Emergency Pod: Paramount Settles—and Bonta Caves

It is Monday, September 21st. We have a deal. As you probably know, Paramount and the 12 States, suing to block its acquisition of Warner Brothers' Discovery, they announced a global settlement this morning. And if you've been following the standoff, it is not exactly what most were expecting. It's a five-year consent decree, meaning Paramount has agreed to do a number of things and it's enforceable by the courts. Released 30 films per year from both studios combined for the first two years, then 32 per year for the final three years, at least four of those movies need to be independently produced. At least 20% need to be so-called blockbuster films, high budgeted. A commitment to spend at least $300 million more annually on film production in the United States than was spent in 2025. Some commitments regarding maintaining pricing to theaters and to negotiate cable TV carriage deals as if Warner's and Paramount were still separate companies, a nearly $50 million fund for workers who are impacted by the merger. Paramount has to stay in California and agree not to sell either studio lot, sorry, Netflix, sorry, Tennessee. And it must establish a news editorial board over CNN and CBS news, and there will be a trusty appointment to monitor that it's actually happening, though that board will be selected by the combined company's board, so not exactly independent. And finally, remedies, meaning the vestiture is potentially for any breach of this deal. Some decent concessions there, but notably not any divestitures, meaning for all the tough talk from Attorney General Rob Bonta, California about how behavioral remedies were not enough and he wants meaningful structural remedies and possibly even selling off CNN or other networks or even the Warner Brothers studio. None of that is happening. Advocacy groups, including the Block the Merger Coalition, they're understandably very upset, quote, "This isn't the last we will hear of the elephants or the fallout from this merger, and it's not the last you will hear from us," they said. But the labor guilds have all signed off on this deal, even the writers' guild, which has agreed to drop its lawsuit in exchange for about $18 million in payments to its health fund and a commitment to not fire CBS news members for five years. So what is happening here? Why did Bonta settle this thing for not a lot when he seemed to have so much leverage over Larry and David Ellison? After all, this merger will lead to thousands of jobs being cut across the two companies. We're going to get into it today with Lucas Shah or Monday Guy. It's the Warner Mouth settlement "What Just Happened?" The Ringer and Puck, I'm Matt Bellany, and this is the town. All right, we are here with Lucas Shah from Bloomberg, our Monday Guy. Lucas, this would qualify as an emergency pod if it didn't happen on a Monday morning when we are already scheduled to record. Well, so you're not telling people the full backstory of what we're going to do Monday and what? Okay. Don't reveal. Don't reveal how the sausage is made here. We don't do that on the town. Actually, we do. Let's try the whole point of the show. But we're not doing that. Okay. I'm reading these terms and I'm flashing back to the rhetoric that we have heard for the past two months from Rob Bonta. Structural remedies. I'm hearing nothing from Ellison that is in good faith. They must be willing to stand up for workers and stand up for the community. And I'm not going to just settle for behavioral remedies. Boom. The settlement comes out this morning. It is behavioral remedies, no structural remedies. What happened? He caved? I think he caved, right? I think he, or he never had the leverage that we thought he had in the first place. Despite the points made by the block the merger coalition and the attorneys general, I think the general consensus was that the case was kind of weak, that the drawn out process was the pain for Ellison and that the longer Bonta could draw it out, get close to the ticking fee where it would start to get expensive, all that stuff, where it would force Ellison to make some concessions. These concessions, as you've said, and I think most people feel, critics of the deal feel are pretty weak. And so the best thing he got out of it was three months of constant press attention. Well for himself, he got three months of constant press attention for himself. Yeah, his name recognition is through the roof, but it's the combination of the pressure from within his own party in the state, frankly, pressure from the industry meant that maybe he, you know, and the feeling that he would probably lose in the, or in the case meant that he didn't wait another six to nine months, because that's the only explanation, you know, he, this had been set up so that he could have just sat around for several months. And David Ellison and his camp didn't want that to happen, and so they pulled every lever they could. They threatened to leave the state. They did all these different things to try to make, you know, bring him to the table. And you can tell that the other state attorney general aren't thrilled with it, at least not all of them. No, we heard Rumblings this past weekend that they were threatening to not be included in the settlement, and they all have their own agendas, they want jobs. And it is telling that one of the concessions here is not to shoot more in California, it's to shoot more in the US. And to me, that's an easy no brainer for David Ellison, because obviously you just go where the incentives are the biggest. And if it means New Jersey, or it means New Mexico, then this is nothing like shooting in California would have been the bigger requirement. Is there anything in this consent decree that creates significant new pressures or requirements for Warner Mell? Or is it just commitments to do the thing that he had already said he was going to do? Because we're talking about, okay, not going to leave California. I was always frank little suspicious, and I thought that that was just very effective negotiating. They are a commitment to release 30 movies a year, which they already said they were going to do. A commitment to spend a little more on film production, which they already said they were going to do. A commitment to spend a very small amount of money on independent film, it's so small it shouldn't even count. An editorial board for CNN that has no real toothpicks do it, we don't know what it looks like. Well, we don't know that. We have no idea. There is a trustee overseeing this. What is the win for Ubuntu? I mean, I guess you could say that agreeing to hold these two studios separate for the purpose of negotiating carriage deals because they're big fear in for television networks. Their big fear was that the leverage of a combined Warner Mell was going to extract larger channel fees from the distributors, which would then be passed along to consumers. And if these two companies have to negotiate separately, then there will be a status quo on those fees, I guess, a relatively minor requirement in the dying part of the business. Yes. But still the profit part of the business. And as we know, a lot of these deals now include streaming services that are thrown in for free, and they don't have much leverage anyways, and likely wouldn't have had huge leverage even as a combined company. So I don't know how much that is. I also don't know what that actually means. If, you know, who's going to be enforcing this separation, whether they can just have one phone call at the beginning of the year saying, don't go over this amount, and then they're separate. Like, I don't know how that's going to work. But that's the only thing that's kind of new here, right? I mean, there's some small stuff around the edges, but there is nothing substantial. Well, they have this fund that they have to pay $10 million a year about to support worker transitions and trainings for people that are impacted by the merger. This seems pretty minor to me. I don't know what training for people who are laid off from the studios would entail. Maybe train them to, you know, do input AI models. I don't know what that means. But it is something that they got. And if you look, if you listen to the Bonta press conference, he was very focused on jobs and trying to prevent the destruction of jobs. And we know that when the second this deal closes, thousands of people are going to be laid off in complicated roles. And I think he's trying to at least have some mitigation of that in place. Well, we think they're going to, they've talked about what, six billion in synergy, something like that, that won't all be job losses. But there's, there probably will save at least a billion or two from cutting people. And then the makeup for that is a, like, $48 million commitment for retraining. What about, I know, it's nothing. What about $500 million for all those people who lose their jobs to go and do something else or, or, I mean, it's just, this is what, when I talk to people in the state government or in the city government, they were advocating for some sort of financial commitment to make up for all these people you're going to cut. And yeah, this is nothing. It just seems like the product of a negotiation where the states didn't have much leverage. And we know that they did. Yeah. I mean, unless we completely misread this, they had some decent leverage over Ellison. They had a judge that seemed to be at least more in tune with the state argument. They had very interesting, they had a hearings. set for this week on the issue of the bond and how much or if a bond will be required by the states and the writers guild to potentially pay up to $1.9 billion if they lose. And I wonder if that was a factor because if there was a ruling on that bond that was potentially impealable and they could have had to get into the substance of this much sooner than if they had waited until the March trial date. So I wonder if that was a factor obviously the October 1st deadline for the ticking fee and when Ellison claimed that he was going to start moving stuff to California but that was pressure for Ellison not for Bonta. Yeah that was the well that was the financial pressure but if Ellison held a press conference in Nashville announcing the new headquarters of Paramount, a Skydance Corporation then I think that may have put some pressure on and clearly it did to the politicians, the Gavin Newsom's, the Javier Baceras, the Karen Bass who's running for re-election. None of them wanted to see that press conference with a smiling governor of Tennessee announcing the relocation of Paramount. Not saying it would have happened but that was on the table. Yes the Ellison's managed to scare the bejesus out of Karen Bass. Meanwhile you mean while you had Spencer Pratt throwing you know throwing all kinds of bombs on social media. Sure but who cares about that? I mean I do think that the optics of this to the average person felt like California driving out business at a time when you drive around Hollywood it looks pretty pretty bleak right now. Yeah that is what they were certainly playing on. But is that enough? Like I just don't like was Bonta just full of was Bonta full of shit the entire time? I think the average person who works in the entertainment business and the average person who lives in California was opposed to the deal and the act of Ellison moving to Tennessee while it would have made California look bad it would have made him look 10 times worse. And so I don't know what yeah I'm not I don't know if it was all an act the whole time it's it's it's sort of hard to understand because again I think you and I both thought that this was going to be the outcome that they would settle they would get the deal and that there probably wouldn't be something too dramatic but as time went on it seemed like there was momentum behind Bonta that sort of dissipated in the last week or two. Well he played it well he yeah he seemed like the adult in the room when he would do these press conferences and come on shows like this one and say very calmly we think this is an illegal merger we want significant we're willing to settle but we want a good faith effort and significant structural remedies to just abandon that in a negotiation suggest to me this was all politics this was just about him getting on television for a few months raising his profile raising his awareness and now he's walking away or there's something behind the scenes that we don't know but what if I knew it I'd be reporting it yeah what an analysis that they're probably going to lose so what you wait six months the leverage like you said the leverage is not in the case I'm thinking something more extreme but I don't know what it is I'm just saying there could be something we don't like about like George Soros called and said something personalized some political whatever I don't know what are the block the merger people do now uh wasn't their statement that we you know this is not the last time you'll hear from us this is not the last you'll hear from us I don't know what do they do do they protest outside of Bonta's house do they set up an encampment in front of the Paramount Gate I don't think there's anything more that they can do Jane Fonda going a hunger strike well the movie stars go back to being movie stars and probably uh look for any opportunity to talk about their to see you know CNN's news coverage being worked by the president and then talk about that we'll see how long Mark Ruffalo's HBO show lasts now how quickly do you think that and I think that Alison has said he wants to steal the clothes in a matter of weeks how quickly do you think we start to see him announcing rolling out changes at the at the two companies I think he's going to stay relatively quiet during the closing period to just get it closed I don't think he'll be doing much announcements he'll probably send an email to everybody and do what is legally permissible after the deal has been approved uh first of all the judge has to sign off on this which we believe she will and then they need to you know they need to close the deal but I think he can start to make moves to make changes even before that it won't be that explicit in public the question I have here is why did the WGA settle well because what they're gonna fight on that they're gonna keep fighting on their own yeah they just said they they basically said we don't have the resources to do this and they were glomming on to the state's case but I think a lot of their members would have liked them to continue yeah it's hard if you don't I mean you're talking about one of the richest families going pursuing litigation against one of the richest families in the world when you are a union that you know doesn't have the financial resource despite with it and also if once the states have settled your leverage is diminished yeah of course there was power in numbers there's power and we have 12 states and the writers guild and Ellison agreed to pay 17.5 million dollars to the health fund of the writer's guild which we know has been struggling yeah because so many writers are out of work and the contributions are so much lower and health care costs are going up so there you go they were bought off 47.5 for this workplace fund 25 million for independent films let's go that's 72 million there's 1.5 billion over five years in domestic production which I think is kind of nonsense but we'll you know we'll we'll roll with it so we're at close to 1.6 million what you said you've you add in the writer's guild so we're basically they got 1.6 billion dollars over the next five years for various programs and production fundings and compare that to what the ticking fee would have cost between now and March yeah it's a pretty good deal for them yeah not bad so there's an interesting element of this where and bought to talk about this today if there is a federal film tax credit meaning all of the machinations right now around you know Trump endorsing it and getting it passed that we believe that a bill will be introduced could be as soon as this week to get a federal film production tax credit paramount if that passes they are agreeing to make 20 percent of their film and television production in the US for the first two years and then 30 percent for the next three after that do we know what the number is now 5 percent Bonta said it's currently 5 percent of their film and television production is made in the US which is a astonishing number I find that hard to believe that is Bonta's number that he announced at the press release I have not confirmed that all those CBS shows the the shared I know I know the reality shows I know but that's the number they put out sure so then if California or New York pass an uncapped incentive meaning you know currently the limitation on the California incentive it's up to 750 million but it's capped at a certain amount and it won't and you can't go over if it is an uncapped incentive paramount will increase domestic production to 40 percent of production and Bonta using his math was saying that that's going to be a 700 percent increase in production in the US and he says that he is going to push in the next legislative session a bill to pass that so he's now going to sponsor legislation to pass an uncapped film incentive which will then trigger paramount shooting more in this country and what is the enforcement mechanism I don't know I don't know I mean presumably this would be subject to the consent degree if it's in the agreement on the movie one if they don't release 30 million if they don't release 30 movies a year and then 32 and more in time they they will have to pay money and sell assets yeah but if all of these things happen then they will be required to produce this amount and there will presumably be some kind of audit or oversight mechanism for the rest I guess I don't I don't know the answer to that what do you make of the movie commitments seems pretty doable if Ellison was basically promising that to the theaters before this whole lawsuit then they think they can do it I think it's less than he was promising I think he was promising 30 wide releases this is 30 movies only 20 of which have to be ride releases so it's like 10 of them can be a re-release of top gun or a heck they might count putting a television show and you know put a new put a new show and movie theaters for a weekend for a stunt but if he's agreed to the 30 with the theaters maybe that's will that'll be the governing document here maybe or they modify that to fit to to me or this what's funny is isn't that 30 32 number less than if you look at what Warner Brothers and Paramount are scheduled to release next year it's 35 films so it's it's not like this is some incredible commitment it's like a little bit less than what's currently scheduled the the concern would be if you put them together that that number would go down right why would one studio release 35 movies you take that down to 22 and suddenly there's 13 missing movies which is exactly what happened with Disney and Fox yeah so you know even more so so I think that that getting this and and it is an increase remember Ellison put three years on the table and this ended up being five years which to me makes much more sense three years is nothing like you know you some movies that green a greenlit today won't even come out in three years so the five years is a win I guess for Bonta I guess yeah I liked it the punishment if they don't do it is they have to divest mirror max I know what was up with that like who gives no disrespect but who gives a shit about mirror max yeah also if someone else buys mirror max it's not like suddenly they're going to be releasing a bunch of mirror max movies mirror max is primarily a library at this point yeah I mean they have a few franchises that that are theatrical they have like scream and shuffled others but like it's not like this is the linchpin it's not yet this is not like and you must sell DC studios are you you know right I know I wonder how they even came up with that I'm surprised the states even like knew about mirror max yeah mirror max gotta be on the list of things that if David L David Ellison be like yeah I'll sell it short yeah BT yeah I'm I'm we try it anyways yeah although they didn't have a big hit this year was scary movie yeah all right so big takeaways here Lucas for everybody around town that was vehemently opposed to this merger and had put their hopes in Rob Bonta the attorney general to essentially save Hollywood from this disastrous merger they've got to feel abandoned not great I mean you've seen it from people the efforts over the weekend to to prevent this from happening or all the outcry which was they knew that this was coming they knew that they weren't going to like it but they were ultimately kind of powerless to to do anything else and I don't know I mean so there were some people who were really opposed the deal who as time went on I think came to their feeling or the conclusion that there like wasn't a great alternative well that's it I mean we've talked about this that's that's what is not being said by a lot of these advocates is like what happens to Warner Brothers if this deal does not go through and it's not spirit airlines it's not gonna go out of business but the shareholders of Warner Discovery were not gonna stop they were gonna sell this company to somebody and you know this deal prevented that from happening who knows if it's better or worse than alternative scenarios we are now going to see likely what the plans are and you know if David Ellison comes out of the gate first day he owns the company fires 30% of the employees that's not gonna happen we know that he never know it could be a big middle finger at everybody you never know but he's not that he's not that stupid is it's been about just under seven months since Paramount ultimately kind of beat out maneuvered whatever Netflix and got Warner's over this seven months of back in the fourth who do you think is the are the biggest winners and losers I would have said Rob Bonta as a winner because of the profile that he has achieved during this case and the fact that he is doing rounds of media in New York and invited to speak at the Atlantic festival sure we all know his name now and before if you ask the average person who worked in entertainment or LA who their attorney general was they probably wouldn't know across California yeah and that may still be the case as we know all the matters in California's name recognition but I think this taints him I think this is not gonna go away where people are gonna be bitching about this for a long time and he is the face of this settlement so I don't know if it helps him with the progressive donors or if it helps him with the average person if he's the guy that enabled a merger that is gonna lead to thousands and thousands of layoffs right okay so he's a loser he's not a way he's neither a winner nor a loser yeah I mean I guess Karen Bass is a winner the L.A. Mayor because last thing she wanted in her reelection campaign is to answer questions about why she's letting Paramount to big employer go to Nashville sure so she can now say that they came up with a settlement that keeps Hollywood in Hollywood etc etc maybe she's a winner obviously Ellison a winner Larry a winner all of the people on that side this this seems like they are getting what they wanted with pretty minimal concessions right just several months of pain and suffering basically yeah or headaches not even pain and suffering that's exaggerating well but but certainly annoyance and his reputation took a hit right leveraging his employees in a settlement negotiation threatening to move them to you know the wind swept baron Texas you know whatever or Tennessee like that's not a good look for him either you know when when discovery bought Warner Brothers there was a period of time where David Sazlev was sort of seen as people at hope because they were so upset with how AT&T had been running the place now he squandered that very quickly but he had a brief honeymoon after doing that deal or in the process of doing that deal David Ellison I feel like had a had his brief honeymoon at Paramount when he did it because people were excited for the redstone is to be gone but he enters here yeah he's leaving Hollywood he enters this with zero honeymoon he will there will be there will be a lot of people almost rooting for him to fail from the get go I agree and who knows that that trickles down to the talent world I don't think it does I think they go where they get they go where they get paid and where they can do something and especially if he owns HBO right if they I know assuming he doesn't screw it up assuming he keeps most of the people around or all that the people who want to work at HBO are going to go work at HBO maybe you know maybe Apple or even a Netflix or Amazon can use it as a little bit of leverage of saying well you know do you really want to go work for that guy and maybe he won't be able to keep the leadership team at HBO we have no idea but I have a feeling he's going to pony up to keep that team and he will likely at least for the first year or so kind of stay the course not structurally and not and but with the creative people I think there will be a let's let's win back the trust of the town right I think or maybe not or maybe he'll go full super villain and just middle fingers all over town fuck you we're firing this guy we're squeezing this we're you know doing everything that you the worst fears come to life right well we're about to have a very interesting you know we've talked about before but contrast of who does he trust versus does he trust the people he's worked does he want to go with the people he's worked with for a long time because he trust them or does he want to go with people who are ardent doing their jobs and people respect the biggest question is how do you and I get on this CNN editorial oversight committee I am officially volunteering us to serve not unpaid we will be paid but we would like to serve on the editorial board for CNN and CBS news somehow I don't think I'm anywhere on their list for that but if they if they want to I'm certainly not but but that would be fun wouldn't it yeah Barry just I'm not sure the Palestinians I don't want to sit in pointless meetings and have a gift just get ignored by whoever the head of CNN and CBS news are yeah Barry I have some notes on your Netanyahu interview could you give me a ring please not not a conversation I want to have no all right Lucas thank you thanks that all right that's a show for today no call sheet I want to thank my guest Lucas Shaw producer Craig Horbeck artist Jesse Lopez and stuff for no Sanchez and I want to thank you we have a special episode on Wednesday morning and then one more later this week we'll see you then