing the transaction: Paramount is not simply seeking approval for a conventional corporate acquisition. It is attempting to combine two major entertainment businesses at a time when regulators and policymakers are closely examining the effects of consolidation across media.
The proposed production investment is significant because it would turn part of the regulatory negotiation into a commitment to maintain economic activity in California. Keeping the studio lots in the state would similarly limit the possibility that a combined company could rationalize its physical production footprint after the merger.
The potential concessions also extend beyond employment and production. Possible restrictions on cable assets and safeguards around CNN’s editorial independence indicate that regulators are examining the transaction through several different lenses, including competition, media ownership and the future of news operations.
Paramount’s willingness to consider such measures will ultimately depend on whether the concessions are sufficient to resolve the states’ concerns without undermining the economic rationale for the acquisition.
Ellison has stated that consolidation is necessary to strengthen Paramount’s position in an increasingly competitive entertainment market. The proposed combination would bring together Paramount’s film and television operations with Warner Bros. Discovery’s Warner Bros. studio and extensive television properties.
The settlement talks therefore represent more than a final regulatory negotiation. They are also a test of how much economic, operational, and editorial control Paramount is prepared to sacrifice to create a larger Hollywood company.
Until an agreement is reached, however, the reported measures remain proposals under discussion rather than binding conditions of the transaction.