A federal judge has signed off on a settlement allowing Paramount to close its $111 billion megadeal for Warner Bros. Discovery, ending a monthslong deadlock between the studio and states challenging the acquisition.
U.S. District Judge Araceli Martinez-Olguin on Wednesday entered a consent decree agreed to by Paramount, the states and the Writers Guild of America. The deal is expected to close on Oct. 6.
The court’s decision greenlighting the settlement was the last obstacle to CEO David Ellison marrying two legacy Hollywood studios to create the next entertainment and media colossus.
The deal “represents a reasonable factual and legal resolution of the dispute,” wrote Martinez-Olguin. “The parties’ proposed consent decree falls within the scope of the case made by the pleadings.”
Under the agreement, Paramount and Warner Bros. must release at least 30 theatrical films a year for the first two years and 32 for the following three, maintain minimum numbers of wide and independent releases, and ensure that at least half of the films are produced or jointly produced by the combined company. They must keep 45-day theatrical windows and a 90-day SVOD holdback for qualifying films. A $30 million per film penalty is assessed for missing the annual quota, with divestiture of Paramount’s stake in Miramax in play if the shortfall remains unaddressed.
Other notable terms: Keeping Paramount and Warner Bros. basic-cable negotiations separate and creation of a five-member independent board overseeing editorial standards at CBS News and CNN (selected by Paramount). A violation of the former term could see an order forcing the studio to divest from BET, VH1 and Comedy Central, among other channels (blue-chip assets like CNN or New Line Cinema are not on the table in these divestiture scenarios).
In the order, the court stressed that the settlement includes backstops requiring divestment of studios and cable channels if the combined company fails to comply with the deal.
“Further, the proposed consent decree imposes these requirements on film distribution and basic cable negotiations in the midst of a rapidly-changing marketplace,” Martinez-Olguin wrote. “The Court therefore finds that the proposed consent decree reflects a settlement between the parties that is a fair, reasonable, and good faith approach to address the competitive harms alleged in the Complaint, and does not violate the law or public policy.”
At the same time, Martinez-Olguin also declined to issue a temporary restraining order requested by Paramount subscribers. In the first lawsuit challenging the deal filed, they had alleged that the acquisition will substantially reduce competition in streaming, news and theatrical distribution in violation of antitrust laws.
The court was widely expected to approve the settlement, with the top ranks of the combined company coming together. Paramount announced on Wedensday that former Mattel CEO Ynon Kreiz will join as co-CEO overseeing oversee day-to-day operations and integration of the combined businesses. It followed Paramount streaming chief Cindy Holland announcing her exit, suggesting that HBO’s Casey Bloys would take over the streaming business once the deal closed.
