Paramount has reached a settlement with 12 states regarding its $110 billion merger with Warner Bros. Discovery. The agreement requires the combined entity to increase its domestic production spending by at least $300 million and adhere to specific film release quotas for a period of five years.
During the first two years of the agreement, the company must release at least 30 films annually. Failure to meet this target will result in a penalty of $30 million per missing film, payable to union-managed healthcare and retirement funds. For the subsequent three years, the annual requirement increases to 32 films.
If the merged studio fails to meet these obligations at any point during the five-year term, it must divest its 49 percent stake in Miramax Studios to a competitor. Additionally, the settlement stipulates that at least 20 percent of the released films must have production budgets exceeding $50 million.
The company can fulfill these quotas by distributing films acquired from third-party production houses, rather than producing them internally. Historically, Paramount and WBD have averaged 15 and 17 annual releases respectively, meaning the new entity must significantly increase its output to comply with the settlement terms.
