Pressure is growing on Paramount to secure its merger with Warner Bros. Discovery, but settlement talks face hurdles.
Paramount has encountered another setback in its $110bn acquisition of Warner Bros. Discovery after California Attorney General Rob Bonta cancelled a planned settlement meeting.
Scheduled for 24 August, the meeting followed talks between the two sides on Friday, but Bonta accused Paramount of leaking and misrepresenting details of those conversations.
“Not only did Paramount leak the alleged substance of settlement discussions, but they misrepresented these discussions, demonstrating a lack of good faith,” Bonta said in a statement to The New York Times.
“As soon as Paramount stops playing games and engages sincerely, my office is happy to meet again.”
Paramount has denied being responsible for the leak and said it is willing to continue talks.
The disagreement is another twist in what has already been a rollercoaster of an attempt to get the acquisition over the line.
Paramount emerged victorious in February after a months-long battle with Netflix, which decided that matching its rival’s improved offer was no longer financially attractive.
The deal, if completed, would bring Warner Bros.’ studios, HBO Max, CNN and the TNT networks under the same ownership as Paramount, CBS and Paramount+.
It would also establish one of the most powerful sports media portfolios in the US, bringing rights to competitions including the NFL, UFC, NHL, NCAA basketball and UEFA Champions League under the same company.
Insider Sport has contacted Paramount for comment.
California leads opposition to the merger
California is leading a coalition of 12 state attorneys general that sued in July to stop the transaction, arguing that combining two of Hollywood’s largest businesses would reduce competition.
The states are concerned about film distribution and cable television, with California’s complaint estimating that the business would control nearly a third of US theatrical films and a similar share of cable programming.
Sports is also an area of contention because Warner Bros. Discovery’s TNT Sports holds rights across properties including MLB, the NHL and NCAA basketball and Paramount has invested heavily in sport through CBS and Paramount+, including UEFA competitions and a seven-year US deal for the UFC starting this year.
The state is the biggest barrier to completion, with the broadcasting giant securing regulatory approvals across nearly 70 countries and the US Department of Justice concluding in June that the transaction was unlikely to harm competition.
Earlier this month, UK Culture Secretary Lisa Nandy announced that the government would not intervene on the basis of assurances and legally binding commitments she has secured from the company.
“The parties were given the opportunity to make representations to the Secretary of State by 6 July in response to her concerns,” a UK government statement read.
“Paramount put forward a set of assurances seeking to address the issues raised by the Secretary of State. These assurances included a range of commitments on future investment in the UK, maintaining the distinct editorial identities of key services and the editorial independence of news.
“Following further discussions with DCMS officials, Paramount offered to strengthen those assurances and turn them into legally-binding commitments by way of a ‘deed of undertaking’ made in the Secretary of State’s favour.”
A trial is scheduled for March 2027 if the dispute cannot be resolved beforehand.
What could a settlement look like?
Bonta has suggested that an agreement would need to change the structure of the company, meaning that Paramount would have to potentially sell parts of the business it has spent months trying to acquire.
Potential remedies discussed publicly include placing some of the company’s cable channels under separate ownership and keeping elements of the two movie studios apart.
Bonta has pushed back against behavioural commitments, including Paramount CEO David Ellison’s pledge to release 30 films annually, stating that structural changes would provide stronger protection for competition.
California Governor Gavin Newsom has expressed a preference for settling the dispute and Los Angeles Mayor Karen Bass has called for a quick conclusion amid concerns about production and employment in Hollywood.
The broadcasting giant is also under pressure because of the financial incentive to avoid a lengthy court battle. From October, delays could trigger payments of around $650m per quarter to Warner Bros. shareholders and failure to complete the acquisition because of regulatory issues could leave Paramount responsible for a $7bn break-up fee.
