Judge Approves Paramount-Warner Bros. Settlement, Clearing Path for Merger

U.S. District Judge Araceli Martínez-Olguín has approved Paramount's settlement agreement with 12 states that had sued over the company's takeover of Warner Bros. Discovery. The ruling on Wednesday allows the companies to proceed toward closing their $81 billion merger, which is now expected to finalize on Oct. 6.

In her order, Judge Martínez-Olguín stated that the proposed consent decree represented a "fair, reasonable, and good faith approach to address the competitive harms" alleged in the states' lawsuit. Paramount, which was acquired by Skydance last year, had identified the antitrust challenge as the final hurdle before completing the merger with Warner Bros. Discovery.

Following the judge's decision, Paramount announced that Ynon Kreiz, the current chief executive of Mattel, will join as co-CEO alongside David Ellison. Ellison described the merger as a "transformational moment for our industry" and stated that he and Kreiz will lead a business focused on being "creator-first, tech-forward and built to scale globally."

The combination will bring together two of Hollywood's remaining legacy studios, uniting assets such as HBO Max, the "Harry Potter" franchise, CNN, CBS, the "Top Gun" franchise, and the Paramount+ streaming service under one corporate umbrella. Critics, however, have expressed concerns that the settlement terms are too lenient, arguing that the merger further concentrates power in an industry already dominated by a few major players.

Paramount had previously secured approvals for its Warner acquisition from regulators globally, including the U.S. Justice Department under the Trump administration. However, in July, prosecutors from 12 states, led by California Attorney General Rob Bonta, filed a lawsuit to block the merger, alleging it would "extinguish competition" and reduce choices for consumers.

Last week, the states agreed to settle these claims through new commitments from Paramount. These include pledges to increase film production in the U.S. over the next five years, provide millions of dollars to a fund supporting workers displaced by the merger, and establish new editorial oversight for CNN and CBS.

Judge Martínez-Olguín had initially expressed a need for scrutiny, stating the court would not act as a mere "rubber stamp." She allowed critics, including members of the Block The Merger coalition and the League of United Latin American Citizens, a period to voice their opposition and instructed Paramount and the states to address concerns raised by Sen. Cory Booker. Ultimately, she concluded that the arguments for the settlement terms to go further "do not rise to the level of legal violations upon which the Court can reject the parties’ negotiated resolution."

The Writers Guild of America, which had filed its own lawsuit in July, also reached a settlement with Paramount last week, acknowledging it could not continue its legal challenge alone.

The Block the Merger coalition criticized the states' settlement as "toothless." The coalition stated, "In years to come, we’ll be able to point to this failure to put consumers over the monied interests of corporate consolidation as the tipping-point moment for media in this country." However, the group also noted that the approval has made the public "wide awake and paying attention."

Paramount's new commitments include increasing U.S. film production spending by at least an additional $1.5 billion over five years and releasing at least 30 films annually. If Paramount fails to meet these film output targets, it faces divestment from Miramax Studios and a $30 million penalty for each missed film, to be paid to healthcare and retirement trust funds for industry unions.

The company has also committed $47.5 million over five years to support training and career development for displaced workers. For basic cable channels, Paramount must negotiate separate deals for current Paramount-owned and Warner-owned channels over the next five years, with potential divestments ordered by a court for violations.

Additionally, Paramount must form a "News Editorial Independence Board" within 180 days of the merger's completion to monitor news operations at CBS and CNN. This board will consist of five experienced journalists appointed by the combined company's board of directors for three-year terms. Critics have expressed skepticism about the effectiveness of this board, citing recent editorial turmoil at CBS.

Colorado and Washington declined to sign the settlement's editorial board terms, while some prosecutors, like Connecticut Attorney General William Tong, had sought a complete divestiture of CNN and CBS.

Including debt, Paramount's buyout of Warner Bros. Discovery is valued at approximately $111 billion based on outstanding shares.