The argument over the Paramount consent decree this past week was whether it can be enforced. The decree we got does not decide the question the states sued over, which was whether a combined Paramount and Warner Bros. lessens competition. My view is that the decisive answer to that question was given on June 12, when the Department of Justice closed its investigation without conditions, and that everything since, the state lawsuit, the ticking fee, the settlement, and the decree, is what happens when the enforcer with the authority to keep two companies apart decides not to use it. So let me say plainly what the rest of this piece is evidence for. I am disappointed in how this played out. I think the Justice Department chose politics over its own staff’s judgment, and I think the states, knowing their case was a long shot and the clock was against them, still settled for less than they should have.
Three shows sent me back through the record, this year’s and 1948’s. On Inside the Stream, Will Richmond called the production commitment squishy and the per-film penalty cheaper than a film. On Cartographer’s Log, Evan Shapiro admitted he had expected structural remedies and then described a trustee reporting to the court with liquidation as a remedy. On Cord Killers, Tom Merritt read the terms straight and Brian Brushwood called the whole thing scaffolding so the people inside don’t take the full shock when the change everyone knows is coming arrives. All three were arguing about the settlement. I kept thinking about the other times Paramount, under very different leadership, had contended with regulators.
What the federal government decided
The Antitrust Division’s closing statement from June is worth reading in full, because it describes the problem and then declines to act on it. It examined streaming, linear television, and theatrical film.
On streaming it found the two companies were late entrants who would compete harder combined, and it said plainly that YouTube and TikTok are not substitutes under existing precedent. On linear television it found the market in decline and competition for live rights robust. On theatrical film it found smaller studios making bigger bets, cited A24 and Amazon and Lionsgate, and in a footnote invoked a 1974 Supreme Court case to warn against relying on historical market shares. It dismissed the labor theory in a paragraph. It called its own review rigorous, eight months, two million documents, led by career staff, with the states sitting in on depositions.
Then it listed AOL and Time Warner in 2001, AT&T and Time Warner in 2018, and Warner Bros. and Discovery in 2022, and observed that the legacy of those deals shows what happens when a merger’s commercial logic does not line up with the acquirer’s competitive incentives. It called Warner Bros. a repeated acquisition target, which is fair. And it cleared the fourth acquisition of the same asset in 25 years with no divestitures, no conduct remedies, and no concessions, concluding the deal would increase competition.
Four days later the Wall Street Journal reported that senior officials had closed the investigation before the career team could deliver its recommendation, and that the team had been leaning toward a lawsuit. In March the acting head of the Division had said the deal would not be fast-tracked for political reasons. Paramount’s chief legal officer is Makan Delrahim, who ran the Antitrust Division in the first Trump administration and who brought and lost the AT&T case the Division’s own statement now cites. None of that proves the decision was wrong. It establishes that the decision was a choice, made at the top, over the reported objection of the people who did the eight months of work. I cannot prove motive from outside. I can say that if you set out to design a clearance that looked political, it would look like this one, and I am disappointed the Division let it.
The case the states brought
A month later, twelve states filed under Section 7 of the Clayton Act. Their complaint defined three markets narrower than the ones the DOJ examined, wide-release theatrical distribution, distribution of anticipated top-grossing films, and licensing of basic cable channels to distributors. In each, the combined shares cross the concentration thresholds at which the government’s own merger guidelines presume harm. Five major studios take about 80 percent of the domestic box office, and the deal makes them four. The combined company and Disney would control 59 percent of basic cable. On July 20 the judge granted a temporary restraining order, writing that the states had shown “serious questions going to the merits”, and set a trial for March.
So the competitive case was strong enough to pause an $111 billion deal for two months. It was the case the federal government had the record to bring, with the depositions the states had only sat in on, and the resources of the Antitrust Division rather than twelve state offices. The states brought it alone, against a company that called it one of the weakest merger challenges in modern history, with a $7 million a day ticking fee due to start running against the company on October 1 and a bond motion for $1.88 billion pending against them. That is the position from which the settlement should be judged.
What the settlement is
The proposed decree is 32 pages, about a third of them signatures, and it is not yet entered.
It protects real things. The lots cannot be sold or closed for five years, and Shapiro is right that real estate was a large line in the $6 billion synergy case Ellison sold investors. Every film counted toward the release quota gets a 45-day theatrical window and a 90-day holdback from subscription streaming, and exhibitors keep the better of the two companies’ rental terms for three years. The quota is 30 theatrical releases a year for two years and 32 for three more, with floors on wide releases and independent films and at least half the slate produced or co-produced by the company. Miss it and the company owes $30 million per film to union funds, the Motion Picture & Television Fund, and a state antitrust fund, and an uncured shortfall means divesting Miramax. The two cable portfolios must be negotiated separately, and a material breach that survives cure means divesting six named channels. Pluto TV must stay free at current quality.
It leaves the market where it found it. The Monitoring Trustee is jointly selected by the company and a committee of state attorneys general, reports to that committee rather than the court, and is barred by the decree’s own language from any role in day-to-day operations, news, or content. Enforcement begins with a meet and confer within thirty days, mediation if either side wants it, and then a state seeking an injunction. The largest commitment, $300 million a year above 2025 US production spend, has no monetary penalty attached and no disclosed baseline figure. A force majeure clause excuses performance to the extent a recession, a strike, or a pandemic prevents it, and when the judge asked about it on September 24 the parties’ answer was the strikes and the pandemic. After two years the company can petition for relief if it can show the decree impairs its ability to compete and the change is not substantially likely to lessen competition. There is no requirement to run the studios as separate divisions. There is no divestiture on day one. Apart from a few unfinished obligations, it all expires at the end of the fifth calendar year after closing.
What the states could do alone
Rob Bonta said at the podium the settlement was “not a vote of support for this merger” and that he did not think the companies should combine. The Block the Merger coalition’s amicus brief opens by quoting his earlier insistence on structural remedies back at him. Shapiro reports that New York wanted to let the fee run. California settled ten days before it started, with Newsom and Bass pushing and a relocation threat on the table.
I am not going to absolve the states, and I am not going to pretend to be neutral about them either. They brought a challenge, won a restraining order on it, said only divestitures would do, and then took a decree with none. I understand why. Their case was narrower than the one the federal government could have brought, a March trial against a defendant with Paramount’s budget was a real risk, and the fee clock was theirs to lose. Settling for concrete protections instead of gambling on a verdict is a defensible call. It still disappoints me. They had the only restraining order anyone had won, they had the calendar for a few more weeks, and they had said in public that structure was the price. Whether another month would have bought a divestiture is unknowable from outside the room. I wish they had made the company find out.
But it is the second question. The first is why twelve state attorneys general were the only public enforcers in the room at all, carrying a Clayton Act case the federal government had the record and the mandate to bring, against a defendant that could outspend them and a clock that ran in the defendant’s favor. What they got is what a coalition of states can extract when it is the last line rather than the second. The protections went to the parties specific enough to write into a paragraph, unions, exhibitors, two lots, independent film, a news board. Competition is not that kind of party, and the enforcer whose job it is to represent it had already left.
The Wu of it All
I keep reaching for Tim Wu on this deal because he is where I learned to read large media deals. The Master Switch is a history of every American information industry and the pattern he found in all of them. Each one starts open, with many small players, and each one closes, ending in the hands of one company or a cartel that owns the channel and decides what moves through it. He called it the Cycle, and the film chapters run through Paramount. Adolph Zukor built the studio that owned its theaters at scale and used block booking to force exhibitors to take the whole slate to get the hits. It took the government until 1948 to break that, in United States v. Paramount Pictures, and the decrees that followed did two things. They separated the studios from their theaters, and they banned block booking and related distribution conduct. Structure and conduct, together. The Justice Department moved to end those decrees in 2019 on the argument that the market had changed, and a court did in 2020.
Six years later there is a new Paramount consent decree. It has the conduct half. The company may not tie one cable portfolio to the other in a carriage negotiation, which I see as the block booking prohibition rewritten for cable, and it must hold films in theaters for a set window. It does not have the structural half, because the only enforcer that could have insisted on it decided in June that none was needed.
The Curse of Bigness is Wu’s account of how that becomes the default. His argument is that antitrust in the Brandeis era treated concentrated private power as a danger in itself, which is where 1948 came from, and that from the late 1970s the Chicago School and then the courts narrowed the inquiry to effects on consumers, with structural remedies falling out of favor along the way. The current 2023 merger guidelines count wages, quality, and innovation alongside price, so the narrowing is not total, and Wu’s point is about what gets litigated rather than what the guidelines permit. The DOJ’s own closing statement is a fair example. It names the pattern, three prior owners of the same asset and the damage each did, and then treats the pattern as history rather than evidence.
Here is how I use him to read this deal, and this is my application rather than anything he wrote about Paramount. There are two kinds of fixes for a merger that concentrates a market. One is structural. You make the company sell something, or you stop the deal, so that two competitors keep existing instead of one. The other is behavioral. You let the deal close and make the company promise to act a certain way for a period of time. Wu’s history says the first kind is what changes an industry and the second kind is what regulators reach for when they have decided against the first.
Only the federal government could realistically have forced the structural fix here. It had the full record, the depositions, the budget, and a statute written for exactly this. In June it passed. Once that decision was made, the states were left with the second kind of fix, because that is the only kind a smaller enforcer can get from a company that has already been cleared. And a behavioral fix has a built-in limit. You can only write promises for parties you can name. You can write a paragraph for theater owners, for unions, for a studio lot, for an independent film fund. You cannot write a paragraph for competition itself, because competition is the thing two separate companies produce by existing, and by June there was going to be one.
So read the decree that way. Every page of it is a promise to a named party. The 32 pages are what the states could get once the only enforcer that could have asked for more had already said it would not.
Year six
This is where the deal touches the thesis I have been writing under for a year, that the model layer commoditizes and governance accumulates the durable value. Twelve states in effect bolted a governance layer onto a media company as the price of letting it exist. An output quota, a spend floor, a monitor, a negotiating firewall, an editorial board. That is public accountability, which is a different thing from commercial value, and the deal proves nothing about the thesis on its own.
What it sets up is a test, and the test has a date on it. The decree runs for five calendar years after closing. If the deal closes this fall, every obligation in it ends on December 31, 2031. The next morning there is no trustee, no quota, no spend floor, no firewall between the cable portfolios, and no court with a role in what the company does.
Some of what the company built to satisfy those obligations will still be standing on January 1, 2032, because a compliance team, an editorial board with three-year terms, and a windowing habit exhibitors have come to expect do not vanish just because the paper that required them does.
So the interesting question is what those leftovers are worth once nobody is making the company keep them. A compliance team that survives because the company finds it useful now answers to the company. An editorial board that keeps meeting because the board of directors sees no reason to disband it has exactly as much independence as that board wants it to have. A windowing practice that persists because it makes money is a business decision, and business decisions get reversed. Each of those can still be standing in 2032 and have lost, on the day the decree expired, every bit of its power to make the company do something it would rather not.
That is the split I want to watch. Governance that accumulates value for the people being governed is a constraint that outlasts the pressure that created it. Governance that accumulates value for the governor is a department. The Paramount decree is a five-year experiment on which one you get, and in 2032 the results will be sitting in plain view.
What happens now
Richmond’s framing is that the hard part starts now, and the hard part is the business. The company is raising $7.5 billion in debt on top of what it already carries. Colin Dixon’s Nielsen math has the combined company’s share of TV viewing down two points in nine months while NBCU gained. The synergy number was built partly on assets it can no longer sell. Warner Bros. staff are expecting layoffs in rounds, and the decree’s labor terms protect bargaining rights while saying nothing about headcount. Management will make the choices, but the balance sheet sets the menu, and the year-two petition is where that pressure has somewhere to go.
Tom’s open on Cord Killers was that streaming is now television, the consolidation phase is nearly over, and within a year or two the survivors will turn on each other for whatever comes next. That is Wu’s Cycle described from a living room, and it is the audience nobody in this sequence represented. The DOJ found consumers would benefit. The states negotiated for unions, theaters, and two lots. Pluto stays free, and on the paid services there is no price commitment and no bundling rule.
The judge has not signed. On September 24 she reminded the parties that a consent decree keeps the court involved, opened the docket to amicus briefs, and asked for responses to Senator Booker’s letter by September 28. Her questions ran to whether the settlement restores competition. That is the right question, and it was answered in June by people who are not in her courtroom. The terms are public. Read what the company agreed to, then read what the Antitrust Division wrote when it decided not to ask for more.