Paramount Skydance’s proposed acquisition of Warner Bros. Discovery has moved closer to completion after Paramount reached a settlement with California and 11 other states that had challenged the transaction in court.

The agreement removes a major legal obstacle to the roughly $110 billion merger, which would combine two of Hollywood’s biggest entertainment companies and bring major film studios, television networks and streaming platforms under one corporate umbrella. However, the deal still requires final court approval before it can close.

The settlement follows months of antitrust concerns from state officials and entertainment industry groups. The states had argued that combining the companies could reduce competition and affect workers, consumers and businesses across the entertainment industry.

New conditions for the combined company

Under the settlement, the merged company will be required to maintain a substantial level of film production in the United States.

Paramount has agreed to release at least 30 theatrical films annually during the first two years covered by the agreement, increasing that number to 32 in the following three years. The company will also commit an additional $300 million each year to domestic film production compared with its 2025 spending level, amounting to at least $1.5 billion over five years.

The agreement also includes financial penalties if the company fails to meet its annual film-production commitments.

Other provisions address movie theaters, cable television and journalism. Paramount and Warner Bros. will have to negotiate their cable channel agreements separately, while a new independent board will oversee editorial independence at CBS News and CNN.

What the merger would create

If completed, the transaction would bring together major entertainment properties associated with Paramount and Warner Bros. Discovery, including Paramount Pictures, Warner Bros. Pictures, CBS, CNN, HBO Max and Paramount+.

The combination would significantly reshape an entertainment industry already undergoing major changes as traditional television declines and streaming services compete for subscribers and original content.

The companies have argued that the merger would give them greater scale to compete in the rapidly changing global media market.

What happens next?

Although the settlement removes a significant legal challenge, the transaction is not yet fully complete.

A federal judge still needs to approve the settlement before the merger can proceed to closing. That distinction is important because the agreement resolves the states' legal challenge but does not itself finalize the acquisition.

The deal has also continued to attract criticism from some entertainment workers and industry groups, who have raised concerns about potential job losses and the effect of greater media consolidation.

For Paramount and Warner Bros. Discovery, the settlement represents a significant step toward combining their businesses. For Hollywood, the outcome could reshape how films are produced, distributed and financed, while the effects on consumers, workers and the wider entertainment industry will become clearer if the merger ultimately receives final approval.