Blueprint #39: The Paramount Consent Decree

Reid MercerOkay, Grant, count with me. How many episodes have we spent staring at a locked door with Bonta's name on it?

GrantTen. Eleven if you count the one where we just yelled about a TRO for twenty minutes.

Reid MercerThe Order Nobody Asked For. Great title, terrible news cycle.

GrantAnd does talks even mean anything? Turns out, sort of.

Reid MercerThis is Blueprint. I'm Reid Mercer, that's Grant, and for the first time all season, we're not speculating.

GrantWe have paper. Signed paper.

Reid MercerAn actual settlement, Grant. Words on a page instead of us guessing what's happening behind a canceled meeting. Twelve states, the WGA, Paramount. It's real, and it's dense. Wait for it. There's a whole editorial independence board buried in here.

GrantOh, that's the part where this gets ugly fast.

Reid MercerAn FCC commissioner already has thoughts. So does a press freedom guy.

GrantShocking.

Reid MercerWe'll get there. But first-

GrantWe actually read the thing.

Reid MercerLet's see what Paramount signed away to make Bonta go home. Okay, so Deadline actually broke this on a Monday afternoon. No advance warning, no leak, just settled.

GrantNo leak? After everything we've watched leak out of this deal?

Reid MercerZero. Deadline's headline literally says, "Done," like they couldn't believe it either.

GrantThat's wild because Bonta's whole posture for months was that this merger was dead on arrival.

Reid MercerThat posture wasn't just talk either. He had lawyers in courtrooms threatening to blow the whole thing up as recently as a few weeks ago.

GrantWhich is exactly why settled quietly on a Monday feels like such a plot twist.

Reid MercerRight, and now the last obstacle just evaporated. That's their phrase, not mine, but it tracks.

GrantNPR's version of the story frames it a little differently, though. They say Paramount's owners made concessions to get this across the line.

Reid MercerConcessions. Not victory, not vindication, concessions.

GrantWhich is a very different verb than won.

Reid MercerIt absolutely is.

GrantAnd that's the tension for this whole episode right there.

Reid MercerWait for it because now we actually get to test it. Is this a real structural check on how Paramount runs this combined company, or is it Bonta finding a way to walk out of a fight he was never gonna finish?

GrantHe spent months on television calling remedies like these disqualifying, not good enough. Now he's the guy who signed off on them.

Reid MercerSo either the remedy has got a lot stronger between June and September-

GrantOr the political math got a lot weaker for him. One of those two things happened.

Reid MercerMaybe both a little.

GrantMaybe both. But we don't have to guess because we've got the actual terms now.

Reid MercerWe do. Five separate pieces, and they're not equally scary.

GrantSome of it reads like real teeth. Some of it reads like a press release with a signature on it.

Reid MercerAnd the only way to know which is which is to open the document and go line by line.

GrantWorth saying out loud why this matters beyond us being curious. This is the framework Paramount operates under for years, not just a headline for one week.

Reid MercerRight. Whatever's actually enforceable here shapes how much leverage regulators keep once the ink dries. That's the stake underneath all the term by term stuff we're about to do.

GrantSo let's do that. Start with the boring one that isn't actually boring at all, the cable money, the affiliate fee stuff. That's the one that actually touches revenue Paramount collects every single month, not some five-year-out promise.

Reid MercerRight. So let's go term by term, starting with the money side of the cable business. So the affiliate fee piece, five years Paramount can't touch cable carriage negotiations. That's the firewall.

GrantFive years is a long time in cable. Half these affiliate deals won't even survive that long.

Reid MercerRight. Some of these networks might not exist in five years.

GrantExactly. So is that a real muzzle or just betting on the industry to solve it for them?

Reid MercerBit of both, honestly. But wait, there's more. The theatrical mandate is where it gets spicy.

GrantThirty films a year.

Reid MercerThirty films a year, guaranteed theatrical release. Miss the number, thirty million dollars per film.

GrantPer film short.

Reid MercerPer film short. So if they're five movies light, that's a hundred and fifty million dollars.

GrantWhew, okay. That actually has some weight to it.

Reid MercerDoes it, though, against a one hundred and eleven billion dollar combined company?

GrantI mean, compare it to a parking ticket for a guy who makes eight figures. You're not thrilled, but he's not selling the house.

Reid MercerA very expensive parking ticket.

GrantThat's my point. Thirty million sounds huge until you put it next to the size that the thing is attached to.

Reid MercerVariety's rundown on the settlement terms actually flags both of these, the theatrical mandate and the affiliate fee provision, as two of the specific concessions the AGs walked away with.

GrantSo it's not just us reading tea leaves off a press release.

Reid MercerNo, it's in the actual terms breakdown. Line items.

GrantHere's what gets me, though. Thirty films a year is a lot of movies to force into theaters when half the industry's been trying to shrink theatrical windows for the last five years.

Reid MercerThat's the tension. Bonta wants bodies in seats. The studio wants flexibility.

GrantSo this is basically Bonta legislating against the streaming pivot.

Reid MercerA little bit, yeah, which is wild when you think about who's supposed to be running this business.

GrantDevil's in the details on enforcement too. Who's actually counting the releases? Who certifies the shortfall?

Reid MercerWe don't know that yet.

GrantFair.

Reid MercerBut even taking it at face value, a theatrical mandate with real money attached is a stronger tool than most people expected out of this thing.

GrantStronger than the fee firewall?

Reid MercerDifferent kind of strong. The firewall protects a shrinking business. The theatrical clause protects jobs on a set.

GrantGrips, gaffers, below the line crews.

Reid MercerExactly. The people this whole merger conversation keeps forgetting about.

GrantOkay, so money penalties are one thing. What happens with the actual production spending commitment, the number attached to keeping people working?

Reid MercerThat's the next line item, and it's bigger than either of these. Okay, so get this. Buried in the same filing is a number that's actually bigger than the theatrical penalties combined.

GrantBigger how?

Reid MercerParamount's on the hook for three hundred million dollars a year in new US production spending. Not total spend. Incremental, on top of whatever they were already doing.

GrantOn top of or dressed up to look like on top of?

Reid MercerThat's the fight, right?

GrantBecause I've read a hundred of these decrees in my old life, and incremental is doing a lot of work in that sentence. Companies love baking in spending they'd already budgeted and calling it a concession.

Reid MercerSo you think this is basically free?

GrantI think it depends entirely on what their baseline was before the ink dried, and nobody's telling us that number.

Reid MercerFair, but three hundred million a year, five years, that's real money moving into union paychecks and soundstages regardless of the accounting.

GrantIf it's actually new. If it's not...

Reid MercerWe're going in circles.

GrantWelcome to every merger settlement ever.

Reid MercerStill, three hundred million a year isn't nothing to argue about. That's the kind of number that either funds real productions or just gets absorbed into the same budget lines they'd used anyway.

GrantAnd until somebody publishes the before and after budget, we're both just guessing which one it is.

Reid MercerSwitching gears, there's a wrinkle here that's separate from the states entirely. Variety reported the Writers Guild settled its own antitrust suit against Paramount over this same merger.

GrantWait, a whole separate lawsuit?

Reid MercerYeah. The WGA had sued to block the deal on its own, and now that's resolved too.

GrantSo it's not just Bonta walking away happy. The writers got their piece signed off before this ever hit the state settlement.

Reid MercerTwo different plaintiffs, two different tracks, same defendant writing checks.

GrantThat actually tells you something. If the guild that represents the people making the content is satisfied enough to drop its own case, the production spend number is probably not nothing.

Reid MercerIt's a decent tell. Guilds don't usually walk away from leverage unless they've actually gotten paid for it.

GrantSure, but a settlement isn't a blank check either. Writers wanted protections on set jobs and residual structures too, not just a headline number.

Reid MercerSo where does that leave the test?

GrantSame test as everything else in this thing. Does it force Paramount to do something it wouldn't otherwise do, or does it just put a number on business as usual?

Reid MercerRight. And on production spend, we genuinely don't know yet.

GrantWhich is more than we can say about the next part of this settlement because the newsroom piece isn't a math problem. People are already yelling about it in public.

Reid MercerAh, this is the one everybody's been waiting for. Okay, so the newsroom firewall, there's an actual Board now watching CNN and CBS News.

GrantRight. The Editorial Independence Board. That's the piece everybody's fighting about.

Reid MercerFive journalists, and here's the rule. No more than two of them can come from the same political party.

GrantAnd the government doesn't get to approve who sits on it.

Reid MercerWait, none at all?

GrantNone. Deadline's reporting on this is specific. No approval rights over appointees, full stop.

Reid MercerSo Sacramento can't handpick the referees. That's actually meaningful on paper.

GrantOn paper.

Reid MercerI knew it.

GrantI'm just saying, Anna Gomez, she's the Democrat on the FCC. She went on record about this.

Reid MercerWhat'd she say?

GrantShe called the protections untested and said there's real reason to be skeptical they'll hold.

Reid MercerThat's a commissioner, not a random pundit.

GrantRight. Someone who actually regulates this industry saying, "Don't celebrate yet."

Reid MercerWhat's her actual worry, though? That the board won't have real independence or that nobody will notice if it doesn't?

GrantThis sounds like both. She's basically saying paper rules don't stop a network from getting leaned on quietly, and nobody outside the room would know.

Reid MercerOkay, but untested isn't the same as broken. Every new oversight body starts untested.

GrantSure, except then you've got Seth Stern from Freedom of Press Foundation going further.

Reid MercerHow much further?

GrantHe called the whole board worthless.

Reid MercerWorthless? That's a word.

GrantHis argument is you can't actually enforce editorial independence without the AGs themselves reaching into the newsroom, which defeats the point of having independence in the first place.

Reid MercerSo the enforcement mechanism is the thing that would violate the mechanism.

GrantBasically. It's a paradox by design or a loophole by design. Pick your read.

Reid MercerThat's actually a smart way to frame it. The same power that would prove the board works is the power that would prove it doesn't.

GrantRight. There's no clean version of enforcement here. Somebody always ends up with their hand near the newsroom.

Reid MercerI don't think that makes it worthless. I think it makes it hard to test until something actually happens on air.

GrantFair, but you've got a commissioner and a press freedom advocate both landing in the same place within days of each other.

Reid MercerTwo skeptical voices isn't a verdict, though. Boards like this always draw skepticism before they've ruled on anything.

GrantMaybe. I just don't love that the loudest praise for this thing is coming from Paramount's own press release.

Reid MercerFair point, though nobody's exactly lining up outside Paramount's PR department to independently verify this thing.

GrantWhich is sort of the whole problem with self-policing structures generally. The company writing the press release isn't the one who needs convincing.

Reid MercerOkay, that's fair. So we've got a five-person board with real structural rules and two credible critics saying it can't bite.

GrantBoth true at once. That's where we sit. Speaking of things nobody's tested, what about the lots? Paramount promised not to touch the physical studio lots.

Reid MercerRight. That's next. Different kind of promise entirely. All right, so lots. Nobody's touching the actual dirt Paramount and Warner Bros. sit on.

GrantThe filed consent decree spells it out too. There's a lot operations clause that bars selling or shutting down either studio lot for the length of the deal.

Reid MercerWait, both lots? Not just Paramount's?

GrantBoth. Paramount's and Warner's. Nobody's allowed to quietly flip either property while the ink's still wet.

Reid MercerHow much does that actually protect, though?

GrantEvery crew and vendor that depends on those sound stages staying open. Grip trucks, catering, post houses, the whole ecosystem that lives around a lot.

Reid MercerSo it's the ecosystem on top of the dirt that actually matters.

GrantRight. And locking that up in writing closes a door Bonta clearly worried about.

Reid MercerSpeaking of doors closing, remember how confident Bonta sounded about keeping the headquarters in California?

GrantYeah, and TheWrap went through thirty-two pages of this thing, and that requirement isn't actually in there.

Reid MercerWait, seriously? He was so sure.

GrantTheWrap's breakdown says it's just not written into the decree. What is written in is an independent monitor plus a five-state committee watching compliance going forward.

Reid MercerSo instead of a headquarters promise, we get watchdogs.

GrantWatchdogs with an actual mechanism, though. Here's the one that has real bite. Go. If Paramount misses its cable commitments, TheWrap's analysis says they could be forced to divest channels, BET, Comedy Central, VH1, inside of a hundred and twenty days. A hundred and twenty days. That's fast for anything corporate. It's a trigger, not a negotiation. Miss the number, start the clock.

Reid MercerBut that only matters if the AGs actually catch a miss in real time.

GrantThat's what the monitor and the committee are for. Somebody has to be watching the actual delivery numbers, not just taking Paramount's word for it.

Reid MercerFair. Still, forcing a company to sell BET is a very different threat than forcing them to keep a building standing.

GrantOne's a paperwork promise. The other's an asset seizure with a clock running.

Reid MercerCompare that to the lot pledge, which is basically, please don't sell the dirt.

GrantRight. The lot clause and the board are behavior promises. The divestment trigger is a deadline with actual consequences attached.

Reid MercerSo out of everything we've walked through, that's the one you'd bet actually gets enforced?

GrantIf I had to put money on which clause gets tested first, yeah, the channels.

Reid MercerOkay. So win, cave, or something in between?

GrantTime for the verdict.

Reid MercerSo Alvaro Bedoya, remember him? Former FTC commissioner. He's on record with NPR calling this whole thing billionaires getting their way by leaning on Bonta and Newsom.

GrantThat's a hell of a quote from a guy who used to sit on the commission.

Reid MercerRight? He's basically saying the state buckled under pressure from the ownership side, full stop.

GrantWhich is the caved read dressed up in a sentence.

Reid MercerBut I don't buy it as the whole story. You've got real dollars attached, the shortfall penalties, the production spend, an actual monitor watching the lots.

GrantSure, dollars exist. Whether they bite is a different question.

Reid MercerA consolidation this size was going to happen with or without Bonta.

GrantProbably.

Reid MercerAnd look, a hundred and eleven billion dollar deal doesn't get blocked forever by one state coalition, no matter how loud the threats get.

GrantSure, but inevitable doesn't mean the terms along the way don't matter. That's the whole reason we've spent ten episodes on this.

Reid MercerSo getting financial teeth into the deal on the way through, I call that a correction, not a surrender.

GrantHere's where I land differently. The board and the lot pledge, those read like Bonta's exit ramp, something he can point to and say he got something.

Reid MercerAnd the divestiture trigger?

GrantThat's the one piece with actual weight. Everything else is optics dressed as oversight.

Reid MercerYou've said some version of that three times now.

GrantBecause it keeps being true every time we check a new term.

Reid MercerFair.

GrantI'll grant you that pattern's held up every single time we've tested it against a specific term.

Reid MercerWhich is why I keep saying it. It's not a hunch anymore. It's the one consistent thread through the whole document.

GrantFair. Bedoya's not wrong that pressure worked. I just think it worked on the softest stuff, not the cable piece.

Reid MercerSo we've got a guy who used to run antitrust enforcement calling it a loss for the state and a divestiture clock that says otherwise.

GrantBoth true at once. That's the messy part.

Reid MercerWhich honestly tracks the whole story of this thing. Bonta canceling meetings, threatening to blow the deal up, and now signing off on terms softer than what he was demanding.

GrantThe position moved a lot.

Reid MercerFrom disqualifying in June to a signature in September. That's not a small shift for a guy who built his campaign brand on being tough on this deal.

GrantIt's the kinda shift that makes you wonder what actually happened behind closed doors that we'll never see in a press release.

Reid MercerIt did. Whether that's growth or fatigue, I genuinely don't know.

GrantI don't think we're settling that tonight.

Reid MercerNo, I think it stays open. Win, cave, something in between. Pick your seat.

GrantI'll take my seat next to the divestiture clause and call it a night.

Reid MercerOf course you will.

GrantAll right. That's the debate for now.

Reid MercerLet's close it out. Okay, so my verdict. Bonta walked away with something real. The divestiture trigger has actual weight.

GrantMine's softer. I think he wanted a bigger scalp and settled for a hundred and twenty days of paperwork nobody's tested yet.

Reid MercerFair, but a company doesn't build in a channel divestiture clock for fun.

GrantMaybe. Or maybe it's the cost of getting Newsom off the phone.

Reid MercerWe're not settling this today, are we?

GrantNope.

Reid MercerAll right. Email us, blueprint@heymato.com. Tell us who won.

GrantTag us wherever you post. We actually read it.

Reid MercerAnd if this saved you from skimming a thirty-two page filing yourself.

GrantSend it to the one friend who actually cares about this stuff.

Reid MercerNew episodes every Tuesday.

GrantHonestly, I just wanna know what Bonta says next time cameras are on him.

Reid MercerSame. See you next week.