Paramount settlement is less than desired, more than nothing
Did California come out a winner when Atty. Gen. Rob Bonta settled a multi-state lawsuit against Paramount Skydance on Monday, allowing its $111-billion purchase of Warner Bros. Discovery to move forward?
That’s the question everyone is trying to figure out, as the 32-page agreement is parsed, with pundits pouring over minutiae of cable streaming and tax credits. I’ll leave that to the business experts, but I’m here to give you a big picture of politics, power and possibilities — and one short but unsatisfying answer about whether this deal is good for the Golden State: Yes and no.
I’ll start with this: Did California win is the wrong question. There was always something bigger at play here that was lost behind the fear of further decimation to an industry so central and crucial to the state. The question the lawsuit asked is, “Do we live in an America where government institutions are so broken that power makes its own rules?”
The settlement might not give the entertainment industry all it hoped for but it was “a fight worth fighting,” said George Hay, a professor at Cornell Law School and a former attorney with the U.S. Department of Justice’s Antitrust Division, because it sought to answer that question in favor of consumers, and showed that states like California can and will step up to fill a dangerous void.
Under the Trump administration, the U.S. Department of Justice hasn’t so much abdicated its responsibility to enforce antitrust laws — it has embraced an oligarchic ethos that seems happy to feed the American economy into the mouths of behemoths, allowing companies such as Paramount free reign to gobble up whatever lies in their paths like an old-school Pac-Man.
Our president personally invests in industries he’s supposed to regulate (I’m looking at you, Silicon Valley). Corporations dump money into elections that average people can never hope to match. The free press is under increasing attack with multiple outlets banned from the White House — including CNN, which Paramount hopes to own along with CBS and whose editorial independence is at least addressed in this settlement, albeit weakly.
States, even powerful states such as New York and California, don’t have the muscle or money of the federal apparatus, and were never meant to play the role of national enforcer on issues such as these.
The fact that Bonta and the 11 other states involved in the antitrust litigation pulled together not just a credible, but effective team is a victory for all American consumers, and a message to other Pac-Man companies out there that even if federal regulation is on life support, there are still rules.
The states “showed that they could quickly and effectively put together a formidable litigation team, and achieve significant initial success. That’s a big deal. That that changes the role of the states for a long time into the future,” said William Kovacic. He’s a law professor at George Washington University and a former chair of the Federal Trade Commission, so like Hay, he knows a bit about antitrust enforcement.
“This has a ripple effect that goes through the entire federal enforcement system because they showed they could do something that was very difficult,” Kovacic said. “That’s a big institutional win for the states.”
To hear Bonta describe it, California is absolutely a winner in its own right, though, and this will be “very good” for the state. Which to be fair, is exactly what any decent politician would say.
“It will be good for consumers, good for prices, good for jobs, good for choice, quality, competition,” Bonta told me Monday afternoon.
Kovacic is a bit more measured, calling it a “modest win.”
The deal has many parts, but it covers a five-year period in which the new Paramount mega-studio must release between 30 to 32 films each year, many in theaters and some independent. It also has to keep open and running both the Paramount and Warner Bros. lots, a not-insignificant source of L.A. jobs — and maybe one of the most visible wins for the city.
The new company also must spend at least $1.5 billion over the five years on production in the U.S., and increase that figure if there are certain, uncapped federal or state tax credits available to them.
In California, where the budget deficit is in the billions, creating uncapped credits may be a hard sell, but Bonta told me he’s making it a priority in the next legislative session and will push the next governor — likely Xavier Becerra, who once held his job — to back them.
“I think we’re going to get it in California,” he said. It’s somewhat important because the settlement doesn’t specifically address production in California — and tax credits from other states have been drawing production away for years.
We’ll see how successful Bonta is on that endeavor — he hasn’t always gotten what he wants from governors.
Much has been made about the recent threats from Paramount Skydance Chief Executive David Ellison to move business operations out of California. That pressure has been cited as one of the factors pushing the state to settle, and it probably was — but not just because of Ellison.
Gov. Gavin Newsom made it clear that he preferred a settlement to a drawn-out court case, especially after that threat.
You may recall our governor has presidential aspirations, and is in a long-running battle with Trump over whether California is a wasteland for business beset by fraud and regulation, or a utopia of economic activity fueling the world’s fourth largest economy. Paramount reupping its threat to leave, or even worse, decamping for someplace such as Nashville, is not a great look.
So this case, which was never going to be a slam-dunk to win in court and which could easily have run into 2028 if it proceeded, was never a winning issue for Newsom.
Newsom Monday called the deal “a practical path forward,” which it definitely is — for him.
Hay, of Cornell, said it was a “big blow” when the governor failed to back Bonta and go all-in on litigation.
“Once [Newsom] once came out on the other side, it made things really, really difficult,” Hay said.
So there was pressure on Bonta to make a deal even from his friends, though Bonta told me that “what you call pressure was just noise to me. I never felt pressured in this process.”
But of course, nearly everything that happens in politics and litigation is about pressure — who has the power to apply it and who has the power to withstand it. Bonta, to his credit, applied pressure where Paramount never expected it.
“If I were in California, I’d be proud of the attorney general. At the end of the day, he got the best he could,” Hay said. “I’m glad they were there when the government bailed out because it made Paramount tow the line, and maybe that’s all that we could hope for.”
The Paramount settlement is more about possible than perfect, but it proved that states — and consumers — are not powerless, and every brawl that proves that is, as Hay said, a fight worth fighting.
