California and 11 other states agreed to end their lawsuit challenging Paramount’s $110 billion Warner Bros. Discovery acquisition, pending court approval. Paramount must release at least 30 theatrical films annually during the first two years after closing and 32 during the following three, spend at least $1.5 billion more on U.S. film production over five years, put $47.5 million into training and career programs for workers displaced by the merger, and negotiate the Paramount and Warner Bros. basic cable portfolios separately for five years. Paramount can still buy Warner Bros. Discovery and pursue more than $6 billion in annual cost reductions from duplicated finance, legal, technology, corporate, back-office, infrastructure and real estate operations.
Bonta Asked Paramount to Keep Major Assets Outside the Merged Company. The Settlement Doesn’t Require Those Sales
California Attorney General Rob Bonta entered settlement talks saying Paramount needed to leave significant businesses outside the merged company. He identified cable channels, a streaming service, a news channel, a TV studio and a film studio as possible assets that could remain separate.
The states had sued to stop the acquisition. Their complaint said Paramount and Warner Bros. would combine two of Hollywood’s five major film distributors and two of the five major owners of basic cable channels, eliminating a company that currently negotiates against the other for theatrical dates, screens and cable carriage.
The settlement allows Paramount to own both companies.
Paramount must release 30 films annually during the first two years after closing and 32 during years three through five. At least 20 films in each of the first two years and 21 films in each later year must receive wide releases. Paramount must also distribute at least four independent films each year.
Missing the annual film total carries a large penalty. Paramount must pay $30 million for every missing film and sell Miramax if it fails to meet the annual requirement.
Paramount and Warner Bros. must also negotiate their basic cable channels separately for five years. A distributor negotiating for Paramount’s channels will continue to conduct a separate negotiation for Warner Bros.’ channels during that period.
The settlement requires no sale or spinoff of the Paramount studio, Warner Bros. studio, Paramount+, HBO Max, CBS, CNN or the companies’ main cable portfolios.
Paramount Had Already Promised 30 Movies
Paramount committed to at least 30 theatrical films annually when it announced the Warner Bros. acquisition in February. It announced the film target alongside its plan to cut more than $6 billion from the companies’ combined annual costs.
By August, Paramount had offered AMC and Regal three-year contracts requiring at least 30 theatrical releases annually. Those proposed contracts also required at least 45 days of theatrical exclusivity and kept the films off subscription streaming services for at least 90 days.
The states secured stronger enforcement and a longer term. Their agreement extends the requirement to five years, increases the annual total to 32 in years three through five, sets minimum numbers for wide and independent releases, and requires Paramount to pay for each film it fails to deliver.
The original 30-film number came from Paramount before Bonta agreed to settle.
Paramount Can Still Cut Finance, Legal, Technology, Offices and Back-Office Jobs
Paramount has told investors where it expects to find more than $6 billion in annual savings. The company named duplicated back-office, finance, corporate, legal, technology, infrastructure and real estate operations.
Its merger plan also calls for moving the two companies onto common technology systems, consolidating streaming technology and cloud providers, using one enterprise resource planning system, reducing corporate overhead, negotiating lower procurement costs and cutting spending on agencies and software tools.
Paramount says most of the savings will come from sources other than payroll. The company has also acknowledged that some employees will become redundant.
Those two statements can both be true. Closing an office cuts rent, utilities, security, maintenance and property costs. It can also eliminate positions attached to that office. Moving two companies onto one technology system eliminates software and cloud costs while reducing duplicated engineering, IT and support work. Combining finance, legal and administrative departments removes vendor costs and employee costs.
A requirement to release 30 or 32 films says nothing about how many accountants Paramount must employ. The production-spending requirement says nothing about how many lawyers, software engineers, HR employees, finance staff or corporate managers the combined company must retain.
Los Angeles County modeled what those cuts could mean locally. Its analysis estimated that about 4,500 direct film and TV jobs could be lost during the three years Paramount expects to spend combining the companies. Including suppliers and spending by affected workers, the county calculated 10,360 job-years exposed. The county did not present those numbers as announced layoffs.
The $6 billion target reaches payroll, vendors, technology, facilities and production spending in Los Angeles. The settlement now requires Paramount to protect some of that spending while leaving other categories available for cuts.
California Required More Production Spending. It Didn’t Require Paramount to Keep a Minimum Number of Employees
Paramount must spend at least $1.5 billion more on U.S. film production over five years than the amount used as the settlement’s 2025 baseline. It must contribute $5 million a year to an independent-film acquisition fund, for a total of $25 million. It must also put $47.5 million into training and career programs for workers displaced by the merger.
The worker fund is written for people who lose work. The states’ settlement contains no requirement that Paramount retain a specified percentage of Paramount and Warner Bros. employees.
The Writers Guild of America obtained a narrower job requirement in its separate agreement with Paramount. Paramount agreed to prohibit layoffs in the CBS News broadcast division for five years and contribute $17.5 million to the WGA health plan.
That CBS News term shows what a direct job-retention requirement looks like. The states didn’t obtain a comparable requirement covering the combined company’s finance, legal, technology, marketing, corporate, administrative or other employees.
Paramount can therefore increase U.S. film spending while cutting duplicated corporate jobs. A movie production can employ crews, rent stages and pay vendors while the parent company eliminates one of two accounting teams or moves both companies onto one IT system.
Paramount had also considered moving corporate jobs and other operations out of California while the lawsuit delayed the acquisition. The company examined Tennessee, Texas and Georgia as possible destinations for some functions and considered reducing its California presence over several years.
The settlement keeps more production money flowing through the U.S. and gives displaced workers money for training. It still allows Paramount to decide how many employees it needs after combining two finance departments, two legal departments, two technology organizations and other duplicated teams.
Cable Distributors Get Two Negotiations for Five Years Even Though Paramount Will Own Both Portfolios
The states’ complaint said cable distributors currently benefit from negotiating separately with Paramount and Warner Bros. A distributor can reject one company’s terms without simultaneously putting the other company’s channels at risk.
For five years after closing, Paramount must continue that separation during negotiations.
The company will own both sets of channels. Paramount employees negotiating the Paramount portfolio must handle that negotiation separately from the Warner Bros. portfolio. The rule prevents Paramount from immediately putting both groups of channels into one negotiation.
The requirement ends after five years.
The states therefore preserved two negotiating processes for a fixed period. They didn’t preserve two owners.
The Streaming Wars Take
Paramount now faces financial penalties if it cuts theatrical output below the required totals. It must add at least $1.5 billion to U.S. film production spending over five years. It must put $25 million into independent-film acquisitions and $47.5 million into programs for displaced workers. It must negotiate the two cable portfolios separately for five years.
None of those requirements sets a minimum companywide employee count.
Paramount still plans to remove more than $6 billion from annual costs. Its own list includes finance, legal, corporate operations, technology, infrastructure, back-office work and real estate. Every dollar removed from those categories has to come from some combination of employees, contractors, vendors, software, cloud services, offices and other operating expenses.
The settlement makes several cuts harder. Paramount can’t reach the target by simply shrinking the theatrical slate below 30 or 32 films. It can’t reduce U.S. film spending below the amount required by the agreement. It can’t immediately combine Paramount and Warner Bros. cable channels into one negotiation.
Paramount can reduce duplicated corporate teams, close or consolidate offices, retire technology systems, cut vendors and combine administrative work.
California secured more films, more U.S. production spending, money for displaced workers and five years of separate cable negotiations. Paramount kept Warner Bros. Discovery and kept its $6 billion-plus annual cost-reduction target.
The employee count after closing will depend on how much of that $6 billion Paramount removes from payroll after it cuts software, vendors, facilities and other nonlabor spending.
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