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Now on to the latest in the WarnerMount saga…

Rob Bonta wants Paramount to sell CNN. The California attorney general won’t say that publicly, and his office stuck to its “remains an active investigation” messaging when I asked him directly. But the widespread belief among people close to Bonta is that a divestiture of the news network would be the best way for Democrats to feel not terrible about the Trump-friendly Paramount’s pending $110 billion deal for Warner Bros. Discovery.

If a court won’t block the entire transaction, CNN is a strong consolation prize, I’m told, as Bonta and potentially other blue state A.G.s mull a high-profile antitrust lawsuit that he knows he’ll have a tough time winning. Especially at the outset, since California will need to find a judge willing to issue an injunction to stop a merger that has already been greenlit by the federal government—however shadily—and is barreling toward closing this summer. To stop the deal, the court would need to determine that the states are likely to win on the merits—essentially finding that the combination of two studios and streaming platforms is anticompetitive amid the dominance of media by Big Tech players. Like I said, a long shot.

But Bonta may now feel he’s in a must-act situation. From the beginning, the block-the-merger movement has been much more political than legal. Some of the reasons are standard, especially in an election year: the coming jobs apocalypse—2,500 of them torched in L.A. alone, according to the city, with thousands more elsewhere; further ideological consolidation of everything from news outlets to big-budget movies; and the forced euthanization of Warner Bros., one of the original Hollywood studios and home of historical California artifacts, like the Friends couch. The recent leftward tilt of big-city Democrats, including this week’s wins in New York by Zohran Mamdani–backed candidates with ties to the Democratic Socialists of America, only add to that pressure on Bonta.

Then there are the decidedly non-standard elements that have made this WarnerMount situation something your aunt has heard about, including the increasingly foul stench of corruption—sorry, close ties—between the Ellison family and Trump. The Journal revealed Wednesday that Larry Ellison’s tender embrace of the president in 2024 came with a $45 million check, as well as his suggestion—either explicit or implicit—that CNN will be dealt with at WarnerMount, just like CBS News has shifted rightward under the Ellisons’ handpicked advocacy journalist, Bari Weiss. (Paramount denies Larry or David Ellison promised anything related to CNN.) Meanwhile, Larry is a frequent phone pal of the president, while David was revealed to have contacted a Paramount board member before he owned the company to stomp his feet for a speedier payoff to settle Trump’s 60 Minutes tantrum. (The board member, Barbara Byrne, told the Journal there “was no intent to transmit information, intervene, or collude in the settlement.”)

Pretty gross details, and good fodder for a Bonta lawsuit designed to play in the court of public opinion—and in the inevitable 30-second spots about standing up to “Trump Media.” The foreign money in this deal—Saudis, Qataris, Emiratis—is another headshaker for a news network that heavily influences the perception of the Middle East. But this stuff is all less effective as a legal argument, which is why the smart conversation around WarnerMount is shifting to what is almost certainly a more relevant question: What can the states squeeze out of the Ellisons?

Regulators in Europe and elsewhere are already playing that game. I was gonna report this today, but the Financial Times and Reuters beat me to it: To grease approval of the deal in Europe, Paramount has agreed to end its joint venture with Comcast’s NBCUniversal to distribute movies overseas. United International Pictures, an entity that streamlines the costs of releasing films globally and has seen various studios and territories come and go over the years, seems like a small concession. I doubt the Ellisons will lament that divestiture much.

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So far the E.U. isn’t asking Paramount to divest its kids channels or SkyShowtime, the relatively nascent pay TV service that combines programming from Paramount+ and NBCU’s Peacock. Regardless, multiple sources tell me that Paramount’s retreat from SkyShowtime is already afoot, with a full shift to Paramount+ expected. Monty Sarhan, the C.E.O. of SkyShowtime, will likely exit, and other execs in London are already looking for jobs. Paramount likely won’t announce its demise until the overall WarnerMount deal closes, so ultimately this would be a business decision, not a regulatory concession, unless the E.U. posture changes. Paramount declined to comment on any of this.

Back home in California, Bonta has so far not made any specific divestment requests to Paramount, per sources familiar. This despite Ellison, his top lawyer Makan Delrahim, and other Paramount executives having held several meetings with the attorney general’s office and exchanged multiple letters. At one Zoom get-together this month with officials from California and other states, Paramount brought several economists and experts to argue why the WarnerMount deal is “pro-competition” (David’s term, not mine).

At this point, with the closing expected in mid- to late July, Ellison must realize that Bonta will likely file suit, but the Paramount team continues to hope the A.G. will decide against antagonizing a major California company. After all, if Ellison feels he’s being jerked around by his home state, he could easily direct production dollars to New Jersey or other states—and say so publicly. Not the result Bonta wants when Gavin Newsom and state lawmakers have prioritized “saving” Hollywood with increased incentives to shoot in the state.

So, what is Paramount willing to offer the states? Officially, nothing. But I’m told there is definitely an internal list of potential “remedies,” and they are tied to specific antitrust issues that might be raised, such as the UIP joint venture overseas, not the political concerns that Bonta and Democrats like Elizabeth Warren are so fixated on. (Warren yesterday went after Ellison again, accusing him of wanting to “inject a tilt into the news.”)

Regardless, both Bonta and the Paramount people might be smart to consider these concerns in crafting a deal. Like headcount thresholds at Paramount and Warner Bros., for instance, or specific commitments to keep the two studios operating separately for a set time period. Ellison has repeatedly said he wants to release 15 movies per year from each studio, but would he put that in writing for a commitment of five years? Ten years? Pledges to shoot a certain percentage of movies or shows in L.A. might be interesting, as well. Again, these don’t seem like specific legal remedies under antitrust law, but given the vitriol directed toward Paramount, they could go a long way politically, and that matters.

So what about the big fish: Would Ellison even entertain divesting CNN? Sources at Paramount say no. David is said to have become much more interested in news lately, even as the CBS News situation has caused so many headaches. And he believes CNN will give WarnerMount a competitive advantage over Netflix and Amazon as news audiences transition to streaming. It also still throws off hundreds of millions of dollars in profit per year.

But if the choice is selling CNN or enduring a protracted legal battle and months of delays in closing WarnerMount, potentially driving up the cost of the deal due to ticking fees that begin in October, suddenly that divestiture might seem more palatable. Plus, the economics of WarnerMount suggest CNN is expendable.

First, there would be motivated buyers for that asset, unlike most of the other garbage cable networks Paramount is taking on. Barry Diller recently said he’d buy it “tonight and tomorrow night.” Others would certainly bid. Most analysts believe WarnerMount will need to sell some non-core assets to bring down debt. And while CNN currently serves as a crucial must-carry network in the Warner Discovery bundle, Paramount already has CBS. It’s technically a broadcaster, but because of retrans fees, the combined WarnerMount will be able to use CBS as its own anchor for leverage with distributors, making CNN less important to the overall business.

Except, of course, when it comes to influence, and both Larry and David very much care about the coverage of Israel, among other causes. The question is: Would Ellison put CNN on the table to get this deal done? He’s already begun meetings to integrate the network with CBS News, which will achieve some of his precious synergies. If not CNN, what is he willing to concede, and what, short of a loud yet potentially costly and losing lawsuit, would satisfy California’s top lawyer and all those loud voices on the left?

See you Monday,
Matt

Got a question, comment, complaint, or a U.T.I. at UTA Beach? Email me at Matt@puck.news or call/text me at 310-804-3198.

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