A $111 Billion Hollywood Takeover With a Murky Future
· The Atlantic
Last Thursday, during a panel discussion at The Atlantic Festival, California Attorney General Rob Bonta seemed confident that the biggest antitrust case Hollywood has seen in decades would go his way. He told my colleague Quinta Jurecic that the coalition of 12 attorneys general who’d filed an antitrust lawsuit against the proposed Paramount–Warner Bros. merger were winning their case. The group had persuaded Paramount to not close the deal until next summer, and they’d landed a favorable trial date in March. But, Bonta said, “we are always open to coming to the table.”
That seems to be exactly what happened. Last week, Paramount settled the lawsuit, ending months of negotiations. Though the agreement still has to be approved by a judge, the company has cleared its biggest hurdle to completing its $111 billion takeover of Warner Bros. Discovery. The move saved Paramount plenty of cash—the company had pledged to pay Warner Bros. shareholders $7 million for each day past the end of September that the deal failed to close—while appearing to satisfy many of the requests of Bonta and his fellow attorneys general, including keeping both studios in California.
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Still, Bonta, at a press conference last Monday, expressed disapproval. “The settlement is not a vote of support for this merger,” he said. To misquote a classic Warner Bros. film, this seems to be the beginning of an uncomfortable friendship. Below are four reasons—all lingering questions as the merger nears its finish line.
The settlement stipulates that the merged company must release at least 30 films a year for the first two years of its existence, and 32 films a year for the following three years, or pay a financial penalty. Is that number achievable?
Hitting those figures could be difficult for a single, combined studio, especially because the settlement states that each year, at least four of those films must be independent productions and at least 20 of them must get a wide release (the number goes up to 21 after the first two years). In 2025, Paramount released just eight films theatrically, while Warner Bros. released 11. The settlement also orders the new Paramount to spend $300 million more annually than it did last year to make films in the United States, rather than producing them abroad, which puts a lot of pressure on the company to generate hits, but neither Paramount nor Warner Bros. has found reliable success at the box office. (Audiences have been inconsistent in showing up to see superhero movies and legacy sequels lately; just look at the underwhelming returns on Supergirl and Practical Magic 2.) Besides, making movies will only add to the company’s ongoing debt: Paramount borrowed more than $54 billion for its takeover bid, and because Warner Bros. already had its own debt, the combined entity owes roughly $80 billion.
How will the merger affect Hollywood’s already flagging job market?
Poorly, probably. Layoffs seem inevitable, considering, again, the amount of debt Paramount has gone into just to acquire Warner Bros. The settlement demands that Paramount contribute $47.5 million to a “workforce fund” over five years to aid those laid off, but giant corporate mergers have a history of massive layoffs whose costs may exceed that sum. The Disney takeover of 20th Century Fox in 2019 led to an estimated 4,000 to 10,000 slashed jobs. Consolidating Hollywood means fewer studios at which to make film and television projects, which in turn means fewer employment prospects. For now, only those at CBS News, which is owned by Paramount, appear to be relatively safe: In a settlement with the Writers Guild of America, Paramount agreed to prohibit writer layoffs there for five years.
The merger brings CNN and CBS News under one roof, and under the oversight of Paramount CEO David Ellison, a Trump ally. How will that affect coverage?
That’s hard to say. Some of the merger’s detractors had hoped that the antitrust lawsuit would pressure Paramount into selling off CNN as an independent enterprise, but the settlement simply states that the outlet will have an oversight committee installed to ensure its editorial independence. And though that board will consist of five journalists with at least 10 years of experience in the field and a mix of political leanings, the combined company’s board of directors, chaired by Ellison, will pick its members. Whether such an arrangement will help to prevent any corporate overreach is up in the air: To Joshua Benton, the Nieman Lab founder, the board seems like a PR move at best. After all, as Reuters noted, how the board’s decisions and findings will be implemented or enforced remains unclear.
Bonta called this settlement a “strong solution that protects competition and consumers.” Is that going to turn out to be true?
Again, that depends on whom you ask. California Governor Gavin Newsom, the Directors Guild of America, and the International Alliance of Theatrical Stage Employees (an organization representing more than 170,000 artists in the entertainment industry) supported settling the lawsuit to prevent further job loss. The deal at least ensures that Paramount isn’t moving out of California for the next several years, which should sustain competition among Hollywood studios to some extent.
A mix of new investors could also help alleviate the extreme debt Paramount is in. (The studio’s spending could heavily influence what the new company makes for audiences to see in theaters and how much it earns in subscriptions to whatever combination HBO Max–Paramount+ streaming service.) Earlier this month, the Federal Communications Commission approved the infusion of money from foreign interests for this deal, including the sovereign wealth funds of Saudi Arabia, Qatar, and Abu Dhabi. Semafor reported last week that Elon Musk, an Ellison and Trump ally, may be asked to invest in Paramount as well. These sources of cash would likely lead to further anxieties about how Paramount will be run, but the company has promised that its foreign investors’ stakes will involve silent, nonvoting shares. For now, the best bet on what will happen next with the merger is that the deal itself will close.