When you last received a newsletter from me on Saturday morning, the business and entertainment press were filled with stories suggesting a resolution to the Paramount merger legal battle was likely to happen over the weekend, as both sides were racing towards an agreement. The storyline was that California Attorney General Rob Bonta was looking for a way to save face and was willing to take a much less ambitious proposal from Paramount in order to protect his future political ambitions.

But at the time, I wrote that the optimism was likely due in part to carefully orchestrated leaks from the Paramount side. And that contrary to what was being suggested, the negotiations included input from all 12 state AGs, not just Bonta. And that not every AG agreed with Bonta’s approach. I also laid out an overview of some of the negotiating points being discussed.

On the upside, much of what I reported then has been verified by other subsequent reporting. The downside is that more than one reporter recycled my reporting without providing any attribution to the newsletter, using weasel phrases such as “we’ve learned.”

So I have one request. Recommend this newsletter to as many people as you can. It’s difficult for independent journalists to receive the credit and the distribution we’d receive if we worked for one of the big outlets. And you can help change that.

I spent months covering the complicated negotiations during the last Hollywood strike, and one thing I learned was that even when you have great access to people who are inside the negotiating room, everything you learn is a lagging indicator. As a reporter, you hear what happened after the fact. And sometimes that means a breakthrough happens long before reporters ever hear about it.

Which means that I am careful not to say something is going to happen or even likely to happen during multi-party negotiations. Because most of the time, even the participants don’t have an accurate sense of how close a final decision might be.

That was one of the reasons I wasn’t convinced the Paramount/state AG negotiations were going to be resolved over the weekend. Everything I heard from both sides suggested there were still substantive differences between the two sides. And absent some collapse of will, they didn’t seem likely to be solved over the weekend.

The Wall Street Journal reported late Saturday night that one of the things that had come up during the negotiations included a $1.5 billion investment by the company in production in California. The piece also reported on these discussions, which I want to highlight:

These conditions might sound familiar to those of you who read this passage in my Saturday morning newsletter:

I mention this not to denigrate the WSJ reporting, but to illustrate that I have some solid sources and have often been ahead of much of the legacy press during these negotiations.

After spending a lot of time over the weekend speaking with sources on both sides, from what I can tell, while talks have continued both officially and unofficially, there are still serious disagreements between the two sides.

All of the disputes between the two sides can be roughly divided into two parts. There are the procedural questions, such as how many theatrical films will be produced and whether Paramount will commit to staying in California. And then there are the structural components, such as whether Paramount will agree to sell some or all of the cable networks it is acquiring as the result of the merger.

First, the procedural questions.

There has apparently been a lot of discussion over Paramount’s commitment to produce at least 30 theatrical films per year. Bloomberg reported late Sunday night that discussions about that release schedule included a financial penalty for the company missing that 30-film goal.

I’m told that while Paramount is willing to do that, negotiators for the state AGs have expressed concerns that the company would attempt to work around those commitments by filling some of the gap with films not produced by the two studios, or by shifting films originally produced for streaming into its theatrical release schedule. AG negotiators pointed to the recent decision by Paramount Skydance to dissolve its animation output deal with Netflix as an indication of possible future intent by the studio.

There are similar problems with attempts to force Paramount into increasing production in California. While the suggestion of the $1.5 billion production boost reported by the WSJ was popular with California’s Attorney General, it was met with fierce pushback from the state AGs in New York, New Jersey, Connecticut and New Mexico, who feared that additional spending would come from productions that would otherwise happen in their states.

Both sides seem to generally align on a pledge by Paramount not to sell the Paramount or Warner Bros. lots in the next decade. Although I am told Paramount had suggested inserting the option for one of the lots to be sold before that deadline, if it were sold to a company that intended to continue movie and television production. It’s not clear to me if that suggestion was palatable to the state AGs.

One serious dispute centered around a pledge by Paramount not to move out of Southern California. According to sources on both sides, there were major disagreements on a timeline for the restriction, as well as whether “moving out of California” applied strictly to the production side of the business, which would allow the company to move some of its executives and back-end employees out of state.

And then there are the structural components of the merger.

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The two biggest hurdles have to do with changes to the merger that would have a substantial impact on the overall financials of the deal. If the merger goes through, the combined company will be burdened with an astronomical level of debt. Unfortunately for everyone concerned, any major changes to Paramount’s plans will impact the company’s bottom line. And there isn’t much financial leeway to be had in this carefully constructed house of cards.

One of the big asks from the state AG side is for Paramount to continue to run Warner Bros. as a separate studio for some unspecified amount of time. There have even been suggestions Paramount could agree to do this until the merger has closed. Or doesn’t close.

The problem for Paramount is that running two mostly autonomous studios negates one of the primary ways the combined company was going to cut its debt — slashing a reported $6 billion in “redundancies” from the studios. And that means thousands of people will lose their jobs.

Delaying or preventing Paramount from making those cuts is a non-starter for executives, so I’m told Paramount has floated the idea of keeping Warner Bros. as more of an independent-ish label, but one run primarily by Paramount. I’m also told that approach wasn’t received positively by the state AGs.

The other big structural battle has been over the cable networks. From the beginning of the merger process, David Ellison has said in interviews that combining the cable network assets from both companies would provide “additional leverage” during carriage negotiations with cable and satellite companies as well as streaming Live TV services. And he predicted that increased revenue would allow Paramount to pay down its debt at an accelerated rate.

I was told by multiple sources that state AGs had initially recommended that Paramount divest the Warner Bros. cable nets in order to lessen monopoly concerns. Paramount responded with a proposal that would see the company divesting itself of a cherry-picked list of mostly non-core cable networks, such as TV Land, Comedy Central and Animal Planet.

State AGs noted that wouldn’t substantially ease concerns, given the divestiture would include primarily cable networks that aren’t of primary interest to live TV operators.

And finally, there is CNN.

From the beginning, the editorial fate of CNN has been a primary topic in the press and inside the news industry, although it really has no impact on any consolidation concerns.

Paramount has focused on CNN’s fate, because doing that allows it to frame opposition to the merger as politically driven, rather than resulting from concerns about media consolidation.

Several sources on both sides told me Paramount negotiators had floated the idea of appointing a management board or some sort of editorial oversight body to ensure the editorial independence of the cable news network.

The state AGs are apparently open to discussing the proposal, although there were concerns the idea would be more of a cosmetic fix than a substantive protection for CNN. And some AGs (including Minnesota AG Keith Ellison) have insisted that CNN must be spun off in order to protect its independence.

These topics are by no means the only ones standing in the way of a resolution. And with formal negotiations apparently paused on Monday for Yom Kippur and a decision on Paramount’s request for the state AGs to pay a bond to cover the company’s ticking fees in case it wins in court, there doesn’t appear to be a final resolution coming in the next few days.

Have a tip about these talks? Contact me at [email protected]. All communications are considered off-the-record unless you decide otherwise.

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