LOS ANGELES, CALIFORNIA – FEBRUARY 23: An aerial view of the Paramount logo on the water tower at Paramount Studios on February 23, 2026 in Los Angeles, California. Paramount Skydance is poised to increase its takeover offer for Warner Bros. Discovery above Netflix’s current bid, setting up a high-stakes bidding war that could see Netflix walk away from the deal if outbid. (Photo by Justin Sullivan/Getty Images)
Getty Images
Paramount Skydance and twelve state attorneys general settled their antitrust litigation yesterday, seemingly clearing the path to the Paramount merger with Warner Bros. Discovery. In the sea of commentary on the deal, there is a noticeable absence of discussion of the agreement’s provisions around cable and broadcast TV. For those of us that “grew up” in these businesses, that silence reinforces their decline as a force in the future of media, not least in how they are perceived by its leaders.
The original lawsuit and the settlement are clearly focused on sustaining as best as possible the production of feature films by the newly combined entity over the five-year term of the settlement agreement. The initial decision from the federal court judge in the case focused exclusively on the potentially negative competitive impact of merging two of the top five legacy studios. In California AG Rob Bonta’s press conference yesterday, he specifically spoke of avoiding the type of decline in film production that followed Disney’s purchase of Fox’s film business in 2019 (although Covid admittedly played a part there).
The agreement lays out a set of concrete terms related to the theatrical business including $300 million per year in incremental investment in film production from the newly combined entity; a commitment to increase the number of films produced each year; a minimum percentage of tentpole or “blockbuster” films (of course one can argue whether a $50 million budget qualifies as a “blockbuster” anymore); a similar minimum for “independent” films; a three-year freeze on exhibition fees for theater owners; and penalties associated with violations of any of these provisions. We won’t know for some time about the ultimate impact of the Paramount-AG settlement on the theatrical business, but certainly if Paramount follows through on these commitments it locks in a non-significant amount of production in the U.S. The agreement creates a five-year infrastructure of legal obligations and governmental oversight.
By comparison, linear TV feels much the forgotten stepchild here. Remember when Bruce Springsteen wrote a song complaining of 57 Channels (and Nothin’ on)? The combined Paramount-WBD will bring together a total of 59 basic cable networks, which doesn’t include the HBO premium channel, the CBS or CW networks or the owned and operated broadcast TV stations. In advertising, the combined entity will total roughly $12 billion in U.S. ad revenues (which includes CBS’s ad revenues also), roughly 25% of the total linear TV ad market. In affiliate fees, the combined Paramount-WBD will represent almost 50% of the $38.7 billion market. All of this on its face presents a dramatic increase in market concentration with no prohibition in the agreement.
The diminished attention to linear TV in the settlement agreement is a recognition of an existing reality than the creation of a new one. The most recent Economics of Basic Cable report from S&P Global Market Intelligence noted that the cable industry has entered the “decline stage of its life cycle.” Paramount in its own annual report noted a fall of nearly 13% in its advertising business, and a drop in its “affiliate and subscription” fees of over 7%. WBD actually exceeded Paramount in its decline, with drops of over 13% in its ad business and over 8% in its “distribution” fees. Oh, how the mighty have fallen.
The agreement is certainly not silent on cable, but it is addressed in a way that suggests that what happens moving forward isn’t that critical for the AGs or for the new Paramount. For five years after the merger, Paramount and WBD cannot combine their affiliate negotiations with distributors such as Comcast, Charter, YouTube TV and others, and information about each legacy company’s affiliate data are supposed to withheld from the sister division. And neither the legacy Paramount nor WBD properties can initiate changes to existing agreements without the consent of the distribution partner.
One of the challenges to the effectiveness of these provisions is that broadcasting is excluded. Paramount is free to leverage distribution of its CBS owned and operated TV stations, and most vitally CBS’s NFL broadcast rights, in negotiations over WBD cable channels.
I may be nitpicking, but what if some of the stations are used to enhance negotiating power for the WBD channels, and another group of stations is used in Paramount cable network negotiations? Given that you’ve got one company owning everything, and nothing prevents the consolidation of legal, finance, HR, and a host of shared services, can you really expect information won’t flow between the legacy operations when the CBS stations are on the table in both sets of negotiations?
The penalties for non-compliance with the settlement’s cable provisions are also hints as to the sector’s diminished importance. In the event Paramount decides to violate these negotiation restrictions – and it would not likely be an inadvertent violation – Paramount would have to divest a set of pre-selected cable networks.
But the list includes all of the BET family of networks that were on the market before Paramount ever took over. The WBD list consists entirely of Destination America and Science. Has anyone even heard of those networks? I don’t think it’s too far-fetched to think they would be happily sold at Paramount’s initiative if anyone wanted to buy them. Paring down of cable networks is a likely future with or without this settlement
Further on the cable front, one of the fiercest objections to the Paramount-WBD merger was the combining of ownership and news operations between CBS News and CNN. Nothing in this settlement stands in the way of that combination. There is a requirement for a Paramount-appointed advisory board on editorial independence. But in a sea of cable news related political and economic challenges, that isn’t likely to provide a lot of solace. The news business as usual is left to fight its business storms on its own.
Leave a comment