Blueprint #38: The Bonta-Paramount Sit-Down

Reid MercerBig news, folks. Paramount and the state AGs are finally coming to the table. Talks, diplomacy, peace in our time.

GrantA judge ordered them into a room.

Reid MercerDetails.

GrantThat's not a thought, Reid. That's a court date with better lighting.

Reid MercerOkay, fine. But doesn't it still feel like something's moving?

GrantDoes it, though?

Reid MercerThis is Blueprint. I'm Reid Mercer, that's Grant, and today we're staring down the most spun-up non-event of the year.

GrantTwo sides who haven't budged an inch forced into the same building.

Reid MercerFor two straight days.

GrantTwo days doesn't undo whatever blew up the last meeting.

Reid MercerOh, we're getting to that. It's messy.

GrantIt's always messy with Bonta.

Reid MercerMessy enough that we spent an entire episode on the last blowup.

GrantAnd here we are again, same cast, new calendar invite.

Reid MercerSo Reid, what actually got ordered, and by whom?

GrantYou're asking yourself the question now?

Reid MercerI contain multitudes. So we know a judge stepped in. Which judge and where?

GrantMagistrate Judge Thomas Hixson sitting in San Francisco. Reports say he's the one who set the whole calendar for this.

Reid MercerFederal magistrate judge, not some mediator both sides hired.

GrantRight. He's the one running the underlying case, so when he says show up, you show up.

Reid MercerAnd it's late October, San Francisco courthouse, both sides in a room.

GrantThat's the setup. And the same reporting says it's not just Paramount and the 12-state coalition at the table.

Reid MercerWait, who else?

GrantWGA West is in the room, too.

Reid MercerHuh. That's not nothing.

GrantIt changes who has to nod along if there's ever a deal on the table. The union is not just watching from the hallway.

Reid MercerDoes the union actually get a vote, or are they there to be heard?

GrantUnclear from what's out there, but you don't invite a labor union into a settlement conference unless whatever gets discussed touches their members.

Reid MercerSo even if they don't get a formal vote, they get information nobody outside the room gets.

GrantRight, and that changes leverage down the line. You can't spring a surprise to people who were literally sitting across the table.

Reid MercerWhich means whatever comes out of this, WGA can say they saw it coming, or they can say they objected the moment it hit the table.

GrantEither way, it's on record now. That's not nothing for a union that's usually reacting to news after the fact.

Reid MercerOkay, that's a real thread. Filing that one away.

GrantYou always say that, and then we forget.

Reid MercerNot this time. Now, why is anyone treating this like news at all?

GrantBecause the last time these two were supposed to sit down, it blew up. Bonta poured out over leak allegations, and there hasn't been a real meeting since.

Reid MercerSo this is the first time they've been back in a room together since that collapsed.

GrantExactly, which is why a mandatory court date is getting treated like a diplomatic reset.

Reid MercerRight, and that's my whole problem with the framing. Nobody chose to be here. A magistrate judge told them to show up.

GrantSure, but people show up differently when a judge is watching versus when it's just lawyers trading emails.

Reid MercerDoes that actually change what either side is willing to give up, though? That's the question I keep coming back to.

GrantThat's exactly the question, and you can't answer it without going back to why the room fell apart the first time.

Reid MercerSo walk me through it. What actually happened at that last meeting?

GrantTo understand why this order matters, you've gotta understand why the last one never happened at all.

Reid MercerOkay, so August, Bonta had a meeting on the books with Paramount, and he canceled it.

GrantJust canceled?

Reid MercerAccused the other side of leaking negotiation details to the press before it even happened.

GrantWho leaked what exactly?

Reid MercerNobodys named a source, but the accusation alone was enough to blow up the meeting.

GrantWhich tells you how thin the trust is between these two sides right now.

Reid MercerAnd that kind of accusation doesn't just fade quietly. It colors everything that comes after it.

GrantRight, because now every future interaction gets read through, "Are they hiding something again?"

Reid MercerRight. And now flash forward to September, Bonta's own office is out there calling this new October date standard course.

GrantWait, his own team is downplaying it?

Reid MercerYeah. Deadline's reporting has him saying basically, "Don't get excited. This doesn't mean a settlement's imminent."

GrantThat's an odd thing to say if you're trying to sell the meeting as progress.

Reid MercerUnless you're not trying to sell it as progress. Unless you're managing expectations because you already know it's a formality.

GrantThat's a strange note to strike if you want people writing, "Talks are back."

Reid MercerMaybe that's the point. Lower it now, and nobody can call October a failure later.

GrantTheWrap had the same office line, too. A case of this magnitude, standard course, no signal of an actual deal coming.

Reid MercerAnd Paramount's not exactly rolling over either. In their own filings, they called the state's whole antitrust case not the product of sound economic analysis.

GrantThat's a real swing to take.

Reid MercerThat's not a company signaling flexibility. That's a company telling a judge the other side doesn't have a case.

GrantSo while everyone's staring at the calendar, both sides quietly filed briefs that said, "We haven't budged."

Reid MercerThat's the tell, actually. You don't usually see a defendant that confident in a filing if they think a deal's close.

GrantSame with Bonta's side downplaying the whole date before it even happens.

Reid MercerBasically, Bonta's camp saying, "Don't read into this," Paramount's camp saying, "Your legal theory is garbage."

GrantNobodys moved an inch.

Reid MercerSame fight it was back in May, just with a court date attached now.

GrantSo walk it through. You had two open questions at the top of the show. Is this progress, and has anyone actually moved off their position?

Reid MercerRight. And they collapse into the same answer.

GrantNo and no.

Reid MercerThe order forces everyone to show up. It doesn't force anybody to change their mind.

GrantWhich is a very different thing than a breakthrough.

Reid MercerBut wait, there's a wrinkle in why this fight exists at all that nobody's really sitting with.

GrantWhat do you mean?

Reid MercerEverybody's treating this like a pure competition case, market share, ticking fees, all of it. But there's a piece of this that's a lot more personal than that. So here's a piece of this that actually caught me off guard.

GrantYeah?

Reid MercerDavid Ellison wrote an op-ed in The New York Times back in August, and he's arguing the whole lawsuit isn't really about market share.

GrantThen what is it about?

Reid MercerControl. Specifically, who controls Paramount once the merger closes. He's saying the AGs and the WGA don't trust what he'll do with the network, and that's the actual fight underneath the antitrust language.

GrantWait, the guy being sued is telling the Times his accusers have the wrong motive?

Reid MercerBasically.

GrantThat's bold.

Reid MercerIt's something.

GrantWhat did Bonta's office say to that?

Reid MercerThey didn't let it sit. On the record, they called it a clear-cut antitrust case under federal law. Two sentences, no hedging.

GrantSo nobody official is buying a personal grudge read.

Reid MercerCorrect. But think about why Ellison's making that argument in public at all.

GrantBecause a CNN framing plays better than the antitrust one.

Reid MercerOr he actually believes it, and he's sick of losing the story to the states.

GrantDoes it matter which one's true?

Reid MercerI think it matters a lot. If this is really about who runs a newsroom, you can't fix that with a settlement about pricing or distribution.

GrantCounterpoint, if it's personal, it might be easier to close. You can flatter an ego. You can't negotiate away a federal violation.

Reid MercerMaybe. Or the ego digs in harder because now it's not a business call, it's his legacy on CNN.

GrantFair.

Reid MercerThink about what that actually means for October, though. If the real dispute underneath all this is trust over who's running a newsroom day to day, then price concessions and distribution tweaks don't touch it at all. You can't buy back trust with a spreadsheet.

GrantWhich is a strange position for a settlement conference to be built around. Everybody in that room is fluent in market share and licensing fees. Nobody's fluent in, "Prove to us you won't turn CNN into a mouthpiece."

Reid MercerSo what would even satisfy that kind of demand? Some kind of independent editorial board, a firewall clause, something concrete enough for the AGs and the WGA could point to it and say, "See? He doesn't have unilateral control"?

GrantMaybe, but Paramount isn't walking into that room offering to give up control of CNN. If Ellison's own op-ed is right, that's the exact thing he's fighting to hold onto, which means this piece of the dispute might be the least negotiable part of the whole case.

Reid MercerAnd Bonta's teams read that op-ed. They're not gonna let, "It's just about CNN," become the headline heading into that room in October.

GrantRight. A clear-cut antitrust case doesn't leave space for a personality dispute.

Reid MercerExactly. So publicly, at least, they're holding the line as structural, not personal.

GrantOkay, so if underneath it really is personal, the control fight, the trust problem with CNN, follow the money. What's actually sitting on the table when these people walk into that room?

Reid MercerOkay, so before we get to what Bonta wants, Paramount's got a move of their own on the table. They want the states and the WGA to post a bond.

GrantHow much?

Reid MercerTheWrap reported it's one point nine billion dollars.

GrantNineteen hundred million dollars just to keep suing them?

Reid MercerVariety's number is a hair lower, one point eight eight billion, but same ballpark.

GrantThat's not a bond. That's a moat.

Reid MercerRight. It's supposed to cover what Paramount calls ticking fee losses, money bleeding out every day the merger's tangled up in court.

GrantSo the theory is delay costs Paramount real money, and they want the other side to be the one holding that bag if they lose.

Reid MercerExactly.

GrantI've seen this move before, actually, just not at this scale. When a buyer wants a deal dead quiet, you make the objection expensive. Price the fight so high nobody wants to keep fighting.

Reid MercerYou think that's what this is?

GrantI think a state AG and a writers union do not have two billion dollars sitting around to risk on a hunch.

Reid MercerNo kidding.

GrantSo even if Bonta's dead right on the law, this bond changes the math on whether it's worth staying in the ring.

Reid MercerAnd there's a date attached. A ruling on whether the bond even gets ordered was expected around September twenty-fourth.

GrantSo we'll actually know soon whether the ruling judge buys it.

Reid MercerWe will, and that ruling lands before anybody sits down in October.

GrantWhich means the settlement conference could open with Paramount either holding a two billion dollar hammer or getting told, "No, put it away."

Reid MercerThat's a hell of a coin flip to walk into a courtroom on.

GrantIt's not subtle. You don't ask for a number that big because you're preparing to compromise.

Reid MercerYou ask for it because you want the other side exhausted before the real conversation even starts.

GrantRight. This isn't Paramount softening up. It's Paramount raising the cost of the state staying at the table at all.

Reid MercerWhich, fine, that's just leverage. Every deal has leverage.

GrantSure, but it tells you nobody's moved an inch. Leverage is what you build when you're still planning to win outright.

Reid MercerAnd practically, that's real money for a state AG's office to justify to a legislature, not exactly loose change lying around.

GrantWhich is the point. Make the states explain to their own budget committees why they're staying in a fight that could cost them billions if they lose.

Reid MercerSo leverage is one thing. What is Bonta actually asking for, though? Like, on paper, what does he say fixes this?

GrantThat's the other half of the story because it's not just no. He's named a specific kind of remedy.

Reid MercerAnd it's apparently not the thing everybody assumes.

GrantNot even close from what I've seen.

Reid MercerWell, don't just sit on it.

GrantPatience. We'll get there.

Reid MercerOkay, so what does Bonta actually want written down on paper, not in a press release?

GrantHe told CNBC back in August, David Faber sat down with him, that settling this thing requires, quote, "robust structural remedies."

Reid MercerStructural, not a fine, not a promise.

GrantRight. And he's drawn a line around what he means by it. He said structural fixes, not behavioral ones, the kind where a studio just promises to release certain titles on a certain schedule.

Reid MercerWait. Behavioral remedies are a whole category? Like they've tried this before?

Speaker 3They have. And Bonta's own words on it were that those content release promises have proven ineffectual. His word, not mine.

Reid MercerSo he's basically saying, "We tried the polite version already, and it didn't work."

Speaker 3That's the read, which tells you where his floor is walking into October.

Reid MercerSo structural means what actually? Divestiture? Spinning off a whole network?

Speaker 3Could be. Could be ownership caps, licensing mandates, something that changes the org chart permanently instead of a five-year pinky promise.

Reid MercerAnd that's expensive for Paramount in a way a behavioral fix never would be.

Speaker 3Exactly. A behavioral fix is a memo. A structural one is a different balance sheet.

Reid MercerAnd a different balance sheet means different shareholders answering different questions on every earnings call afterward. That's not something you undo in a quarter or with an apology tour.

Speaker 3Which is exactly why Paramount would much rather be haggling over a bond number than a permanent change to who owns what pieces of the company for years to come.

Reid MercerNow, here's the piece I keep coming back to. The brief on this episode flags the WGA seat at the table as one of the open questions. Does their presence nudge this towards structural, or is it just optics?

Speaker 3I think it matters more than people assume. The AGs care about market concentration. WGA cares about jobs, staffing minimums, who's green-lighting what.

Reid MercerDifferent demands, same room.

Speaker 3Which either makes Paramount's life a lot harder because now there are two sets of asks.

Reid MercerOr it splits the pressure and lets them play one side off the other.

Speaker 3See, that's the fun part. We genuinely don't know which.

Reid MercerIf I'm Paramount's lawyers, I'm terrified of WGA pushing for staffing guarantees stacked on top of Bonta's ownership demands.

Speaker 3If I'm Paramount's lawyers, I'm betting the two groups don't fully agree on what a win looks like, and I use that.

Reid MercerThat's a real strategy, actually. Divide the coalition instead of settling with it.

Speaker 3It's the oldest move in the book, and it's not just the AGs applying pressure right now.

Reid MercerMeaning?

Speaker 3Meaning there's a whole other track working on Paramount from outside this courtroom entirely.

Reid MercerSo while everybody's staring at San Francisco, there's a whole other fire lit under Paramount from a direction nobody's really talking about, which is Iowa and Montana. Their attorneys general went straight to the Supreme Court and asked the justices to kill the entire case, calling it a politicized enforcement action.

Speaker 3Wait, kill it how?

Reid MercerToss the whole thing. Not settle it, not narrow it, erase it.

Speaker 3Wait, that's a wild swing.

Reid MercerAnd there's a clock on it. The response is reportedly due around September twenty-fifth.

Speaker 3So one day before the bond ruling, two states are trying to blow up the entire lawsuit from underneath everybody else?

Reid MercerRight in the middle of it.

Speaker 3That's chaos.

Reid MercerAnd if the justices actually decide to take it up at all, that's not a quick process. That hangs over Paramount and the states regardless of whatever happens in that October room.

Speaker 3Right. You could get a signed settlement in November and still have this thing lingering at the Supreme Court for months after that.

Reid MercerWhich makes you wonder if anyone in this whole mess actually wants a clean resolution right now, or if everybody's just trying to keep every single option open on every front at once.

Speaker 3That's the cynical read, but it's probably the accurate one.

Reid MercerAnd then you've got politicians weighing in from the other side entirely. LA Mayor Karen Bass came out and said both sides need to, quote, "Come to the table."

Speaker 3Which is a nice sentiment.

Reid MercerVery civic-minded.

Speaker 3Doesn't move a number, though.

Reid MercerNo, but it's optics. You've got a mayor publicly nudging, two red states trying to nuke the case from orbit, a bond ruling, and now a court-ordered sit-down all stacked in the same six weeks.

Speaker 3Okay, here's where you and I actually split on this one.

Reid MercerGo.

Speaker 3I think all that stacked pressure makes late October matter more than it looks. When a Supreme Court challenge and a mayor and a bond deadline all converge on the same room, somebody usually blinks.

Reid MercerI don't buy it. Paramount's still calling the case economically unsound. Bonta's office is still calling it clear-cut. Nobody's filed a number.

Speaker 3Not yet.

Reid MercerPressure from the outside doesn't settle a lawsuit. Money on the table does.

Speaker 3Sure, but pressure is what gets somebody to put money on the table.

Reid MercerWe're gonna find out in about six weeks who's right.

Speaker 3We are.

Reid Mercer'Cause right now, everybody's just posturing in public while a judge makes them sit in a room.

Speaker 3And a mayor cheering from the sidelines.

Reid MercerFair.

Speaker 3All right.

Reid MercerTime to wrap it up. Okay, so where do we land? Grant, you're betting on movement.

Speaker 3I am. Too much stacked on this date. The bond ruling, the Supreme Court petition, the mayor weighing in. Something gives.

Reid MercerI'll take the other side of that bet. Dollar figure or it didn't happen.

Speaker 3Bold.

Reid MercerWe'll know soon enough. This is a late October thing. Mark it.

Speaker 3Circle the calendar.

Reid MercerAnd if the conference gets pushed again, you know we'll be first ones yelling about it on the show.

Speaker 3Loudly, and probably with a spreadsheet.

Reid MercerIf you've got a read on it or you just think one of us is wrong-

Speaker 3Email us, Blueprint@heymato.com, or tag us on social. We want the arguments. We're back every Tuesday. New episode, same two guys arguing about Hollywood's money problems.

Reid MercerSee you in late October and hopefully with an actual number to talk about.

Speaker 3Fingers crossed.