California AG seeks channel divestitures to clear $81B Paramount deal

California Attorney General Rob Bonta is expected to demand Paramount divest cable channels and commit to keeping its movie studio separate from Warner Bros. to clear the $81 billion merger with Warner Bros. Discovery, people familiar with the matter said.

"As it stands today, the proposed Warner Bros./Paramount merger will mean higher costs, less competition, lower wages, job cuts, and fewer movies and TV shows," Bonta said in a statement Friday. "This merger violates long-standing federal antitrust law, and we are committed to enforcing the law."

Bonta and Paramount Chief Executive David Ellison are scheduled to meet Monday to discuss potential settlement terms. The merger is currently on hold pending a March trial in federal court in Oakland. Paramount has pledged various commitments, including making 30 films a year for the next three years and keeping them exclusively in theaters for at least 45 days, but Bonta's office has argued such behavioral remedies have proven impossible to enforce in the past.

A lengthy court battle could force Paramount to pay an extra $7 million per day until the deal closes. The merger would consolidate two of Hollywood's five legacy studios and two of the top three cable programmers, and the 12-state coalition led by Bonta argues it would illegally contract the marketplace for theatrical distribution and basic cable.

Structural remedies vs. behavioral promises

Bonta has repeatedly said any settlement must include structural remedies — not just behavioral commitments. His office has argued that promises like minimum film output and theatrical exclusivity windows are difficult to monitor and enforce. The expected demands for TV channel divestitures and studio separation reflect that stance, marking a significant escalation from Paramount's current proposals.

The talks come as a parade of interested parties has publicly backed a settlement, including the Directors Guild of America, IATSE, Los Angeles Mayor Karen Bass and Cinema United, the trade group representing theater chains. Gov. Gavin Newsom said Friday that "there's some universal sentiment" favoring a boardroom resolution over a courtroom battle.

Cost of delay

Paramount is eager to reach a deal because a prolonged court fight could cost the company an additional $7 million per day until the transaction closes. The company has also floated relocating its Hollywood studios to Tennessee, Texas or Georgia — with Ellison eyeing Austin as a potential new base — a threat that carries significant economic implications for California's entertainment industry.

The Writers Guild of America has filed its own lawsuit challenging the merger, which is set to be tried alongside the states' case in March. At a hearing this week, Judge Araceli Martinez-Olguin asked both sides to identify two potential magistrates who could oversee mediation by next Wednesday.

The last time a major Hollywood merger faced this level of regulatory scrutiny was the proposed AT&T-Time Warner deal, which went to trial in 2018 before ultimately being approved. That case took more than a year to resolve and cost both companies significant legal fees and management distraction.

If Bonta's conditions are met, the deal could close with Paramount selling off cable assets and operating its movie studio as a separate entity from Warner Bros. If not, the case heads to trial in March, where a federal judge in Oakland will decide whether the merger violates antitrust law. The outcome will shape not just the future of two legacy studios but the competitive structure of theatrical distribution and basic cable across the United States.

This article is for informational purposes only and does not constitute investment advice.