California's attorney general said the settlement resolves his antitrust concerns over the $110 billion Warner Bros. Discovery merger. He also said it is "not a vote of support" for the deal.
If Paramount Skydance releases too few films after it buys Warner Bros. Discovery, it could lose Miramax.
That penalty is the enforcement mechanism in a settlement with 12 state attorneys general, led by California's Rob Bonta, who had sued to block the roughly $110 billion merger on antitrust grounds. The states alleged the combination would reduce the output of films and raise prices. The settlement, announced , resolves that suit with a set of behavioral commitments.
The core commitment is volume. For the first two years after closing, the combined company must release at least 30 films a year, including at least 20 wide releases. For years three through five, the floor rises to 32 films, with at least 21 wide releases. At least four independent films are required each year. A shortfall would cost the company the Miramax library, along with $30 million for each missing film, paid into union health and pension plans.
The rest of the package is a mix of spending pledges and structural rules. The company must spend an extra $1.5 billion on production in the United States across five years. It must fund a $47.5 million training program for displaced workers over the same period and honor existing collective bargaining agreements. It will put $5 million a year into a $25 million fund to acquire independent films. For five years, Paramount's and Warner Bros.' cable and streaming distribution deals must be negotiated separately and at arm's length, and Pluto TV must remain a free, ad-supported service. A new News Editorial Independence Board is meant to protect newsroom independence at CNN and CBS News.
Bonta's own description of the outcome cut two ways. The settlement "resolves our antitrust concerns," he said. He also said: "This settlement is not a vote of support for this merger."
The dollar commitments are modest next to the transaction. The $1.5 billion production pledge, the $47.5 million worker fund and the $25 million film fund add up to about $1.57 billion over five years, roughly 1.4% of the deal's value. The Miramax clause and the film floors are harder to price, since their cost depends on whether the combined company would otherwise have cut output.
That leaves two readings of the settlement. In one, a state official who went to court to stop the deal extracted enforceable, multiyear limits with a real asset at stake, which is more than an unconditional approval would have produced. In the other, the settlement ended the litigation without resolving the opposition behind it, at a price the buyer can absorb. Bonta's two statements support each reading.
The settlement removed the final known legal hurdle to the deal. The Justice Department had cleared the merger in June, and the Federal Communications Commission approved its foreign-ownership structure, up to 49.5%, on . The Writers Guild of America separately settled its own challenge. Warner Bros. Discovery shares rose sharply on the day of the settlement.
Paramount Chief Executive David Ellison told employees in an internal memo that the company was tentatively planning to close the purchase in about two weeks.
The first real test of the settlement comes after closing, in the release slate. The combined studio's first-year film count against the 30-film floor, and whether the Miramax clause ever comes into play, will indicate whether the terms constrain the company or simply describe what it planned to do anyway.