Paramount Skydance has reached a settlement with California and 11 other states that sued two months ago to block its $110 billion merger with Warner Bros. Discovery, clearing the way for a consolidation of two major Hollywood studios.

California Attorney General Rob Bonta announced the agreement at a news conference in Los Angeles, saying it would support local employment and domestic film production. The settlement, enforceable for up to five years, does not fully meet the states’ original demand to stop the merger, which they had described as unlawful. "I don’t think these two companies should merge," Bonta said, "but that’s not something we are focused on with our resolution here."

Under the terms, Paramount will increase annual U.S. production spending by at least $300 million and release a minimum of 30 films each year for the next two years, rising to 32 films annually for the following three years. The company will also create a board of journalists to oversee editorial independence at CNN and CBS.

The merger would combine Paramount and Warner Bros. studios, the television networks CNN and CBS, and the streaming platforms HBO Max and Paramount+. Paramount chief executive David Ellison, son of Oracle co‑founder Larry Ellison and a known supporter of former President Donald Trump, would lead the combined entity. Warner Bros. had initially agreed to sell most of its assets to Netflix, but Paramount Skydance’s hostile bid forced Netflix to withdraw. The Justice Department cleared the deal in June, but a federal judge later paused it after a lawsuit from 12 Democratic state attorneys general, led by California, raised antitrust concerns.

Connecticut Attorney General William Tong said he had sought a full divestiture of CNN and CBS to protect independent journalism. "We wanted to save ethical and independent journalism and news," he wrote. "I am deeply disappointed that we could not do more."

Bonta noted that all 12 states had signed onto the settlement. As part of the agreement, Paramount and Warner Bros. must continue negotiating cable packages separately for five years, effectively maintaining them as distinct offerings post‑merger. The company will also contribute $5 million annually to a fund for independent film acquisition and $9.5 million each year to workforce training and community organizations. Additionally, Paramount must produce at least four independent films per year to diversify storytelling perspectives.

The settlement ties future U.S. production share to the passage of a federal film tax credit of at least 20 percent. If such a credit is enacted, Paramount would be required to raise its domestic production share from the current 5 percent to 20 percent, and up to 40 percent if combined with an uncapped state tax credit. Both California and New York already offer limited state‑level film incentives.

Bonta emphasized the deal’s benefits for job creation in Hollywood, citing conversations with industry workers who would be affected. Governor Gavin Newsom praised the settlement as a way to avoid prolonged litigation and protect thousands of California jobs. Ellison, in a statement, thanked the attorneys general, the Writers Guild of America and Governor Newsom for their cooperation.

The settlement also includes provisions that prevent Paramount from closing or selling the Paramount and Warner Bros. film production lots in Los Angeles County, addressing earlier speculation about a potential relocation. The Writers Guild of America has agreed to drop its separate lawsuit, securing a five‑year ban on layoffs at CBS News Broadcast and a $17.5 million contribution to a health‑care fund.

While some officials expressed disappointment, Bonta argued that the agreement resolves the antitrust concerns identified in the original complaint and provides a pragmatic path forward, despite the inherent risks of litigation.