As its legal battle with 12 state attorneys general heats up, Paramount Skydance is stepping up its campaign to get entertainment executives to support its merger with Warner Bros. Discovery, with everything from a David Ellison op-ed to glowing statements from execs to a written pledge to increase theatrical output. The company’s efforts to gain the backing of the movie theater industry at the center of next March’s trial have won over some major players, but other execs who spoke to TheWrap remain deeply skeptical.
Last week, the CEOs of Regal Cinemas and the U.K.-based Vue Cinemas, Eduardo Acuna and Tim Richards respectively, released statements in support of the merger, expressing trust in Paramount Skydance CEO Ellison to fulfill his repeated public pledge to release 30 films a year in theaters after the merger is completed, a total that would exceed the 15-25 films that major studios have released annually since the turn of the century.
“The industry now needs final certainty so it can focus on what matters most: making and releasing great films. David Ellison is a highly respected filmmaker that has consistently demonstrated a long-term commitment to feature-film making and theatrical exhibition,” Richards said in his statement. “We believe the industry will be stronger with Paramount and Warner Bros. Discovery coming together, rather than competing separately. The time, money and energy invested in this process should be directed back into creating the next generation of films for audiences around the world.”
Their support comes four months after AMC CEO Adam Aron became the first executive to openly endorse Ellison and the merger at CinemaCon right as Cinema United CEO and President Michael O’Leary was warning that an acquisition of Warner Bros. would be dangerous for the industry.
In the intervening months, theatrical sources told TheWrap that Aron was alone in such support, as doubt that Paramount could or would put out 30 films a year was widespread among theater owners.
So what changed? Paramount is now offering more than Ellison’s word — a written pledge. Three individuals with knowledge of the talks between Paramount and exhibition executives told TheWrap that the studio is now offering contracts pledging to release 30 films a year for at least three years, with all films having a 45-day window to premium on-demand and a 90-day window to streaming.
Paramount also expressed a willingness to include some form of penalty if it did not hold up its side of the agreement, though sources who spoke to TheWrap did not have specifics as to what those penalties would be and how they would be enforced.
Beyond exhibitors, one individual told TheWrap that Paramount has been reaching out to entities in the independent film industry, offering to negotiate terms on a written contract that would outline how many of those 30 films would be acquisitions of indie productions. Such films tend to have more favorable revenue split for theater owners than big-budget blockbusters, so theaters stand to make more on the dollar when a film like Focus Features’ microbudget megahit “Obsession” performs beyond expectations.
Paramount and Ellison’s efforts to win the support of theater owners underline the gravity of their $110 billion deal, for which they stand to pay over $1 billion in ticking fees ahead of the March trial date. But the public support lent by some of the biggest theater owners in the world — a sharp turn from the largely unified opposition to the Paramount-Warner Bros. Discovery deal just a few months ago — also lays bare the cost that a lengthy antitrust trial would have on some theater chains that are still trying to dig themselves out of the pandemic hole.
“A long fight in court that extends into spring or summer doesn’t put more films in theaters, and is not beneficial to studios, filmmakers, the guests who go to the movies, or theater businesses like Regal and the people who work for them,” Acuna, who runs the second-largest theater chain, wrote. It just creates more uncertainty and distraction that could be damaging to our industry as we build on our current success. It is time for all parties to sit down and work out how to formalize these commitments.”
Cinemark, the third-largest U.S. chain, has remained largely quiet as the regulatory process has proceeded. The most recent comments from the chain’s CEO, Sean Gamble, came at the Morgan Stanley Investors Conference in March, where he said he saw Paramount’s victory in the bidding war for WBD over Netflix as a reason for exhibitor optimism, but wanted to hear more on the studio’s output and windowing plans.
“Anything that leads to sustained or increased levels of investment in the number and scale of releases theatrically, that continue to have a robust theatrical window and comprehensive marketing campaigns is viewed as a positive for the industry. I think we’re hearing all the right things,” Gamble said this past spring.
Cinemark did not respond to TheWrap’s request for comment.
But one theater executive from a smaller chain pointed out that the one thing that Paramount-backing AMC, Regal and Vue have in common is that they are all major chains working their way out of financial turbulence.
After reaching a debt load of $6 billion at the height of the pandemic, AMC has cut its long-term debt to approximately $3.85 billion as of this past quarter while Vue has worked to improve its credit rating as it reportedly considers a sale or stock flotation. Regal Cinemas emerged from bankruptcy in 2023 and has spent the past two years upgrading its entire circuit with new seats, upgraded concessions and premium format installations thanks to a $250 million capital raise in 2024.
“The whole industry needs this recent box office surge to keep going, but chains like AMC and Regal especially need to project confidence to investors,” the exec said. “So it behooves them to support Paramount’s message that this merger will help theaters, because what’s the alternative? They lose that access to capital when they need it most because there’s all these warnings that the merger is going to hurt theatrical?”
A second individual with knowledge of the talks between Paramount and Regal also noted that for those in exhibition who decided to support the merger, there is the belief that Paramount will win its lawsuit against the attorneys general.
The insider pointed to an argument made by the AGs on page 26 of its complaint that the entrance or expansion of new competitors would not counter the harm done by the merger because of the vast financial resources required to release a full slate of theatrical films.
The insider said that California Attorney General Rob Bonta’s argument as outlined does not account for the nascent popularity of self-distribution or the rise of studios like Amazon MGM, which is not counted as one of the five legacy studios but has made long-term commitments to a full theatrical slate. Those gaps could be used by Paramount to poke holes in the AGs’ argument at trial.
“It’s an outdated description of a theatrical market that is changing fast,” the insider said.
Skepticism and quiet Cinema United negotiations
Not everyone in theatrical shares that opinion. Foremost among them is the lobbying group Cinema United, which has stated for months that it opposes the acquisition of Warner Bros. Discovery by any major studio, saying in a statement following the filing of the AG lawsuit that it “welcomes” the challenge by Bonta and his colleagues.
“The ramifications of further movie studio consolidation will be significant and lasting, not just in Hollywood, but on Main Streets across this nation where local movie theaters serve as cultural and financial cornerstones for communities of all sizes,” O’Leary said.
Despite that steadfast opposition, O’Leary also said that Cinema United remains open to talks with Paramount, having most recently done so in Washington D.C. in June to discuss “enforceable commitments that would allay our concerns about the merger.”
“On July 1, after what Cinema United believed were additional constructive conversations with Paramount, we provided them with a comprehensive list of our concerns to move the discussions forward. We have not heard from them since,” O’Leary told Cinema United members in a memo sent last week.
According to an insider with knowledge of the talks between Paramount and Cinema United, the two sides had reached an impasse on the length of the agreement Paramount was offering, as Cinema United wanted a longer commitment to a 30-film annual release minimum than the three years the studio had proposed. There were also disagreements over the severity of the penalties Paramount would pay if that agreement was not fulfilled.
Deal or no deal?
It’s not just Cinema United that is balking at that length. It’s several of its member exhibitors too. TheWrap asked three executives at regional chains who spoke on condition of anonymity how they would respond if Paramount presented them with a written contract for 30 films annually for three years. All said they wouldn’t take it.
“I don’t think I would take it if it was five years. Look at what has happened in the last five years. Yeah, pandemics don’t happen all the time, but so much has changed in our business,” one of the executives said. “After three or five years of that promise, what happens then? They could then cut back and suddenly we have less films than when Warner and Paramount were separate.”
A second regional chain exec said he has other concerns unrelated to output and windowing, such as the possibility of Paramount using its increased market power post-merger to push for less favorable revenue splits and stricter “clean screen” terms, which require a theater to devote a film to a certain auditorium for a minimum number of weeks. These concerns were included in the state AG’s lawsuit.
“We already deal with these rough terms now. What’s to stop it from getting worse if there’s less competition?” the exec said. “Paramount will be taking on billions in debt from this deal, and they will need to maximize profit on their biggest hits if this goes through. If they’re lucky enough to get another ‘Top Gun: Maverick,’ I could see them wanting to take a larger cut.”
That debt, which is estimated to reach $79 billion should the merger close, is part of the reason why these executives are skeptical that Paramount will have the finances to properly produce and market 30 films a year. The third regional chain exec told TheWrap that if he were presented the three-year offer from Paramount, he would be looking for loopholes.
“Would re-releases like the 35th anniversary of ‘Forrest Gump’ count towards that total? Would they put Paramount+ content like the season finale of ‘Lioness’ in theaters and count that? Depending on how the agreement is written, there could be a lot of flexibility in how Paramount gets to that number without necessarily delivering 30 new, meaningful theatrical releases,” the exec said.
“My concern is that Ellison is motivated right now to say whatever is necessary to get the merger approved. Once the merger is complete, the industry needs more than a public commitment or headline number — we need something that is clearly defined and legally enforceable,” the exec continued. “If there are no meaningful consequences for failing to produce and theatrically release 30 legitimate films per year, then I don’t see the commitment as providing exhibitors with much protection.”
When reached for comment, a Cinema United spokesperson told TheWrap that the organization is committed to securing “consistent guardrails for exhibitors that last into the future” and that it “would not negotiate in the media about the specifics of any proposal.”
Whether or not talks between Paramount and Cinema United go forward, the bigger question is whether any such deal could be made with Bonta in the months between now and next March’s trial. Acuna and Richards are among several CEOs, including Endeavor’s Ari Emanuel, who have pushed the AGs to reach a deal with Paramount or drop the lawsuit entirely. The Wall Street Journal has additionally reported that California Gov. Gavin Newsom also urged Bonta to settle out of court.
Representatives for Newsom, Bonta and Paramount declined to comment.
In any hypothetical settlement talks with Bonta, the written agreements that Paramount has offered to the theaters would take the form of legally binding consent decrees. One such decree became the basis of a landmark 1948 Supreme Court ruling that declared that Hollywood studios could not own movie theaters, a ruling that was phased out in 2020 by the U.S. Department of Justice during the first Trump Administration.
But Bonta has signaled in press conferences over the past month that such “behavioral” consent decrees would not go far enough, and that Paramount would have to divest cable or film assets as part of any settlement to avoid a trial.
“We’ve never gotten anything that would come close to addressing the concerns we’ve raised,” Bonta said in July. “We’re focused on litigation. We’ve built momentum and we look forward to taking that momentum into trial.”
