California Gov. Gavin Newsom Encourages State AGs to Settle Paramount-Warner Bros. Merger Lawsuit | Report

California Gov. Gavin Newsom has expressed concern over 12 state attorneys general’s lawsuit seeking to block the pending $110 billion Paramount-Warner Bros. Discovery merger. The Wall Street Journal reported Friday that Newsom has warned people involved that if the merger is blocked, employment in the state could suffer. The outlet noted his office has encouraged California AG Rob Bonta to find an out of court settlement with Paramount. Representatives for Newsom, Bonta and Paramount declined to comment. Newsom’s concern comes as Paramount’s litigation with the state AGs and the Writers Guild of America is slated to move to an antitrust trial, with the date for a specific hearing yet to be announced. The media giant agreed to delay the closing of its merger until five days after the outcome of the trial or June 1, 2027, whichever is earliest. That decision came after a temporary restraining order against the merger was secured and extended for up to 28 days, pushing the earliest closing date to mid-August. Paramount Chief Legal Officer Makan Delrahim previously said that a potential list of concessions has already been sent to Bonta’s office. Meanwhile, Bonta told a KQED Forum earlier this month that the state AGs would prefer structural remedies over behavior remedies, arguing the latter is difficult to enforce. He also has emphasized that a CNN sale on its own is not enough to satisfy the states’ concerns. “What’s a structural remedy? It means keeping corporate entities separate,” Bonta said at the time. “Having a suite of cable channels that remain separate from this merger, from this merged company. Having a streaming service that’s separate. Having a news channel or a TV studio that’s separate. Having a film studio that’s separate. So we would be interested in considering structural remedies, but the behavioral remedies have traditionally not proven to be effective.” It also comes after Paramount received an invite from Tennessee Deputy Gov. Stuart McWhorter to move its corporate offices out of California. When asked by Puck, Delrahim noted that “multiple states” have reached out to the company, but that they’ve “committed to be in California” and that the decision would ultimately come down to what CEO David Ellison wants to do. Despite Newsom’s concerns, the state AGs argue the merger would create an entertainment giant that would control 27% of the wide-release theatrical distribution market, 30% of the submarket comprising “anticipated blockbuster films” and 27% of the basic cable bundle. They warned that the deal’s approval could give the combined company increased leverage over movie theaters and cable distributors, lead to an increase in consumer prices and reduce content output. The WGA also alleges that the merger would eliminate competition by giving the combined company the “incentive and the ability to lower costs by suppressing writers’ wages and reducing output.” The state AG and WGA lawsuits have also received support from SAG-AFTRA, who have demanded enforceable safeguards against reduced production by the studios with guarantees of increases in the percentage of productions made in the U.S. In addition, an economic analysis of the merger ordered by the Los Angeles County Board of Supervisors found that nearly 2,500 local jobs and roughly 6,000 jobs globally could be put at potential risk due to consolidation. On Aug. 18, the Department of Economic Opportunity will release a more in-depth analysis on the merger’s impact on production workers, including the longer-term erosion of local production, the role of competing incentives from other jurisdictions and potential effects on crews, crafts, post-production workers, vendors and production-serving small businesses. The deal has been cleared by the U.S. Department of Justice, Warner Bros. shareholders and the European Commission, who implemented conditions such as an exit from United International Pictures. Other countries where the deal has received clearance or where relevant waiting periods have expired include Australia, Austria, Brazil, Canada, China, Kuwait, Saudi Arabia, Serbia, South Africa, Ukraine, Montenegro, New Zealand and North Macedonia. Foreign direct investment authorities in Spain, Germany, Slovenia, Belgium, Czechia, Italy, France and Romania have also signed off. In addition to state AGs and the WGA, a Paramount shareholder and a group of consumers also filed separate lawsuits to block the merger, though the latter was denied a preliminary injunction after a judge ruled that they failed to show irreparable harm or that their case would have a likelihood of success. U.K. Secretary for Culture, Media and Sport Lisa Nandy has also said she’s “minded to” intervene in the merger and asked that the companies address her concerns over whether the deal would result in a “sufficient plurality” of views in news media and address the need for “sufficient plurality of persons with control of the media enterprises, or the enterprises providing on-demand [program] services or both, serving that audience.” The U.K. Competition and Markets Authority will decide on whether it will clear the merger, seek remedies or launch a Phase 2 investigation by Aug. 7. In the event the transaction does not close by Sept. 30, WBD shareholders will receive a 25 cent per share “ticking fee” for each quarter until closing, which translates to a payout of roughly $650 million per quarter, or $7 million per day. In the event that the deal does not close at all due to regulatory matters, Paramount will pay WBD a $7 billion termination fee.