California and Paramount Skydance have reportedly reached a settlement allowing the company to complete its $111 billion merger with Warner Bros. Discovery. The settlement, which will reportedly be announced later today, drew condemnation from Democrats and media advocates.
“The Paramount/Warner Brothers merger seems facially illegal, and the state AG lawsuit challenging it is very strong,” Lina Khan, who chaired the Federal Trade Commission during the Biden administration, wrote yesterday. “It’s troubling to hear that the states may now settle for behavioral remedies, allowing the deal to go through subject to various promises from the firms. Behavioral remedies routinely fail, and the stakes here are particularly high given that a strong democracy requires open markets for sound journalism and creative expression.”
After news of advanced settlement talks was reported over the weekend, Bloomberg reported today that Paramount reached an agreement with California and other states that sued to block the merger. “Settlement talks came to fruition over the weekend after four states that had opposed terms of a deal outlined with California conceded,” Bloomberg wrote, citing a person familiar with the matter.
The New York Times reported the deal a bit later, saying that “four people familiar with the negotiations” confirmed it. The settlement was also confirmed in a Wall Street Journal report that said “the combined company is set to emerge with nearly $80 billion in debt—a substantial burden already expected to weigh on its investments in the business.”
Advocates unhappy with California AG
Media advocacy group Free Press criticized California Attorney General Rob Bonta. “We are disappointed that Attorney General Bonta went back on his promise to enforce the law and protect consumers and workers,” Free Press co-CEO Jessica J. González said. “Hundreds of thousands of people called on our state AGs to stand up to the Ellisons, who have engaged in a campaign of corruption and extortion to pave the way for this unlawful merger.”
John Bergmayer, legal director at advocacy group Public Knowledge, said the settlement “does not address the central problem with this merger: the loss of competition. This merger leaves fewer studios competing for scripts and talent, gives one company greater power to dictate terms to distributors, and reduces streaming choices. Consumers will face higher prices, while writers and other creative workers will have fewer employers bidding for their work.”
According to Bloomberg, the Paramount/California deal was initially opposed by Massachusetts, New York, Connecticut, and Minnesota. But the state attorneys general “ultimately concluded the expense of the legal battle was not justifiable without California at the helm,” the report said.
“The states that held out longer did succeed over the past week in securing independent editorial boards for CBS and CNN as part of the deal,” Bloomberg’s report said. Paramount reportedly also agreed to terms that “include a financial penalty if the company fails to make good on a promise to distribute 30 films per year in theaters.”
“Oversight committee won’t save CNN”
González said that “a fake bipartisan oversight committee won’t save CNN. We have all the evidence we need from the Ellisons’ destruction of CBS about what they do to warp journalism at Donald Trump’s request. This latest capitulation comes as the Trump administration barred CNN and other reporters who dare ask hard questions from the White House press pool.”
Bergmayer said that “independent editorial boards for CBS and CNN may be better than nothing,” but “are far short of actual independence. The states were right to challenge this merger after federal enforcers failed to act. They should insist on a settlement that preserves competition—or wait for their day in court.”
Netflix originally had a deal to buy Warner Bros. but backed out after it became clear the Trump administration preferred Paramount. Paramount CEO David Ellison reportedly wooed Trump administration officials with a promise to make big changes at the Warner-owned CNN.
Trump’s Justice Department approved the deal in June. The Federal Communications Commission last week allowed Paramount to finance the merger by selling large equity stakes to the sovereign wealth funds of Saudi Arabia, the United Arab Emirates, and Qatar.
States’ lawsuit was going well
Twelve states led by California sued to block the deal in July and were able to delay the merger’s completion when a federal judge ruled that the combination would likely reduce competition substantially and violate antitrust laws. The deal will let Paramount combine two of the largest movie studios, merge streaming service Paramount+ with HBO Max, and take ownership of CNN and other TV channels.
Bonta alleged in July that “the unlawful merger of these two entertainment behemoths would lead to higher prices, lower quality, and less content for film and television, harming movie theaters, basic cable distributors, and ultimately, audiences on every sofa and movie theater seat in the US.”
Democratic lawmakers who oppose the deal had been pinning their hopes on the California lawsuit. “Paramount, run by the Ellisons, should not own both CBS and CNN. California must not cave and take a deal that leaves both under the same owner,” US Rep. Ro Khanna (D-Calif.) wrote Saturday.
US Rep Jamie Raskin (D-Md.) urged state attorneys general to “hang tough” against the merger. “At a time of massive economic concentration, accelerating monopoly and growing MAGA political capture of America’s media institutions, we need the state AGs to vigorously defend antitrust principles and freedom of expression,” he wrote.
Jon Brodkin Senior IT Reporter
Jon is a Senior IT Reporter for Ars Technica. He covers the telecom industry, Federal Communications Commission rulemakings, broadband consumer affairs, court cases, and government regulation of the tech industry.
