Emergency Pod: Paramount Settles—and Bonta Caves

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0:45Before treatment, get checked for infections and tuberculosis. Tell your doctor if you have an infection, flu-like symptoms, or need a vaccine. Explore what's possible. Ask your doctor about Tremphaya today. Call 1-800-526-7736 to learn more or visit Tremfierradio.com. Every game day you show up for your team. Now it's your time. We go V! We go V! Ask your prescriber about WeGoV, semaglutide injection 2.4 milligrams, a GLP-1. Call 1-833-4WEGOV or visit WEGOV.com to view the medication guide and to learn more about WEGOV. Why wait? 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.

1:44They 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. Release 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.

2:20Some commitments regarding maintaining pricing to theaters and to negotiate cable TV carriage deals as if Warners 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 trustee appointed 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 divestitures potentially for any breach of this deal.

3:01Some decent concessions there, but notably not any divestitures, meaning for all the tough talk from Attorney General Rob Bonta of 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 Ellisons or the fallout from this merger, and it's not the last you will hear from us, they say. But the labor guilds have all signed off on this deal.

3:36Even 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 Shaw, our Monday guy. It's the Watermount settlement. What just happened? From The Ringer and Puck, I'm Matt Bellany, and this is The Town.

4:16All right, we are here with Lucas Shaw from Bloomberg, our Monday guy. Lucas, this would qualify as an emergency pod if it didn't happen on a Monday morning when we were already scheduled to record. So you're not telling people the full backstory of what we were going to do Monday? Don't reveal how the sausage is made here. We don't do that on the town. Actually, we do. That's kind of the whole point of the show. But we're not doing that. So 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.

5:00They 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 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.

5:54These 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 he got three months of constant press attention for himself yeah his name recognition is through the roof but it's the combination of you know the pressure from within his own party in the state frankly pressure from the industry meant that maybe he you know he and and the feeling that he would probably lose in the or in in the case meant that he he didn't wait another six to my 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.

6:40And 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 U.S.

7:12And 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 Warnermount? Or is it just commitments to do the things that he had already said he was going to do? Because we're talking about, okay, not going to leave California. I was always, frankly, a little suspicious, and I thought that that was just very effective negotiating.

7:56They 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 in 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 teeth to it. We don't know what it looks like. So what is... Well, we don't know that. We have no idea. There is a trustee overseeing this. What is the win for Vonta? I mean, I guess you could say that agreeing to hold these two studios separate for the purpose of negotiating carriage deals because their big fear, for television networks, their big fear was that the leverage of a combined WarnerMount was going to extract larger channel fees from the distributors, which would then be passed along to consumers.

8:49And 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. 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.

9:30And 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.

10:05And 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 duplicative 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 probably will save at least a billion or two from cutting people. And the makeup for that is a like$48 million commitment for retraining. What about, it's nothing.

10:49What about$500 million for all those people who lose their jobs to go and do something else? 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.

11:29They had a hearing 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 one point nine billion dollars if they lose. And I wonder if that was a factor, because if there was a ruling on that bond, that was potentially appealable. 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.

12:05But 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 Becerra's, the Karen Bass, who's running for reelection. 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 Ellisons managed to scare the bejesus out of Taron Bass.

12:43Meanwhile, you had Spencer Pratt 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 bleak right now. yeah that is what they were certainly playing on but is that enough like i 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.

13:33And 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 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 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.

14:12We 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 suggests 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 about. 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.

14:50I'm just saying there could be something we don't know 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? Wasn't their statement that, 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 go on a hunger strike. Well, the movie stars go back to being movie stars and probably look for any opportunity to talk about to see CNN's news coverage being warped by the president and then talk about that.

15:30We'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 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. First of all, the judge has to sign off on this, which we believe she will. And then they need to close the deal.

16:13But 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 going to fight on their, they're going to 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. you. 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 resources to fight with it.

16:53And also, once the states have settled, your leverage is diminished. Yeah, of course. There was power in numbers. There's power We have 12 states and the Writers Guild. And Ellison agreed to pay$17.5 million to the health fund of the Writers Guild, which we know has been struggling 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. 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 roll with it.

17:37So we're at close to$1.6 billion. What you said, you add in the writer's guild. So basically they got$1.6 billion 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 was a pretty good deal for them. Yeah, not bad. This episode is brought to you by Whole Foods Market. Now, this is a player in the food space that has championed winning food standards and quality since 1980. That means no added growth hormones or antibiotics in their meat and no synthetic nitrates or nitrites in their deli meats, hot dogs, or sausages.

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19:25Every second counts. Count on ADT. Visit ADT.com to learn more. So there's an interesting element of this where, and Bonta talked 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. 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 % of their film and television production in the U.S. for the first two years and then 30 % for the next three after that. Do we know what the number is now?

20:125%. Bonta said it's currently 5 % of their film and television production is made in the U.S., 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 Sheridan shows. 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 % of production.

20:58And Bonta, using his math, was saying that that's going to be a 700 % increase in production in the U.S. 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 decree if it's in the agreement. On the movie one, if they don't release 30 movies a year and then 32 and more in time, they will have to pay money and sell assets.

21:45Yeah. 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 this. I guess. 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 wide releases. So it's like 10 of them can be a re-release of Top Gun or heck, they might count putting a television show and put a new show in movie theaters for a weekend.

22:28for a stunt. But if he's agreed to the 30 with the theaters, maybe that'll be the governing document here. Maybe. Or they modify that to mirror 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 not like this is some incredible commitment. It's like a little bit less than what's currently scheduled. The concern would be if you put them together that that number would go down, right? Why would one studio released 35 movies, you take that down to 22, and suddenly there's 13 missing movies.

23:03Which is exactly what happened with Disney and Fox. Yeah. So, you know, even more so. So I think that getting this, 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, some movies that are 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 like that the punishment if they don't do it is they have to divest Miramax. I know. What was up with that? No disrespect, but who gives a shit about Miramax? Yeah. Also, if someone else buys Miramax, it's not like suddenly they're going to be releasing a bunch of Miramax movies.

23:44Miramax is primarily a library at this point. Yeah. I mean, they have a few franchises that are theatrical. They have like Scream and a couple of 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 Miramax. Yeah. Miramax got to be on the list of things that if David Ellison would be like, yeah, I'll sell it. Sure. Yeah. We try it anyways. Yeah. Although they did have a big hit this year with Scary Movie. Yeah. All right.

24:18So 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 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 do anything else. And I don't know. I mean, And so there were some people who were really opposed to the deal who, as time went on, I think came to their feeling or the conclusion that there wasn't a great alternative.

25:01Well, we've talked about this. 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 going to go out of business. But the shareholders of Warner Discovery were not going to stop. They were going to sell this company to somebody. and 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 if David Ellison comes out of the gate, first day he owns the company, fires 30 % of the employees.

25:38We know that's not going to happen. We know. You never know. It could be a big middle finger at everybody. You never know, but he's not that stupid. it is it's been about just under seven months since paramount ultimately kind of out beat outmaneuvered whatever netflix and got winners over this seven months of back and forth who do you think is that 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.

26:19And 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. And that may still be the case. As we know, all that matters in California is name recognition. But I think this taints him. I think this is not going to go away where people are going to 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 going to lead to thousands and thousands of layoffs.

26:57Right. OK, so he's a loser. He's not a he's 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 is letting Paramount, a big employer, go to Nashville. Sure. So she can now say that they came up with a settlement that keeps Hollywood in Hollywood, et cetera, et cetera. Okay. Maybe she's a winner. Obviously, Ellison, a winner. Larry, a winner. All of the people on that side. This seems like they are getting what they wanted with pretty minimal concessions. Right.