California’s attorney general confirms settlement with Paramount

California Attorney General Rob Bonta, in a press conference on Monday, confirmed that a coalition of state attorneys general had reached a settlement with Paramount over its pending merger with entertainment giant Warner Brothers.

In his announcement, Bonta said the settlement was not a vote of support for the merger, insisting that it still hurts competition and the economy, but he said he would rather settle in a boardroom instead of a courtroom. He said Paramount’s threat to leave California did not affect the decision to settle the case.

What are the terms of the settlement? Paramount is required to increase production in the United States, particularly in Los Angeles, by spending $300 million more each year in domestic production. Paramount must also create 30 movies in each of the first two years of the deal, then 32 in each of the next three years. At least four of the films must be independent films, according to Bonta.

Further, if Congress passes a federal film tax credit, Paramount has agreed that 20% of all film production will be in the United States for the first two years and then 30% in the next three years. If California or New York pass an uncapped film tax credit, then they will increase that domestic production to 40%. If Paramount does not comply with those terms, Bonta said the state can take Paramount to court.

What did the lawsuit allege? Bonta and a coalition of a dozen attorneys general filed an antitrust lawsuit against Paramount in July, alleging that the potential $110 billion merger with Warner Brothers would eliminate competition between the two companies. They said it would damage movie theaters, basic cable distributors, and audiences nationwide. They also claimed it would violate the Clayton Act, creating a monopoly and leading to higher prices and low-quality content for consumers.

What was Paramount's response? David Ellison, the CEO of Paramount, had threatened to move the studio to Texas, Tennessee, or Georgia if Bonta did not back off the lawsuit and settle by Oct. 1, according to a report by TMZ, citing unnamed sources. Paramount had not made an official comment, but Bonta suggested the reports were true in an interview with MS NOW. He said Paramount had made similar threats before and that he did not want the company to leave California, but ultimately, the decision was up to Paramount. At the time, he doubled down on the antitrust lawsuit, insisting he would not be distracted by what he characterized as threats.

The settlement required Paramount to establish a news editorial independence board to support the editorial independence of CBS News and CNN to, as Bonta characterized it, ensure objective, fact-based reporting.