Paramount Skydance has reached a settlement with a coalition of 12 US states, removing a major legal obstacle to its proposed $110bn merger with Warner Bros Discovery.
The lawsuit, led by California, had challenged the deal over concerns about competition in the film and television industries.
The settlement requires Paramount to produce at least 30 films annually, with a specified proportion made in the United States, or face penalties that could include the sale of parts of its business.
California Attorney General Rob Bonta said the agreement should not be interpreted as an endorsement of the proposed merger, stressing that it was “not a vote of support for this merger”.
Paramount Chief Executive David Ellison, however, welcomed the settlement, saying the concerns raised by state attorneys general and the Writers Guild of America 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 Writers Guild of America said it still believed the merger would harm writers and the wider industry.
The guild said it had been compelled to settle its own legal action because, as a non-profit organisation, it could not afford to continue fighting the deal without government backing.
Under its agreement with Paramount, the studio will pay $17.5m into the WGA health fund and cover legal costs.
It will also be barred from laying off writers at CBS News Broadcast for five years.
Bonta said the settlement would boost film production in the US, with Paramount required to release at least 30 films every year.
The agreement also includes safeguards aimed at preventing the studio from meeting the target through low-budget or automated productions.
The California attorney general said there were strict protections against “AI-generated” films, adding that officials wanted to ensure “real, robust movies” were produced to generate economic activity and employment.
Paramount could be forced to sell its 49 per cent stake in Miramax if it fails to meet the annual production requirement. Bonta said the agreement would increase film production, jobs and economic activity in the US.
Under the initial terms, at least 20 per cent of the company’s film production must take place in the US during the first two years, rising to more than 30 per cent over the subsequent three years.
The agreement also provides for an independent monitor to oversee Paramount’s compliance with the settlement. California was joined in the legal action by state attorneys general from Arizona, Colorado and New Jersey.
Bonta said the deal could generate between $300m and $1.5bn in additional film and television production activity in the US, describing the figure as the minimum expected impact.
“Importantly, that is the baseline. That is the minimum,” Bonta said, adding that production commitments could increase by as much as 700 per cent if Congress approves a federal film tax credit.
Although Ellison had previously suggested that the merged company’s headquarters would remain in California for the foreseeable future, Bonta said that commitment was not included in the settlement. “It’s not part of the deal,” Bonta said.
