David Ellison, CEO of Paramount Skydance, has reached an agreement with 12 US states, including California and New York, to address regulatory concerns over his proposed $110 billion acquisition of Warner Bros Discovery (WBD). The deal includes a set of behavioural conditions aimed at protecting consumers, which have become less common under the Biden administration that typically favors divestments or outright blocking of large mergers.

The conditions require Ellison’s combined entity to release at least 30 movies annually for five years, each meeting minimum budget requirements. Additionally, Paramount and the Warner business will negotiate separately with distributors and maintain distinct Hollywood studio lots. To ensure compliance, the agreement includes remedies if terms are violated and provisions for a third-party monitor.

These behavioural remedies represent a shift from the approach favored by Biden’s antitrust leader Lina Khan, who has criticized such agreements as difficult to enforce and lacking meaningful benefits. The states involved took a more creative approach partly because a merger of this scale, combining two of the five major film studios and two of the largest US pay-TV channel owners, likely would not have been proposed without the more permissive merger environment under the Trump administration.

While securing this regulatory truce marks a victory for Ellison, questions remain about the practical impact of the conditions on his broader strategy. Some analysts suggest that commitments like the movie release schedule align with Paramount’s existing operational plans. The main financial incentive behind the acquisition appears to be the expected $6 billion in annual cost savings, likely achieved through workforce reductions and other efficiencies.

However, the real challenge facing Paramount may stem from financial markets rather than regulatory hurdles. The acquisition would leave the combined company with approximately $80 billion in net debt—over six times its annual earnings before interest, taxes, depreciation, and amortization (EBITDA), even before accounting for anticipated cost savings. This heavy leverage has caused the price of the company’s traded debt to decline this year, reflecting investor concerns about the new entity’s financial risk.

Market watchers remain cautious about whether the benefits of the deal justify the financial strain it imposes. While the regulatory agreement allows Ellison to move forward for now, the long-term outcome will depend on how effectively Paramount manages its debt burden and integrates the Warner Bros Discovery assets.