Paramount-Warner Bros. Merger Closes as Ellison Faces $80B Debt

The deal is done, but the hard part has started

David Ellison has the studio he chased for more than a year. On October 6, Paramount Skydance closed its purchase of Warner Bros. Discovery. Most outlets value the deal at $110 billion to $111 billion. The combined company has been renamed Skydance and trades on the New York Stock Exchange under the ticker SKYD.36 It owns the Paramount and Warner Bros. studios, CBS, CNN, HBO, Paramount+ and HBO Max. The company says it brings in nearly $70 billion a year, and it carries about $80 billion in net debt.46

The last legal obstacle fell on September 30. That day U.S. District Judge Araceli Martínez-Olguín in Oakland signed a settlement that ended the antitrust lawsuit brought by California Attorney General Rob Bonta and 11 other states.9 On the legal side, Ellison won clearly. On every other front, his position is shakier. The coverage that followed the closing agrees on one main point: winning the deal was easier than running the company will be.

How the antitrust fight ended

The states sued on July 13. They argued that putting two legacy studios together would give one company too much control over wide-release films and potential blockbusters, in violation of the Clayton Act.1318 They also raised concerns about pay TV. The combined company owns more than 50 basic cable channels, which could give it leverage over the operators that carry them.814

Bonta had said he would accept only structural remedies, meaning the sale of parts of the business. Reports at the time said one sticking point was whether the states could force asset sales such as parts of the cable business. Ellison would not agree to give up CNN.12 In the end Bonta got none of the divestitures he had asked for. The Los Angeles Times called that a major win for Ellison.11 Instead, the five-year settlement can be enforced in court and relies on conduct rules, overseen by a trustee who can bring Paramount back to court if it breaks them.1314

The main terms:

• A theatrical release minimum. The company must put at least 30 films a year in theaters. NBC News reported that the number rises to 32 a year for the last three years of the agreement.59 If it falls short, it pays a penalty and must sell the Miramax film studio.11
• Production spending. This is where the reports differ most. The Los Angeles Times described an extra $300 million a year for U.S. film production.11 Bonta's office described more than $1 billion in domestic production and releases.5 Coverage of the court approval put the figure at an added $1.5 billion.9 These may be the same pledge measured over different periods. Either way, the headline number depends on who is counting.
• Studio lots. Paramount may not sell or close the Melrose Avenue lot or the Burbank Warner lot before 2031.11
• Workers and newsrooms. The settlement sets aside $47.5 million for workers hurt by the merger. It also requires a five-member panel to protect editorial independence at CBS News and CNN, though critics point out that the Ellisons control appointments to the board.9

The Writers Guild of America settled its own lawsuit separately. Paramount agreed to put $17.5 million into the union's health fund, pay the guild's legal fees, and not lay off writers at CBS News Broadcast for five years.13 The guild was open about why it settled: once the states were out, a nonprofit union could not afford to take a complex antitrust case to trial by itself.14

Why the money pushed Ellison to settle

The settlement makes more sense once you look at the deadlines. When Paramount beat Netflix in February, it promised Warner shareholders $31 a share in cash. It also agreed to pay a "ticking fee" of 25 cents per share for every quarter the deal stayed open after September 30.15 The Los Angeles Times put that cost at about $7 million a day.13

The judge had set the states' trial for March 2, 2027. If the case had run that long, ticking fees could have totaled $2.1 billion, and bridge-loan costs another $190 million. Paramount would also have owed a $7 billion breakup fee if the deal missed its June 4 deadline.15 CNBC reported that the lawsuit threatened to push the closing to mid-2027 and cost hundreds of millions in fees.14 As it turned out, the one-week delay cost Paramount an extra $41.9 million paid to Warner Bros.6 For comparison, the amounts going to the writers' health fund and the worker fund are small.

Politics mattered as well. Governor Gavin Newsom, Los Angeles Mayor Karen Bass and Democratic governor nominee Xavier Becerra all urged Bonta to settle rather than go to trial.13 Ellison, for his part, spent the summer threatening to move Paramount to Texas or Tennessee.15 The Hollywood Reporter described a dispute shaped by the Ellison family's ties to President Trump, Bonta's own political ambitions and accusations of antisemitism aimed at some of the deal's critics.12 Bonta stated plainly that the settlement was "not a blessing" of the merger.11 That reads like an attorney general who knew he had settled from a weaker position.

Debt is the biggest constraint

All the coverage agrees the debt is the main pressure on Skydance, though the exact figure varies. The New York Times cited about $79 billion in net debt. Variety and NBC News said about $80 billion.36 Citing Bloomberg, the Los Angeles Times reported that the bond and loan sales would leave the company with more than $87 billion in total debt.9 Rising interest rates during the delay made borrowing more expensive than Ellison's team had planned for.9

The money behind the deal shows how much was at stake. It was funded with $47 billion of new equity priced at $12 a share. That equity was led by Larry Ellison, RedBird Capital Partners, LionTree and the sovereign wealth funds of Saudi Arabia, Qatar and Abu Dhabi.6 The three Gulf funds alone put in $24 billion. The Federal Communications Commission signed off on nearly 50% foreign ownership, but the foreign investors get no voting shares.813 All voting control belongs to the Ellisons and RedBird.6 The New York Times reported the family's share of the votes at 77.5%.

Investors did not cheer. Shares dropped about 5% after trading opened.8 The company plans $6 billion in cost cuts over three years. It says most of the savings will come from technology, procurement, marketing and real estate, and NBC News reported that Paramount has pointed to "non-labor sources" such as merging streaming technology and cloud providers.36 Few observers expect jobs to be spared. Los Angeles County's Department of Economic Opportunity estimates the merger will cost 4,500 local jobs.9 Ellison's own memo to staff warned of "difficult decisions that affect our workforce."7

Hollywood's trust problem

The talent community opposed the deal openly and has not let go of it. After the settlement was announced, protesters with fake gravestones gathered at Paramount's Melrose gate. A coalition that includes the Committee for the First Amendment filed a brief urging the court to reject the agreement.11 The Block the Merger campaign said that approving the deal without structural remedies would cost jobs, stifle creativity and weaken independent journalism.9 SAG-AFTRA was more cautious. It said the terms addressed some of its concerns but called them "the lowest standards" employers must meet.11

The 30-film promise is where the skepticism is easiest to measure. Theater owners and industry veterans doubt it can be kept, since no studio has released more than 25 wide-release films in a single year in the past quarter century.14 The penalty does give the promise some weight. The question is whether a company this heavily indebted can keep production that high once the five-year agreement runs out. Newsweek suggested that big, filmmaker-driven original movies could be among the first things cut. It noted that Warner film chiefs Michael De Luca and Pamela Abdy are reported to be leaving.4

The CNN question has not gone away either. Ellison argued in an August New York Times op-ed that the lawsuit was really about whether he could be trusted to own CNN, not about market share.19 The editorial panel is supposed to address that worry, but its members are appointed by the board the Ellisons control.9 Bari Weiss's role at CBS News is unchanged, and CNN chair Mark Thompson will run the larger news organization.8

Analysis: a legal win that leaves the hard questions

It is easy to read the result as Ellison getting nearly everything he wanted, and that is mostly right. He paid behavioral concessions and kept every asset, including CNN. But the settlement's terms work as a five-year lock on a company that also has to cut $6 billion and service roughly $80 billion in debt. Keeping the studio lots, the film minimum and the production spending will be in tension with that cost-cutting. Kreiz will run day-to-day operations and Ellison will focus on strategy and technology, so the work is clearly divided.1 What remains to be seen is whether keeping the settlement's promises and paying down the debt can both be done at once. Until the company shows that, Hollywood has reason to stay skeptical.