For a lawsuit that swore to stop the $111 billion merger between Paramount Skydance Corp. and Warner Bros. Discovery Inc. for the everyday moviegoer, Rob Bonta’s case sure folded quickly under mounting pressure.
By filing in the U.S. District Court for the Northern District of California with 11 other state attorneys general in July, Bonta had seemingly brought the merger between the entertainment giants to a screeching halt. By that time, it had received approval from the U.S. Department of Justice. The European Commission also gave it a nod.
With a federal judge temporarily blocking the deal with restraining orders, the suit seemed to be the last major line of defense against what the critics said would deplete jobs, threaten journalistic integrity, and devastate creative communities in film and TV.
That defense has since dissolved. On Sept. 21, the attorney general’s office announced a settlement with the company, led by tech scion David Ellison, calling it a “strong outcome” achieved. Over the next five years, Paramount is expected to invest no less than $1.5 billion in domestic film and TV production, and to release at least 30 films annually for two years – 32 for the following three. A 45-day theatrical window was secured, the two historic filming lots in L.A. will stay open for the time being and the merged company will be headquartered in L.A. CNN and CBS got assurance of editorial independence, and displaced workers got a training and career development program backed by $47.5 million.
“Let me be clear: This settlement is not a vote of support for this merger,” Bonta said in a statement. “But we believe this settlement, which resolves our antitrust concerns in every market alleged in our case, protects competition and consumer choice, and puts workers’ needs, concerns, and futures first, is the best course of action.”
The Writers Guild of America, which filed a similar lawsuit against the merger, subsequently agreed to settle. It said in a statement that without backing from government enforcers, it “must contend with the reality of forging ahead alone” on the expensive case. Paramount agreed to no layoffs among its writing staff at CBS for five years, an investment of $17.5 million into the guild’s health fund and reimbursing the non-profit for attorneys’ fees to pursue the case.
Ellison himself had thanks to give. In a Monday statement obtained by Deadline, the emerging entertainment mogul said that the team was grateful to Bonta and the attorneys general coalition, and the Writers Guild of America for “engaging in good faith to find a path forward to a resolution that serves all parties.” He further thanked Gov. Gavin Newsom for supporting the process. In an internal memo also obtained by Deadline, he forecast the deal to close in the next two weeks.
“Our shared aim was an outcome that best serves consumers, workers and – most importantly – the creative community so vital to the art of visual storytelling,” he wrote. “We’re confident this agreement does exactly that.”
Political fingerprints
The case had evolved beyond business and law into political domains – and that’s where Bonta’s position faltered, some suggested.
The lawsuit originally held real promise to stop the merger by delaying it past Sept. 30, after which Paramount would start paying roughly $7 million a day to Warner Bros. Discovery shareholders. That is a burden that might destroy the deal before a final restraining order even hits the table, said Matt Stoller, director of research for the anti-monopoly advocacy organization American Economic Liberties Project, in conversation with The Ankler.
The ticking fee put Ellison under pressure, but Bonta was not exactly having an easy time either. The CBS owner has repeatedly threatened to move its headquarters outside the Golden State – each time with more seriousness – and Newsom had expressed concerns about state employment levels if the deal was blocked by the lawsuit, reported the Wall Street Journal.
If Paramount followed through with the move, L.A.’s entertainment industry would suffer one more heavy blow – one that might devastate its already struggling talent pool. It also wouldn’t look good for Newsom if he still has presidential plans in the next two years, said Court Stroud, a professor of integrated marketing at New York University. According to the Wall Street Journal, the governor’s office had encouraged Bonta to seek an out-of-court resolution instead of dragging the case through trial.
“What happened is that every major power player in the state in the Democratic Party put pressure on Bonta to settle or to let the merger through,” Stoller said. “Everyone was shocked and offended that someone would try to stop a billionaire.”
The siding of politicians with capital, furthermore, might be a larger trend, Stroud said.
“When the spending limitations have been removed by the Supreme Court (in June), for example, it means politicians can only survive and thrive with the help of the very, very wealthy,” he said. “So therefore … by necessity politicians must pay attention to the very wealthy over the people because they can’t get reelected otherwise.”
Newsom himself has denied exerting his influence over Bonta.
“I didn’t pressure anybody,” Newsom told Axios correspondent Alex Thompson Sept. 23. “I made the point … (we, including Mayor Karen Bass and Democratic nominee for the next California governor Xavier Becerra) preferred in the words of Rob Bonta himself that he focus on getting this done at the boardroom, not the courtroom.”
(Photo by David Sprague)
A viable settlement?
The reality of the settlement might not match the promise.
The $1.5 billion investment in domestic production is for the entire country, not for California or L.A. alone, El Segundo-based litigation attorney Parag Amin pointed out to the Business Journal in an email. How much of that money – pocket change for the giant combined corporation – will fall into Hollywood remains to be seen.
“The commitment to spend at least an additional $1.5 billion on U.S. production over five years is not what will make or break an acquisition of this size,” he wrote.
Other terms of the settlement also have loopholes and might be hard to enforce, Stroud said. It is unclear how much power the independent editorial board for CNN and CBS will have over its employees. That is further complicated by its members, who will be selected by its corporate leaders – effectively Ellison himself, wrote The Hollywood Reporter.
“This independent editorial board has no teeth, no real authority,” Stroud said. “The WGA-negotiated, five-year no-layoff pledge for CBS News … sounds good, but there’s nothing that prevents Paramount from combining CNN and CBS’ news operations. It’s going to be very hard to keep everybody employed if they do that.”
Beyond that, the five-year hold on keeping both historic studios running is not a long time, Stroud said. The company can simply wait it out.
The settlement remains deeply unsatisfactory to many in the industry. Protesters rallied outside Paramount’s Melrose headquarters Tuesday morning, led by Block the Merger Coalition. The Los Angeles Times reported that besides potential loss of jobs and threats to local businesses, the protesters also called out the politicians for succumbing to pressure.
“We are disappointed and angry that the interests of average Americans have been trampled to benefit oligarch billionaires,” the coalition said in a Monday statement. “This isn’t the last we will hear of the Ellisons or the fallout of this merger – and it’s not the last you will hear from us.”
