Paramount settles lawsuit with US states, clearing way for $110bn merger with Warner Bros

Paramount Skydance has settled a lawsuit with a dozen US states, paving the way for its $110bn (£82.8bn) merger with Warner Bros Discovery.

Under the agreement, Paramount must produce at least 30 films a year and ensure a certain percentage are made in the US, or face penalties including selling off parts of its business.

Paramount has also promised to create an editorial independence board to oversee CBS News and CNN, the news network owned by Warner Bros Discovery which was recently banned from the White House by President Donald Trump.

The deal clears one of the final hurdles for the merger that is set to reshape Hollywood, combining legacy studios, major streamers, and national networks.

Announcing the settlement, California Attorney General Rob Bonta said the agreement was "not a vote of support for this merger", while Paramount's chair and chief executive David Ellison welcomed the resolution.

Ellison said that now the state attorneys general and the Writers Guild of America (WGA) concerns had been addressed, "we have complete clearance for this merger and look forward to putting these commitments into action".

"Our shared aim was an outcome that best serves consumers, workers and - most importantly - the creative community so vital to the art of visual storytelling," he said.

The WGA said it continues to believe the deal "will cause damage to writers and the industry at large".

The guild said it was forced to settle its own lawsuit because, as a non-profit, it could not afford to fight the merger alone without government support.

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.

As part of the deal, Paramount has agreed to establish a "news editorial independence board" to "ensure independent, objective, fact-based reporting" at CNN and CBS.

The settlement said the board must be set up within 180 days of the merger completing and must include five acting or retired journalists with at least a decade of experience.

The board will resolve "any disputes between CBS News employees, CNN employees, and management of the combined entity regarding alleged reporting bias or failure to meet agreed reporting fairness standards", the settlement said.

Ellison, who hosted a dinner for President Trump earlier this year, has sought to reassure people that editorial independence would be maintained after the merger.

In an op-ed for the New York Times in August, he said he had voted for both Republican and Democrat candiates in the past, adding that, if the merger went ahead, "journalists will continue to answer to the facts and to all the people they serve - not to any party or cause".

CNN, along with MS Now and Politico, have filed a lawsuit against the Trump administration after they were banned from the White House. Trump has accused them of writing "fiction or lies" about his time in office.

Bonta said the settlement will help boost film production in the US. Under the agreement, Paramount must release at least 30 films each year.

To prevent the studio from fulfilling its annual quota with low-budget or automated content, Bonta said there were strict guardrails against "AI-generated" films.

Officials wanted to guarantee "real, robust movies" that generate economic activity and put people back to work, he added.

If Paramount fails to meet its annual production quota, it will be forced to sell its 49% stake in Miramax, the film company founded by disgraced Hollywood mogul Harvey Weinstein and his brother Bob.

"Divestitures are part of our solutions to all three markets," Bonta said, arguing the deal turned what could have been a "falling off the cliff in domestic production into a huge increase," leading to more movies, jobs, and economic activity.

However, Ned Thorne, an LA-based film editor, described the merger as "a little unsettling".

He told the BBC World Business Report podcast: "When two giant companies consolidate into one it's never a totally positive thing because of the merger and cost cutting.

"Whilst I know this might on somebody's ledger be a great idea, it's so far out of the hands of ordinary folks on the ground that it's a case of who's really going to be benefitting apart from a group of shareholders."

Though Ellison previously indicated the merged company would keep its headquarters in California for the foreseeable future, Bonta clarified that this 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.

To ensure remaining terms are enforced, Paramount has agreed to the appointment of an independent monitor to oversee ongoing compliance with the settlement.

California led the legal push alongside a coalition of state attorneys general from Arizona, Colorado, and New Jersey.

Under the deal's initial terms, Paramount must ensure 20% of all film production takes place in the US for the first two years, rising over 30% over the following three years.

While mergers typically lead to corporate overlap and redundancies, Bonta maintained that it would be a "job creator" that will put people back to work across the industry.

Thanks to the deal, Bonta said that economic activity would be "$300m to $1.5bn more, at minimum, for film and TV production right here in our country".

"Importantly, that is the baseline. That is the minimum," Bonta said, noting that production commitments could surge by up to 700% if Congress passes a federal film tax credit.