Judge Holds Off on Paramount-Warner Bros. Merger Settlement Ruling

Judge Araceli Martinez-Olguin is holding off on approving Paramount Skydance’s settlement with 12 state attorneys general to resolve antitrust litigation over the $110 billion Warner Bros. Discovery merger. During a Thursday hearing to address “certain outstanding questions” regarding the proposed settlement, Martinez-Olguin asked the parties to respond to concerns outlined in a letter from Sen. Corey Booker by Monday at noon. The lawmaker urged the court to “subject the proposed consent decree to an independent public-interest review before entering it.” She also asked for a written version of the consent decree to be sent to her and said it would be optional for the parties to respond to amicus briefs from the Block the Merger coalition and The League of United Latin American Citizens (LULAC), which are due no later than 12:01 p.m. PT on Friday. Once that is addressed and she’s reviewed the amicus briefs, Olguin said she’d get the parties an official ruling in “due course.” Under the terms of the settlement, Paramount has agreed to a minimum investment of $300 million per year for five years in U.S. film and TV production, amounting to a total of $1.5 billion. The company will also release at least 30 films per year theatrically in the first two years of the deal and 32 films per year in the three years after that. At least four films per year must be independent films and at least 20% must be blockbusters, although the consent decree defines independent films as movies “based on an original screenplay” or simply co-produced by Paramount. If Congress passes a federal film tax credit, Paramount agreed that 20% of all film production must be in the U.S. for the first two years of the merger and 30% of the next three. Paramount will also be held to its prior commitment to have a theatrical window of 45 days and hold its films back from streaming availability for 90 days. On the TV side, Paramount agreed to negotiate distribution for its suite of cable networks and Warner Bros. cable portfolio separately, unless a distributor requests otherwise in writing. It also agreed to establish an independent oversight board at CNN and CBS News and will continue to operate free, ad-supported streaming platform Pluto TV. Additionally, the companies will maintain their respective studio lots, honor collective bargaining agreements with Hollywood’s unions and make community investments. Those investments include a $5 million-per-year contribution to an independent films fund and $9.5 million annually for film and TV career training and development programs to benefit qualified educational institutions and community arts organizations. Failure to comply with the various commitments in the settlement range from a $30 million penalty per film that misses the theatrical goal to forced divestitures of the company’s 49% Miramax stake within a 12-month period as well as BET, Comedy Central, VH1, Smithsonian, Destination America and Science Channel within a 120-day period. During the hearing, Martinez-Olguin asked the parties to “shore up the idea that this is not the result of collusion, but instead was more of an arms length process.” Paula Blizzard, a senior assistant attorney general for the antitrust section of the California Attorney General’s Office, confirmed that the the states felt it was “procedurally fair,” an “arms length” negotiation and “presumptively valid, citing tens of hours of in-person video conferences, phone conferences and drafts. When asked about whether the settlement resolves state AGs’ concerns about the merger’s impact on competition, Blizzard said that the parties were wary about permanently blocking the deal, noting that WBD could just seek another M&A partner if it was denied. “If we block the merger, it would be forever,” Blizzard said. “Sometimes we say, here are some remedies that will address the harm we see, but are not going to permanently change the structure by either completely blocking the merger or completely divestment, and this is one of those cases.” Blizzard also tried to address the public’s concerns about the commitment period only lasting for five years. “We absolutely recognize that this merger has engendered a large amount of controversy and commentary and feelings and concerns on a whole host of issues. A lot of these are outside antitrust,” Blizzard told the judge. “ They reflect the country’s very broad political and philosophical divides, concerns about the state of the news media, people’s relationship to big companies and consolidation and corporate power, and we hear those voices, we listen to those voices, we respect those voices. But at the end of the day, this is an antitrust case, and it is focused on the antitrust law.” While she emphasized that the state AGs are trying to “protect the businesses and the competition,” Blizzard said there are “some voices that carry a little less weight.” “Those are the ones that are threatening and are blackmailing us to say that they will pull out of California,” she said — a reference to Paramount CEO David Ellison’s threat to move out of the state. “Our antitrust case does not live or die, whether or not we are threatened or blackmailed.” More to come….