Paramounts

Last week’s settlement of the antitrust lawsuit between state attorneys general and Paramount Skydance over its planned merger with Warner Bros. Discovery marked a clear victory for David Ellison.

If approved by a judge, the settlement would clear the way for the emerging Hollywood mogul to complete the blockbuster $111-billion purchase after months of uncertainty over whether the deal would overcome intense opposition in Hollywood.

What’s more, Ellison achieved the settlement without having to agree to any so-called structural remedies that California Atty. Gen. Rob Bonta had been seeking.

But Ellison can hardly rest on his laurels. The Paramount Skydance chief executive will have to work hard to repair badly frayed relations with Hollywood talent who fiercely opposed the consolidation of two historic studios as a bad deal for workers. And the 43-year-old tech scion will be constrained by some of the terms that were imposed in the consent decree negotiated with Bonta and other attorneys general.

“I don’t envy David Ellison. You bought this ship, now you’ve got to sail it. And you’re facing threats on all fronts: bad will, everybody rooting for you to fail and operating a business in an incredibly uncertain, challenging time,” said Gabriel Kahn, a professor at the USC Annenberg School for Communication and Journalism. “At the same time, you are going to have to mortgage everything to make these debt payments.”

As part of the deal, Paramount agreed to a slate of requirements that, if it fails to deliver, could induce financial penalties, litigation and other costs.

For one thing, Paramount would have to pay a penalty and divest the Miramax film studio if it does not distribute 30 or more films a year in theaters.

The studio also pledged to spend $300 million more each year on film production in the U.S. and further boost its film spending if the federal government adopts a film tax credit of at least 20%; it agreed not to sell or close its lot on Melrose or the Warner Bros lot in Burbank and to operate them “in a manner consistent with past practices,” until 2031.

Additionally, Paramount is required to establish a board to ensure editorial independence for CNN and CBS News, though it will be appointed by Paramount directors with the authority to remove its members.

Beyond attempting to smooth the industry’s many ruffled feathers, Hollywood’s newest mogul must now also wrestle down an astonishing $80 billion in debt accrued as a result of this highly leveraged merger.

Ellison’s father, billionaire Larry Ellison, late last year agreed to backstop the $47 billion in equity needed to complete the acquisition. Royal families from Saudi Arabia, Qatar and Abu Dhabi have agreed to contribute another $24 billion for an equity stake by assuming some of Ellison’s financial commitments.

The months-long battle was bitter and hard fought and enmity within the industry has yet to subside.

On Tuesday, the morning after Bonta announced the settlement agreement, protesters converged outside of Paramount Skydance’s Melrose Avenue gate criticizing the deal. Some held fake gravestones that read: “RIP local business,” “RIP crew call” and “RIP creativity.”

Two days later, a coalition of several groups including the Committee for the First Amendment, filed an amicus brief asking the court to reject the consent decree, saying that it failed to address the anti-competitive concerns of the state attorneys general and would not protect jobs or consumers.

The sense of betrayal was acute.

“Hate to say it but we all got played,” wrote actor Mark Ruffalo, a leading organizer in Block the Merger, a grassroots organization made up of 1st Amendment advocates and Hollywood celebrities who aggressively opposed it, in a post on X.

Sen. Elizabeth Warren (D-Mass.) repudiated the deal, saying in a statement. that it “enables a handful of billionaires to call the shots in the media.”

The entertainment unions struck more cautionary notes.

SAG-AFTRA, the actors union, wrote in a statement that the deal “addresses some of our deep concerns,” but added, “We hope that the process of engaging with the attorneys general has impressed upon them the fact that in addition to collective bargaining, our members rely on the law to help protect our interests. These are the lowest standards that our employers must meet.”

Bonta, who had spearheaded the antitrust suit, gave a tepid endorsement of the consent decree.

“I want to be clear about something right up front: This settlement is not a vote of support for this merger. It is not a blessing,” he said.

During Paramount’s heated and often contentious legal and political wrangling to wrest control of Warner Bros., many in Hollywood became increasingly apprehensive. Combining two legacy studios, opponents feared, would bring even more job losses to an industry already battered by runaway production.

The skepticism hardened as the Ellisons made several controversial moves after Skydance acquired Paramount last summer. They included agreeing to pay $16 million to settle a lawsuit filed by President Trump over a “60 Minutes” interview segment, canceling the “Late Show With Stephen Colbert,” ending diversity, equity and inclusion programs and appointing Bari Weiss as editor in chief of CBS News, who engaged in a wholesale overhaul that led to a revolt at the esteemed “60 Minutes.”

When the newly formed Paramount Skydance announced its intention to swallow up Warner Bros. Discovery just months later, a massive wave of political pressure and public backlash began.

But the Ellisons dug in.

In January — after Netflix threw a surprise wrench into the Ellisons’ designs on Warner Bros. by offering $72 billion, which the studio accepted — Paramount took Warner Bros. to court and launched a hostile takeover bid.

A month later, Netflix walked away from the deal and collected a $2.8-billion termination fee after the Warners’ board agreed to Paramount’s higher all-cash bid.

But many in Hollywood began agitating against the planned merger and pushing for guardrails and protections.

In April, Block the Merger released an open letter declaring their opposition; its list of professionals across the film and television industry eventually swelled to nearly 6,000 names, including Ruffalo, Jane Fonda, Ben Stiller, Sofia Coppola, Trey Parker and Denis Villeneuve.

“The future of free media and a strong entertainment industry in America is at stake here,” said Norm Eisen, co-founder and executive chair of Democracy Defenders Fund, who also helped lead the Block the Merger campaign.

The Writers Guild of America sued to stop the deal, saying it violated antitrust laws. The union last week settled its lawsuit, citing the costs of continuing the litigation, after Paramount agreed not to lay off writers at CBS Broadcast News for years and to pay $17.5 million to the union’s health fund. Nonetheless, the guild said: “We continue to believe the merger will cause damage to writers and the industry at large.”

Some backed the megadeal, including power broker Ari Emanuel.

The WME executive and chairman and CEO of TKO came out swinging, excoriating the antitrust suit, in an op-ed for the Wall Street Journal in July. “They say they are protecting competition. Their actions threaten to destroy it,” he wrote.

The Ellisons’ ongoing ties with Trump — whose administration has clashed with ABC, CNN and other networks — only deepened the suspicions.

Oracle co-founder Larry Ellison has been a Trump supporter and friend. In addition to political donations, he participated in a Nov. 14, 2020, conference call that discussed ways to challenge Trump’s presidential election defeat.

Both Ellison and his son David reportedly promised the president they would make “sweeping” changes at CNN, which is owned by Warner Bros. Discovery.

In June, David Ellison attended the “UFC Freedom 250” event hosted by Trump on the South Lawn of the White House, and last week he was a guest at the White House state dinner honoring Chinese President Xi Jinping.

Amid the high-level public-facing Trump engagements, Paramount had been quietly trying to allay fears about the relationship to industry insiders.

Two individuals in the entertainment industry, who declined to be named for fear of retaliation, said that Paramount sent emissaries to extend a kind of olive branch, explaining their commitment to Hollywood and downplaying the relationship as a necessary step to get the deal done.

In August, Ellison published an op-ed in the New York Times in which he extolled his lifelong love of movies and laid out his case that he could be “trusted as a steward” of the media giant he was amassing, that includes two institutional news organizations (CBS and CNN) and the legacy studios he wished to combine.

However, his seemingly conciliatory message was undercut that same month when he threatened to relocate Paramount’s base to Tennessee or Texas. Ellison built his Skydance production in Santa Monica.

Across the industry, workers viewed the mixed messaging with wariness and anger.

“If Ellison truly wants to be a steward and do the things that he said he can do and wants to do in that article, I think people would welcome it,” said Pamala Buzick Kim, a co-founder of Stay in LA, the 23,000-member grassroots campaign aimed at boosting local film and television production. “They just have no evidence of it.”

Aside from the bad blood, Ellison’s biggest challenge may be financial.

At a time of massive industry upheaval, most observers believe that the company will have to lay off droves of workers to bring its costs down.

“I will honestly say that the biggest work that they have cut out for them is servicing this debt, and that’s going to guide every decision,” said Kahn, the USC professor.

“Now they’re going to have to fire lots of people in order to reduce costs to be able to make this deal pencil out, and they’re going to be skating on the razor’s edge to make sure that they have enough revenue coming in going forward to service this debt. They have almost no room to maneuver.”

But Paramount has one thing working in its favor: leverage. David (as in Ellison), for better or worse, is now the industry’s Goliath.

“I think temper tantrums can be easily forgotten if the work is there,” said Buzick Kim. “I think most people would be happy to leave it behind them — if the work is there.”

Times staff writers Meg James, Stephen Battaglio and Samantha Masunaga contributed to this report.

Paramount Skydance Chief Executive David Ellison faces a pivotal decision: Should he uproot his Hollywood studio — the birthplace of such film classics as “Sunset Boulevard,” “The Godfather” and “Beverly Hills Cop”?

Paramount floated shifting its home base to Tennessee or Texas in July, hoping to deter California Atty. Gen. Rob Bonta from waging a legal battle to block Paramount’s $111-billion acquisition of Warner Bros. Discovery.

Bonta rejected the tactic, calling it “blackmail.” His antitrust lawsuit, filed in collaboration with 11 other Democratic state attorneys general, has since stalled the largest Hollywood merger in decades and put Ellison in a jam.

The 43-year-old tech scion — a film aficionado who has spent two decades building his career in Hollywood — has told associates he doesn’t want to leave L.A. But he has signaled that he’s prepared to sell the historic studio lots and move Paramount’s and Warner Bros.’ operations from California if the merger isn’t finalized by next month, according to people familiar with the situation who were not authorized to comment.

The prospect has rattled a region already reeling from steep declines in film production, heavy job losses, empty soundstages and shuttered small businesses.

“It would be devastating,” Assemblymember Rick Chavez Zbur, who represents a district that includes the Melrose Avenue movie lot and neighborhoods near Warner Bros. in Burbank, said of a Paramount move. “We need to do everything we can to protect these important jobs in California’s iconic industry.”

Paramount declined to comment.

Ellison is frustrated after securing approvals from more than 65 regulators worldwide for the mammoth merger that would bring HBO, CNN, CBS, Comedy Central, MTV and TBS under the same roof.

Bonta’s lawsuit stands in the way.

“California is the fourth-largest economy in the world and the best place to do business,” a spokesman from Bonta’s office said. “Strong antitrust enforcement is essential so everyone can benefit from a vibrant economy.”

A federal judge in Oakland temporarily blocked the deal, prompting Paramount to agree not to finalize the acquisition until after a trial or June 1, whichever comes first. Settlement talks collapsed in late August after Bonta accused Paramount of leaking and misrepresenting their discussions.

Paramount has plenty at stake. U.S. District Judge Araceli Martínez-Olguín set the trial for March, but the company urgently needs the valuable Warner assets to better compete against tech behemoths. And beginning Oct. 1, Paramount must increase its payout to Warner Bros. Discovery shareholders by $7 million a day, so-called ticking fees that will heap more debt onto the highly leveraged transaction.

Paramount asked the judge to require California and other plaintiff states, including Nevada, Oregon and New York, along with the Writers Guild of America (which also sued) to post a $1.88-billion bond that could compensate Paramount for ticking fee costs. A hearing is set for Sept. 24.

For weeks, Paramount’s most potent weapon has been its in-the-works plan to leave L.A.

Lobbying has been intense, prompting a parade of politicians led by Gov. Gavin Newsom, L.A. Mayor Karen Bass and gubernatorial nominee Xavier Becerra to urge the two sides to settle the lawsuit.

“It’s a game of chicken,” Kevin Klowden, an economist and managing director at the Melcene Advisory firm, said in an interview. “But I’m not dismissing the threat because it is very real.”

Relocating from Los Angeles would allow Ellison’s cash-hungry media company to qualify for lucrative tax incentives offered by another state. Ellison’s short list includes Tennessee, Texas and Georgia. But leaving its longtime home would be costly for Paramount too, given how much of the talent and deal-making remains concentrated around L.A.

Tennessee’s Department of Economic and Community Development declined to discuss its negotiations with Paramount, but in a statement a spokesperson said the state “remains committed to working with companies across a wide range of industries that are exploring opportunities to invest and grow in Tennessee.”

Early this month, a pro-merger group was set to hold a news conference outside Paramount, but it moved its gathering to a warehouse a few blocks away after anti-merger activists planned a counterprotest.

The pro-merger organization, Neighbors for Strong Communities, was incorporated in Washington, D.C., in June and has lobbed text messages to Californians urging them to press Bonta to drop the case.

Speakers were concerned with just one issue: What would happen should Paramount pull out?

“What are we going to do with all these people who have invested their lives and many generations into building something here?” asked Keyla Wood, who moved from Mexico to L.A. about a decade ago after getting her start in Spanish-language soap operas.

“It’s been one thing after the other: The pandemic, the strikes and then it was the fires,” said Wood, who has worked as a stand-in for Eva Longoria and Salma Hayek. “So many people never work again.”

David Ellison is deciding whether to leave Hollywood.

(Bloomberg via Getty Images)

L.A.’s very identity is at stake, added Daniela Kelly, an actor and dancer who arrived from Brazil two decades ago.

“Everyone in the world sees Los Angeles and Hollywood as the platform for their dreams,” Kelly said. “Imagine if a huge studio with 100 years of history here just leaves? What will we be?”

Businesses like Kelly’s small Kreashen Studios USA, which provides video and podcasting space in Marina del Rey, depends on the region’s entertainment economy.

“It’s difficult financially right now to keep open,” she said. “So I’m pro having Paramount stay because this is the center, the heart of Hollywood.”

But deal opponents and some experts say the merger would actually worsen L.A.’s already bleak production picture.

Paramount has promised to cut $6 billion in expenses — a figure that doesn’t factor in the cost of ticking fees, which would add $650 million each quarter to the $81 billion that Paramount had anticipated paying Warner shareholders.

“We’ve seen from previous mergers that jobs have been lost,” L.A. City Councilmember Adrin Nazarian said at a City Hall event recently.

Combining Paramount and Warner could result in the elimination of nearly 4,500 positions over three years and put at risk an additional 5,865 jobs within businesses that serve the studios, according to an August report by the Los Angeles County Department of Economic Opportunity.

“When you look at the economic impact, it’s pretty staggering,” Kelly LoBianco, the department director, said in a recent interview. “An estimated $4 billion in economic output lost, and another $550 million lost in tax revenue at the local, state and federal level.”

The merger also could erase $79 million in tax revenue to Los Angeles County even if Paramount stays in L.A., she said.

But state and county tax revenue would plummet further should Paramount dispatch hundreds of its workers to Tennessee or some other state, Klowden said.

“If Ellison moves all the management out and all of the productions out, you’re talking about potentially tens of thousands of jobs,” Klowden said. “That, bluntly, isn’t just devastating to L.A. That becomes devastating to everybody.”

A report commissioned by Paramount from Los Angeles Economic Development Corp. predicted even steeper losses of at least 28,000 jobs should the studio move its entire operation out of state, according to a draft report given to Politico.

Under a less dire scenario, Paramount could shift its corporate headquarters to another state to qualify for incentives but still maintain large staffs in the creative hubs of Los Angeles and New York, where the company has its legal headquarters.

When the Ellison family acquired Paramount from the Sumner Redstone family last year, Ellison shifted operations to L.A., where he and other key executives work on the Melrose Avenue lot.

The threat to pull up stakes has created a disconnect after Ellison has spent more than a year touting how his family’s growing collection of media properties would strengthen traditional Hollywood.

The relocation campaign echoes a tactic used by software giant Oracle Corp., co-founded by Ellison’s billionaire father, Larry Ellison. For three decades, Oracle thrived in Redwood City, Calif., but in 2020, the company moved its headquarters to Austin, Texas, joining other California tech firms leaving in protest of the state’s high taxes.

The elder Ellison announced in 2024 that Oracle would be moving again, this time to Nashville, although that relocation hasn’t been finalized.

Paramount would risk leaving behind a skilled talent pool filled with experienced production workers and entertainment executives, Klowden said.

Fleeing L.A. could prompt “a talent bleed-out,” Klowden said. “Creative types are like: ‘Would I feel comfortable moving there?’ And, ‘What if I move there and something goes wrong? There would be nowhere else for me to go.’”

He pointed to Nissan’s 2006 U.S. headquarters move to the Nashville area from Gardena in L.A.’s South Bay, which dramatically reset the automaker’s workforce as fewer than half of its Southern California employees made the trek to Tennessee.

On Friday, a magistrate judge told both sides to identify dates in late October to meet for court-ordered settlement talks.

Each has motivations to settle — including avoiding a years-long court fight. Bonta has said Paramount must be willing to part with assets to alleviate market concentration, which could lead to a sale of Warner’s New Line Cinema, which has rights to “The Lord of the Rings” and “The Conjuring” franchises, and potentially cable channels such as CNN, Food Network or Cartoon Network.

Paramount, as part of a settlement, could abandon plans to leave L.A.

“All of the parties need to understand what this [issue] means to workers and small businesses,” Zbur, the local Assembly member, said. “I’m hopeful for a settlement that assures that Paramount and Warner Bros. will maintain their operations and remain a significant economic and employment force in Los Angeles.”

Times staff writer Cerys Davies contributed to this report.