Paramount Threatens to Leave Tinseltown Unless States Settle Merger Case Quickly

Like father, like son.

In 2020, Larry Ellison moved Oracle from California to Texas in search of lower operating costs, and later decided to relocate to Nashville, Tennessee. Now, as an antitrust lawsuit brought by the attorneys general of California and 11 other states stalls Paramount’s acquisition of Warner Bros. Discovery (WBD), his son, CEO David Ellison, is telling his executives that he will move the entertainment company to Music City (or Georgia or Texas) if the states don’t negotiate a settlement by October 1.

Sources told The Los Angeles Times in a story Wednesday that Paramount’s board has approved relocation plans but noted Ellison prefers to stay in Hollywood. If Paramount does leave, it’d be just the latest gut punch for an industry town in decline.

Filming Not in Progress

Either way, Ellison is motivated to force a speedy resolution. October 1 is also the day Paramount will begin paying WBD a “ticking fee” of about $7 million per day until the deal closes. The antitrust trial determining the fate of the merger doesn’t start until March of next year, and WBD’s board can squash the deal altogether by June 4 if it’s still unconsummated and force Paramount to pay a $7 billion breakup fee in the process. 

According to the Hollywood Reporter, the relocation plans could involve selling both the Paramount and WBD studio lots, while reducing production spending in the state remains another bargaining chip. It’s a threat that carries a lot of weight as California fights, and spends, to keep productions from fleeing to other locales:

• On-location productions in Los Angeles held just 4,711 shoot days in the second quarter, according to industry group FilmLA, down 13% year over year, and well below the 7,476 shoot days in the first quarter of 2023. 
• The dip comes after the state last year raised its annual tax incentive program for productions to $750 million from $330 million. Total production spend in California, however, rose 5% year over year in the second quarter to $1.3 billion, still more than any other state, according to industry group ProdPro.

Behavioral Issues: At a Politico conference on Tuesday, California’s attorney general called the threat to leave California “blackmail,” but said he’d be open to a settlement featuring structural remedies. He said Ellison’s promise to theater owners to release 30 films per year wouldn’t cut it, calling the pledge difficult to enforce, and instead called for keeping “certain corporate entities separate” to maintain competition in film and TV markets.