Decree and Debt: Skydance's Five-Year Plan

On 5 October, the day before it completed its purchase of Warner Bros. Discovery, Paramount Skydance sold $41.4bn of secured notes in dollars and a further €885m in euros. The longest of them runs to 2066 at 8.90%. Fourteen days earlier its lawyers had filed a proposed consent decree with twelve states that sets how many films the combined company must release in each of the next five years, how long each must play in cinemas before it can reach a streaming service, and that the studio lots on Melrose Avenue in Los Angeles and Warner Boulevard in Burbank may not be sold or closed before 2032.

The company that emerged on 6 October, renamed Skydance and listed on the New York Stock Exchange as SKYD, therefore runs to two plans at once. The first was negotiated with the attorneys general of California and eleven other states and approved by a federal judge on 30 September. It fixes theatrical output, release windows and the way the basic cable networks are sold until the end of 2031. The second is management's own, set out in the closing announcement: at least $6bn of annual savings within three years, net leverage of 3.0x by the end of 2029 and more than $10bn of free cash flow by 2030, against $82.5bn of debt on the pro forma balance sheet.

The primer asked whether the acquirer could justify paying full value for Warner Bros. Discovery while deleveraging before the cash flows from traditional television declined too far. The close has replaced most of the unknowns behind that question with documents. What follows sets out what the court's plan fixes, what management's plan requires, where the two overlap, and what the two studios' recent releases say about the film slate both plans now depend on.

Nearly Seventy Jurisdictions and Twelve States

Federal approval came in June, according to Forbes 2026, and the European Union and Britain had also cleared the deal, as Reuters 2026 reported. By the company's count, competition authorities in nearly 70 jurisdictions approved it. The exception was a coalition of twelve state attorneys general led by California's Rob Bonta and joined by Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington, which sued on 13 July in the Northern District of California under Section 7 of the Clayton Act. Section 16 of the same act allows states to seek an injunction against a merger that federal enforcers have declined to challenge, as an analysis of the case by Lewitt Hackman 2026 set out.

The complaint alleged harm in three markets. In the first, basic cable, the combined company would own more than 50 channels and gain leverage over the distributors that carry them. In theatrical distribution, it and three rivals, Walt Disney ($DIS), Universal and Sony, would release more than 86% of wide-release films and 90% of anticipated blockbusters. In employment, the states argued that thousands of jobs were at risk, and a separate report for Los Angeles County put the losses at about 4,500 film and television jobs over three years. The Writers Guild of America brought a parallel suit arguing that the merger would reduce writers' pay and worsen their working conditions.

A federal judge granted a 14-day temporary restraining order on 20 July, two days before the planned close, and the two companies then agreed not to complete the merger until five days after the court ruled or 1 June 2027, whichever came first, an arrangement the second-quarter memo recorded, with trial later set for 2 March 2027. Talks broke down on 24 August, when Bonta ended a planned settlement discussion over an alleged leak that Paramount denied. As 1 October approached, the date from which a ticking fee of about $7m a day would start to accrue to Warner Bros. Discovery shareholders, Paramount pressed for terms. Forbes reports that it threatened to pull its operations out of California and asked the court to hold the states accountable for the $1.9bn it said it could lose by waiting for trial.

The decree was filed on 21 September, and the Writers Guild settled its own case the same day while saying it still believed the deal would damage the industry. Judge Araceli Martínez-Olguín approved the decree on 30 September, calling it a "compromise that may leave some dissatisfaction for both sides and the public but a compromise that saves the risk, time, and expense of litigating through trial", while acknowledging that critics had raised "meaningful grounds for disappointment" and finding that their hopes for the decree "to reach farther" did not "rise to the level of legal violations upon which the Court can reject the parties' negotiated resolution". Bonta described the result as "a strong antitrust outcome" and added: "I don't think these two companies should merge, but that's not something that we are focused on with our resolution here." The Block the Merger coalition, which had urged the court to reject the settlement, said the deal was going ahead "with no meaningful structural remedies".

The wait itself cost a fraction of what Paramount had told the court it might. The merger closed on 6 October, five months before the trial date, and the ticking consideration paid to Warner Bros. Discovery shareholders came to $41.9m in total, according to the closing filing. No divestiture was required. The price of ending the case was a set of obligations, and those obligations make up the first of the two plans.

What the Court's Plan Fixes

The decree runs from the close to 31 December 2031 and measures performance across five commitment years, 2027 to 2031, so the remainder of 2026 carries no quota. Its terms fall into four groups: theatrical output, the basic cable networks, production and labour, and news.

The theatrical terms are the most detailed, and they start with volume: the combined company must release at least 30 films in the United States in each of 2027 and 2028 and at least 32 in each of the three years that follow. At least 20 of the 30, and 21 of the 32, must be wide releases on 2,000 screens or more. At least four a year must be independent films, defined as original screenplays or films from producers outside the combined company, Disney, Universal and Sony, and at least half must be produced or co-produced in house. A film released on fewer than 600 screens counts only if it reaches 1,000 within 30 days, and re-releases do not count at all. At least 20% of each year's films must carry production budgets of $50m or more in September 2026 dollars and play on at least 3,000 screens within four weekends, and every film counted toward the quota must receive marketing "consistent with typical practice for similar films and release patterns".

Each counted film must also stay exclusive to cinemas for at least 45 days, cannot be promoted as coming to any streaming platform before day 30, and cannot appear on a subscription service, "including Paramount+ or any successor service", for at least 90 days. For the first three commitment years, the rental terms offered to cinema operators may be no less favourable than the better of the two studios' terms at the close, and both catalogues remain available to exhibitors on terms similar to those of 2025 throughout.

A shortfall costs $30m per missing film, paid within 60 days of the end of the six-month cure period into union health and retirement funds (50%), the Motion Picture & Television Fund (40%) and an antitrust fund run by the National Association of Attorneys General (10%). The payment falls due even if the company later releases the missing films. If the shortfall is not cured within six months, the company must sell its entire interest in Miramax within a further twelve months to a buyer the states approve.

The production terms require the company to spend at least $300m a year more on US production than the two companies spent in 2025, or at least $1.5bn across the term. The decree also sets targets for the share of production days spent in the United States, but they apply only if Congress enacts an uncapped federal film tax credit of at least 20%. Neither studio lot may be sold or closed, existing union contracts must be honoured, and employees displaced by the merger may apply for open roles and must be considered in good faith. Nothing in the decree limits the number of jobs the company may cut.

The cable terms answer the first of the states' three markets directly. Until the end of 2031, the Paramount and Warner Bros. basic cable channels must be negotiated separately with each distributor, neither portfolio may be made a condition of the other, and confidential fee data from one side may not inform the other. The obligation excludes premium channels, the CBS network, streaming services and any virtual distributor with more than five million subscribers that has no cable or satellite affiliation and has never offered traditional pay-TV, and it lapses for any distributor that asks in writing to negotiate jointly, although the company may not solicit the request. A breach that the court finds uncured six months after notice requires the sale of BET and its sister networks, VH1, Comedy Central, Smithsonian, Destination America and Science.

The plan also contains a review clause, under which, after the second full commitment year and so from the start of 2029, the company may petition the court for relief or modification, with the burden on it to show that the decree impairs its ability "to successfully operate the business and to compete effectively" and that the change is not substantially likely to lessen competition. Throughout the term, any of the twelve states can enforce the decree in court, a monitoring trustee chosen with a committee of the states within 90 days of the close reports on compliance, and the chief executive and general counsel must certify compliance each year. Its force majeure clause lists "strikes, labor disruptions, economic recessions" among the events that excuse a failure to perform.

What Management's Plan Requires

The purchase was funded with about $47bn of new equity and $56.9bn of new secured debt. The equity came from 3.92bn new nonvoting Class B shares sold at $12.00, the floor of a collar that would have allowed a price of up to $16.02, to affiliates of the Lawrence J. Ellison Revocable Trust and RedBird Capital Partners together with Saudi Arabia's Public Investment Fund (PIF), Abu Dhabi's L'Imad, the Qatar Investment Authority and LionTree. The issue was about 3.5 times Paramount's diluted share count in the first half of 2026. The Ellison family and RedBird remain the only holders of Class A stock, and therefore of every vote. PIF is also part of the consortium behind the EA buyout, the subject of the EA buyout piece. Holders of Class B shares outside the Ellison and RedBird groups and the Paramount 401(k) plan received 470.7m ten-year warrants struck at the same $12.00, which would raise about $5.65bn if exercised in full, according to the 13 October filing. Because the warrants were issued one for one, those holders owned at least 470.7m shares at the record date, a little over 9% of the roughly 5.03bn shares on the pro forma count.

The $30.0bn of first-lien notes was issued in eight series maturing between 2028 and 2066 with coupons from 6.30% to 8.90%, and the second-lien notes in four series running from 2031 to 2036 at 7.00% to 9.125%, the euro series swapped into dollars at a fixed 8.82%. Beside them sit $9.5bn of seven-year Term B loans priced initially at 2.75 percentage points over SOFR or Euribor, $5.0bn of Term A loans and an undrawn $5.0bn revolving facility. Holders of 99.15% of the eligible Warner Bros. Discovery bonds exchanged them for $12.0bn and €547m of new second-lien notes, and holders of 98.83% of two further series sold them for cash. The $49.0bn bridge loan arranged in December 2025 was never drawn and has been cancelled. All of the secured debt is backed by substantially all of the personal property of the company and its guarantors, a list that runs from Paramount Pictures and CBS Broadcasting to Home Box Office, Warner Bros. Entertainment, Turner Broadcasting and Cable News Network.

On the pro forma balance sheet at 30 June, total debt stands at $82.5bn against cash of $7.9bn, and pro forma interest expense for 2025 comes to $6.4bn. The pro forma assumes weighted coupons of 7.48% on the new first-lien notes and 8.60% on the new second-lien notes, and because most of the new borrowing is fixed rate, a one-point move in interest rates changes the annual charge by $145m.

The maturity profile gives the company time, with about $12.7bn of the new and exchanged debt falling due by the end of 2030, including $9.0bn of notes in 2028 and 2029, before $16.0bn matures in 2031 and $15.1bn in 2033, the year the Term B loans come due. The exhibit converts the euro tranches at the rate implied by the company's swap and assumes the Term A tenors run from the close, and it leaves out Paramount Global's existing notes.

The documents also set an order of repayment, because the notes' liens and guarantees fall away permanently once two of the three rating agencies grade them investment grade, provided no more than $250m of Term B loans remains outstanding, and the credit agreement's own release requires the Term B loans to be repaid in full. Those loans can be prepaid at par, which makes them the natural first $9.5bn of any debt reduction aimed at releasing the security.

Against that structure, the closing announcement sets the targets: run-rate savings of at least $6bn are to arrive within three years, net leverage is to fall to 3.0x by the end of 2029, and free cash flow is to exceed $10bn by 2030. Pro forma content spend over the last twelve months was more than $30bn, against combined revenue of nearly $70bn.

Where the $6bn Can Come From

The closing announcement names the sources of the savings as "technology, integration and procurement, marketing and real estate rationalization". Read against the decree, two of the four are untouched and two are narrowed.

Technology and procurement sit outside the decree entirely, as do the costs of running two corporate functions, two streaming platforms and two sets of systems. Marketing is narrowed, since the company can merge two marketing organisations but each of the 30 to 32 films a year it must release has to be supported at a level "consistent with typical practice", which, together with the screen-count rules, stops the quota being met with films placed in a handful of cinemas without support.

Real estate brings in the Los Angeles question, which the documents now answer. During the settlement talks, as Forbes reported, Paramount threatened to pull its operations out of California. The decree that followed forbids the sale or closure of both studio lots until the end of 2031 and requires the company to use commercially reasonable efforts to keep operating them as before, including leasing them to outside productions. Ynon Kreiz's employment agreement, signed on 27 September, sets his place of work as "the Company's principal offices located in Los Angeles, California", according to the 1 October filing, and the three releases issued on closing day were all datelined Los Angeles and New York. Office space elsewhere remains available to rationalise, and the production commitment is national, requiring more production in the United States without specifying California. Beyond honouring studio-development contracts already signed in the plaintiff states, the decree makes no commitment on headcount or where employees work. Both lots stay where they are. The decree is silent on how many people work on them.

On the revenue side the decree goes further, removing levers outright. The merger joined two portfolios of basic cable networks, and the obvious commercial use of the combination was to negotiate them together with the distributors that carry them, which is the leverage the states alleged in the first of their three markets. Until the end of 2031 the company must negotiate them separately, and a breach the court finds uncured obliges it to sell BET and five other networks. The theatrical terms work the same way on the exhibition side, holding the company's rental terms at the better of the two studios' existing schedules from 2027 to 2029.

What the decree leaves open is most of the cost base outside theatrical film. Television production, sports rights, newsroom budgets, corporate overhead, streaming beyond Pluto TV and most operations outside the United States are untouched, and the company remains free to sell assets other than the lots. The first-lien notes permit disposals made largely for cash, though a share of any proceeds above a threshold of at least $5bn must be offered to noteholders, used to repay other first-lien debt or reinvested in the business, content included, within 540 days. The four savings sources management has named therefore lie largely outside the court's terms, with two narrowed and none barred, while the revenue the combination might have drawn from its scale is unavailable in carriage until the end of 2031 and in exhibition until the end of 2029.

Two Studios' Releases Since 2023

Both plans depend on a film slate that, outside DC, one group will now run. The record of the two studios over the past four years, drawn from The Numbers with Box Office Mojo as a cross-check, compares each film's worldwide gross with its reported production budget. The comparison has three limits. Budgets cover the whole film, including partners' shares on co-financed titles. They also leave out marketing, which the studio pays on top, and box office is gross ticket sales, of which the studio receives only part once cinemas and partners have been paid. Both of those put a film's break-even point somewhere above its budget, by an amount the data cannot show, so a film that grossed less than its budget did not recover its cost in cinemas under any division of the receipts, and 1.0x is the lowest multiple at which a release can have broken even theatrically. Above that line, the multiple says nothing about profit.

The comparison covers 40 films financed or co-financed by Warner Bros. Discovery and 25 by Paramount, released in the United States between January 2023 and 21 October 2026, with distribution-only titles such as F1 and Killers of the Flower Moon excluded from both. The Paramount set includes five co-financed films where Paramount's share is unconfirmed, among them the two Scream titles, so that both sets follow the same inclusion rule. Across the period the 37 Warner Bros. films with reported budgets grossed 2.84 times those budgets and Paramount's 25 grossed 2.28 times, and both studios earned their highest multiples on their cheapest films.

The 22 films budgeted under $50m grossed 3.71 times their combined budgets, against 2.09 times for the 14 budgeted at $150m or more. Warner Bros.' New Line label released eleven films with reported budgets totalling $378m that grossed $1.89bn, among them three 2025 horror releases, Final Destination Bloodlines, Weapons and The Conjuring: Last Rites, which took $1.09bn on $143m. Paramount's equivalents were Smile 2 at 4.93 times and the two Scream films at more than 4.7 times each. Paramount's highest multiple belongs to Scary Movie, released in June 2026, which grossed $231m on a $30m budget and which Paramount's own release described as a Paramount and Miramax film. Miramax is the asset the decree requires the company to sell if it misses the film quota and fails to cure.

At the expensive end the record belongs to Paramount, whose three largest productions, Mission: Impossible – The Final Reckoning at $400m, Dead Reckoning Part One at $290m and Gladiator II at $250m, were the three most expensive films either studio released, and none grossed twice its budget. Box Office Mojo puts The Final Reckoning's budget at about $350m, which lifts its multiple from 1.48 to 1.69 times without changing the conclusion. Warner Bros.' largest bets were more dispersed in outcome, from A Minecraft Movie at 6.40 times on $150m to Supergirl at 0.74 times on $170m.

Warner Bros. also missed more often, with six of its films grossing less than their budgets against one for Paramount, The Running Man at 0.62 times. The Warner Bros. shortfalls were The Alto Knights at 0.23 times and The Lord of the Rings: The War of the Rohirrim at 0.69 times, followed by four 2026 releases: The Bride! at 0.30 times, Digger at 0.33 times after 19 days in cinemas, Supergirl, and They Will Kill You at 0.97 times. Over the period Warner Bros. released 40 of its own films to Paramount's 25, so it also took more chances to miss.

By year, Warner Bros. led in 2023 and 2025, was level in 2024 and is well behind in 2026, when its nine releases to date have grossed 1.08 times their budgets. Paramount's 2026 figure of 4.39 times rests on five films with $124m of combined budgets, two of them Scream 7 and Scary Movie. From 2023 to 2025 Warner Bros.' results also leaned on a single film a year, with Barbie, Dune: Part Two and A Minecraft Movie each accounting for between 28% and 36% of the studio's worldwide gross in their year.

The DC record bears on the decision to keep its leadership in place. The five DC films of 2023 and 2024, from Shazam! Fury of the Gods to Joker: Folie à Deux, grossed 1.41 times their combined budgets. The two released since, Superman in 2025 and Supergirl in 2026, grossed 2.75 and 0.74 times theirs, one well above the break-even floor and one below it. The leadership announcement names Man of Tomorrow among the DC projects Gunn and Safran will oversee.

The quota itself asks for volume and for a 20% share of films budgeted at $50m or more. On both studios' records, multiples have fallen as budgets have risen, from 3.71 times under $50m to 2.09 times at $150m and above, so a quota met mostly with mid-sized and low-budget releases would sit nearer the part of the record with the highest multiples.

One Service and Who Runs It

Management's plan for streaming occupies one clause of the closing announcement, which says the direct-to-consumer products "will unify into a single service over time". The combined company starts with two global services, HBO Max and Paramount+, and more than 200 million subscribers across its platforms, and the decree adds two constraints. Pluto TV must be kept as a free, ad-supported service at no lower quality than when the decree took effect, and no film counted toward the quota can reach HBO Max, Paramount+ or any successor subscription service until 90 days after it opens.

The leadership team announced on 5 October shows how the integration has been divided. The executive officers named in the closing filings, David Ellison as chairman and chief executive, Ynon Kreiz as co-chief executive, Andrew Brandon-Gordon as president, Dennis Cinelli as chief financial officer and Makan Delrahim as chief legal officer, all came from the Paramount side or from outside. The wider team that reports to Ellison and Kreiz includes five executives from Warner Bros. Discovery, and between them they run streaming, DC, CNN and the business side of television.

Streaming content for both services sits with Casey Bloys, who ran HBO and Max content, and the business side of both television and streaming with JB Perrette, who ran Warner Bros. Discovery's global streaming and games division. James Gunn and Peter Safran continue as co-chairmen of DC Studios, and Mark Thompson as chairman and editor-in-chief of CNN Worldwide. The film slate for both Paramount Pictures and Warner Bros. moves to the Skydance Motion Picture Group under Dana Goldberg, formerly chief creative officer of Skydance Media, and Josh Greenstein, formerly president of Sony Pictures' motion picture group, so outside DC the quota now sits with two executives, one from the acquiring side and one from outside. Television, including the sports group, CBS, its 27 local stations and more than 50 cable networks, goes to George Cheeks of Paramount. The announcement does not name Warner Bros.' current film executives, and it states no departures. Kreiz, whose remit is day-to-day management and integration, joined from Mattel, where he had been chairman and chief executive since 2018.

The board added Kreiz, Laurene Powell Jobs and Bobby Kotick, who ran Activision Blizzard from 1991 until its sale to Microsoft ($MSFT) in 2023, the $68.7bn transaction at the far end of the three decades of gaming M&A this coverage has traced. Tony Blair joins as an adviser to the board in a personal capacity, and no Warner Bros. Discovery director joined.

CNN and CBS News

According to NBC News 2026, Bonta and the other attorneys general also worried that the merger could "potentially imperil the journalistic independence of CNN", and the decree answers that concern with a board. Within 180 days of the close, by early April 2027, the company must establish a News Editorial Independence Board of five journalists, each with at least ten years in the profession, no more than two of whom may be affiliated with the same political party. The company's board appoints them, but no government official may serve or hold approval rights, and no officer, director, shareholder or non-journalist employee of the company is eligible. Members serve three-year terms and can be removed only for good cause.

The board's remit is to set editorial principles based on the CBS News and CNN standards in force when the decree took effect, to resolve disputes between journalists and management over alleged breaches or bias, and to monitor editorial independence, "including from the Combined Entity's ownership and shareholders". It reports to the company's board through the chief compliance officer, covers news produced principally for the United States, and lies outside the monitoring trustee's remit. Colorado and Washington did not join this section of the decree. Ellison has said, as quoted by Forbes, that he "do[es] not aspire to lead" CNN and CBS "to bend their newsrooms to my views". Thompson leads CNN, and Bari Weiss is editor-in-chief of CBS News.

CNN is also one of the guarantors of the secured debt, which places its assets in the collateral package alongside the group's other main operating companies, and any future sale of the network would fall under the same disposal rules as the rest of the group.

The Dated Tests

The two plans meet a sequence of dates over the next five years, most of them fixed by the documents themselves.

The first tests are procedural: the monitoring trustee by early January, the deadline of 4 March 2027 for Warner Bros. Discovery's bond-issuing subsidiaries to launch exchange offers for certain of their remaining notes or pay holders a one-time 10% of principal, and the editorial board by early April. The first commitment year is 2027, with its compliance certificate due within 90 days of the year's end. The quota rises to 32 films in 2029, the year by whose end management has promised its savings and its leverage target.

The court's plan allows one formal revision. From the start of 2029, once two full commitment years have passed, the company may ask the court to relieve it of terms it can show impair its ability to compete, after first conferring with the states. The same year brings the step up to 32 films, the close of the three years in which management has promised $6bn of savings, and the deadline it has given investors for net leverage of 3.0x. A petition filed that year would argue that the court's plan stands in the way of management's own, in the year management's own plan is judged. Whether Skydance files one will say which of its two plans proved harder to keep.