Settlement talks between Paramount and the states Attorneys General are said to be heating up, with both sides eager to come to an acceptable arrangement to allow Paramount’s acquisition of Warner Bros. to proceed. The AGs have filed a lawsuit to block the merger, out of a concern that the combination of the two Hollywood studios will result in massive job losses, felt especially deeply by California-based workers. An additional concern has been expressed that the number of new movie releases destined for movie theatres will be reduced, causing hardship for theatre owners and moviegoers.
The U.S. Federal court has set a trial date of next March to hear the AGs lawsuit, but Paramount is on the hook to begin paying WB shareholders an additional a “ticking fee” of $7M for every day after September 30th when the merger has not been completed. As an additional point of leverage, Paramount’s David Ellison has suggested that if the AGs continue to stand in the way of the merger, he is considering moving the studios’ headquarters and operations out of California to a new “red state” home base in Tennessee, Texas or Georgia.
Reports this weekend indicate that the pressure on all parties is getting to the point that a settlement may be at hand. Paramount may agree to the AGs demands to guarantee a at least 30 new movie releases annually from its combined studios, maintain its operations in California and minimize the potential for job cuts, and find remedies that would protect its cable channels from undue political influence that would alter its content.
Over the course of the past several months, the wider entertainment industry has shifted in support of a speedy resolution of the AG lawsuit and other barriers to allow the merger to proceed. The worst-case scenario would be a prolonged battle that paralyzes both studios in the current marketplace and hobbles them with debts that force eventual staff cuts and limit their ability to produce new movies and other content.
