Paramount Settles State Lawsuit, Clearing $110bn Warner Bros Merger

Paramount Skydance has settled a lawsuit with a dozen US states, clearing one of the final hurdles for its $110bn (£82.8bn) merger with Warner Bros Discovery.

California Attorney General Rob Bonta, who led the legal push alongside state attorneys general from Arizona, Colorado, and New Jersey, said the agreement was "not a vote of support for this merger." But the settlement removes a significant competition challenge to a deal set to reshape Hollywood.

Under the settlement, Paramount must release at least 30 films each year. To prevent the studio from meeting that quota with low-budget or automated content, Bonta said the terms include strict guardrails against "AI-generated" films.

The agreement also sets domestic production floors: 20% of all film production must take place in the US for the first two years, rising over 30% over the following three years. If Paramount misses the annual production quota, it will be forced to sell its 49% stake in Miramax.

Paramount chief executive David Ellison said that with state attorneys general and Writers Guild of America concerns addressed, "we have complete clearance for this merger and look forward to putting these commitments into action."

The Writers Guild of America said it continues to believe the deal "will cause damage to writers and the industry at large." The guild said it settled its own lawsuit because, as a non-profit, it could not afford to fight the merger alone without government support.

Under that separate settlement, the studio is set to pay $17.5m into the WGA health fund, cover legal fees, and prohibit writer layoffs at CBS News Broadcast for five years.

Bonta argued the terms would turn what could have been a "falling off the cliff in domestic production into a huge increase," pointing to economic activity of "$300m to $1.5bn more, at minimum, for film and TV production right here in our country." He said production commitments could surge by up to 700% if Congress passes a federal film tax credit.

Although Ellison previously indicated the merged company would keep its headquarters in California for the foreseeable future, Bonta clarified that commitment was not written into the legal agreement. "It's not part of the deal," Bonta said. Ellison had previously threatened to move studio operations out of California.

Paramount has agreed to the appointment of an independent monitor to oversee ongoing compliance with the settlement. With the state litigation resolved, the deal now moves forward under production quotas, financial penalties, and a monitor's oversight.

Reporting by BBC. Read the original report: Paramount reaches settlement with states in $110bn Warner Bros merger.