What we know — and don’t — about Paramount’s Hollywood plans

By Brian Stelter, Liam Reilly, CNN

(CNN) — Paramount has cleared the final hurdle in its year-long race to take over Warner Bros. Discovery. Now comes the really hard part.

In the coming weeks, Paramount will take control of CNN and scores of other Warner assets like HBO, DC Comics, and the Discovery Channel.

Integrating all the channels, studios and streamers will take a while. While Paramount executives have had months to think through the possibilities, the work of turning two sprawling media empires into one company is only beginning.

“There’s still work to get this deal across the finish line,” Paramount CEO David Ellison told staffers in a memo, “but we’re excited to bring these two iconic companies together, as it means more opportunity for our creatives, production crews and employees across the business, and more great entertainment for audiences everywhere.”

Ellison sent the memo after a coalition of state attorneys general agreed to drop their antitrust lawsuit in exchange for relatively modest concessions.

Analysts have called it a massive victory for the Ellisons — David and his father, Larry, the Oracle billionaire — as they assemble a global media empire.

But as Paul Nary, a Wharton professor who studies mergers and acquisitions, wrote on X, “A reminder is in order: most large media megamergers fail to live up to their promises. The harder work is still ahead.”

Warner CEO David Zaslav told staff in a separate memo that the merger is expected to take effect “by early October.”

Combining the streamers?

Consumers won’t notice any immediate changes. But over time, Paramount will likely begin merging the Paramount+ and HBO Max streaming services. The company could also look to combine CBS News and CNN’s news operations.

Paramount has long positioned the merger as a way to compete more effectively with streaming behemoths like Netflix and Disney+, which boast giant digital libraries full of attractive IP.

A merged Paramount–WBD will create a single company that owns HBO Max, Discovery+, Paramount+ and Pluto TV, in addition to CNN’s All Access streaming platform.

That combination would also house everything from the DC Universe, “The Sopranos” and “Harry Potter” to the “Top Gun” and “Mission: Impossible” franchises.

Paramount said in March that the streamer combination “gives us a little over 200 million direct-to-consumer subscribers.”

The settlement did not require Paramount to divest some of its cable assets — a concession that California Attorney General Rob Bonta, who led a 12-state coalition suing to block the merger, had previously sought.

But the deal does give some shape to that vast media company, at least for the five-year commitment period. Outside media and entertainment circles, it also foreshadows changes consumers may expect on their end.

Creating a studio behemoth

The merger will also put two major Hollywood studios, Paramount and Warner Bros., under the same ownership. A major concern among the deal’s critics was that combining the two studios would mean one larger studio giant with fewer jobs and fewer films overall.

Bonta reportedly sought to require Paramount to operate the two studios separately. However, the final deal requires Paramount to preserve both studio lots and meet minimum annual film-release targets — but it does not require the studios to operate separately.

The settlement commits Paramount to a reliable stream of theatrical releases for the next five full calendar years — 30 per year in the next two years, rising to 32 per year after that.

Bonta told reporters on Monday that the settlement is “the opposite” of Disney’s 2019 acquisition of 21st Century Fox, which Paramount’s critics have cited as an example of theatrical output shrinking after a mega-merger.

“All the things we saw in the Disney–Fox merger — a massive decrease in film production, in film output, fewer films being made — this doesn’t just guard against that and protect against a downside,” Bonta said. “It locks in a massive upside.”

After the commitment period, however, things aren’t so clear. The merged company could maintain or increase output; without these requirements, it could also reduce the number of movies released or its domestic production spending.

To ensure the company honors the terms during the five-year period, the state attorneys general built two penalties for missing commitments.

Paramount would have to pay $30 million per film below the annual requirement — half going to designated film-industry union health and retirement trust funds, 40% to the Motion Picture & Television Fund and 10% to a National Association of Attorneys General fund.

The company would also have to divest its ownership interest in Miramax, a joint venture studio, if it fails to meet the theatrical-release quota and doesn’t make up the shortfall within six months.

Paramount also agreed not to sell or close Paramount’s Hollywood studio lot or Warner’s Burbank lot during the five-year commitment period.

At one point during Paramount’s tense standoff with the state attorneys general, the company threatened to move its headquarters out of Los Angeles — a threat that many viewed as an effort to twist Bonta’s arm into cutting a favorable deal.

With the settlement secured, Ellison said the newly combined company will stay put.

“We’re eager to get to work building a stronger Hollywood,” he wrote in a statement on Monday. “Let me be clear: the newly merged company will be headquartered in Los Angeles. We aren’t going anywhere. Our history is here and this is where our future is being built.”

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