• by Wendy Davis , Yesterday

A California-led coalition of 12 states on Monday has agreed to drop its challenge to Paramount Skydance's $10 billion acquisition of Warner Bros. Discovery in exchange for the company's promise to follow conditions aimed at resolving the states' concerns over the merger.

Among other terms, Paramount agreed to produce and distribute at least 30 films a year for the first two years after the merger, and 32 films a year for the following three years.

The company also promised that for five years following the merger it will negotiate licensing fees for Paramount "basic" cable and Warner Bros. "basic" cable separately. That promise doesn't extend to premium cable, streaming services or broadcast.

Paramount additionally will create an editorial board of independent journalists who will establish editorial principles based on existing policies at CBS News and CNN, and resolve disputes between the news side of those companies and Paramount management.

The deal removes a major hurdle to Warner Bros. acquisition by Paramount, which is controlled by Trump allies Larry Ellison and his son David Ellison.

The Justice Department in June approved the merger, but the California-led coalition of 12 states sued in July to block the deal. They alleged the merger would violate antitrust law by eliminating competition between Paramount and Warner Bros.

The states specifically argued that the merger would leave the country with just four major film distributors, and that a combined Paramount-Warner Bros. would control more than 30% of "anticipated blockbusters" -- meaning big-budget films likely to earn more than $100 million in box-office revenue.

The attorneys general also said the merger would leave the combined company in control of more than 50 basic cable channels, giving it more leverage with distributors.

In July, U.S. District Court Judge Araceli Martinez-Olguin in the Northern District of California issued an order that temporarily prevented the merger from closing. On Monday, the state attorneys general asked Martinez-Olguin to revoke that order and approve the settlement.

The Writers Guild of America had also sued to block the deal. On Monday, the union filed court papers seeking to dismss its suit.

Advocacy groups that opposed the merger denounced the proposed resolution.

“This settlement is disappointing, and does not address the central problem with this merger: the loss of competition," John Bergmayer, legal director at Public Knowledge, stated Monday.

He stated that the merger will result in "fewer studios competing for scripts and talent," and also "gives one company greater power to dictate terms to distributors, and reduces streaming choices."

"While independent editorial boards for CBS and CNN may be better than nothing, they are far short of actual independence," he added.

When the states challenged the merger on antitrust grounds, the lawsuit didn't include allegations about the possible impact on editorial decisions at CNN. But observers say some critics were clearly concerned by how the merger would affect CNN's news coverage.

"Political control of CNN was motivating a lot of the actors that were objecting to this merger," Bergmayer tells MediaPost.

He adds that those concerns might not have been part of the legal case because they are "hard to fit into an antitrust lens."

As of Monday evening, the settlement agreement awaited Martinez-Olguin's approval.