David Ellison, CEO of Paramount Skydance, is facing a tough decision regarding the future of his renowned Hollywood studio. The studio has produced classic films including “Sunset Boulevard,” “The Godfather,” and “Beverly Hills Cop.” Paramount is considering moving its headquarters to Tennessee or Texas to avoid legal opposition from California Attorney General Rob Bonta. This move would deter Bonta from blocking Paramount’s acquisition of Warner Bros. Discovery, a $111 billion deal.
Bonta has labeled Paramount’s relocation threat as “blackmail.” His antitrust lawsuit, supported by 11 other Democratic state attorneys general, has halted this significant Hollywood merger. Ellison, at 43, is passionate about Hollywood and has spent two decades developing his career there. He has informed associates he prefers staying in Los Angeles but has indicated he might sell the studio lots and move operations out of California if the merger is not completed by next month, according to sources.
The potential move has shocked the region, which is grappling with diminished film production, job losses, vacant soundstages, and closed businesses. Assemblymember Rick Chavez Zbur, representing the district including the movie lot and nearby neighborhoods, expressed concern about a Paramount move, emphasizing the importance of preserving jobs in California’s legendary industry.
Paramount remains silent while Ellison struggles after obtaining approvals from over 65 global regulators for the merger that would unite HBO, CNN, CBS, and other media outlets. Bonta’s lawsuit poses a barrier, and a federal judge in Oakland has temporarily blocked the acquisition. Paramount agreed not to finalize the deal until after a trial or by June 1, whichever is earlier. Settlement discussions dissolved in August after Bonta accused Paramount of misrepresenting their negotiations.
Paramount faces significant challenges, with U.S. District Judge Araceli Martínez-Olguín scheduling a trial for March. The company needs Warner’s assets to compete with large tech corporations. From October 1, Paramount must pay Warner Bros. Discovery shareholders an extra $7 million per day, known as ticking fees, which add more debt to the deal. Paramount requested the judge to compel California and other states, alongside the Writers Guild of America who also sued, to post a $1.88 billion bond for the ticking fee costs. A hearing is scheduled for September 24.
Paramount’s relocation tactic has intensified lobbying efforts, prompting political figures like Gov. Gavin Newsom, L.A. Mayor Karen Bass, and gubernatorial nominee Xavier Becerra to urge a lawsuit settlement. Economist Kevin Klowden views the situation as “a game of chicken” but acknowledges the real threat of relocation.
Relocating would allow Ellison’s media company to secure tax incentives from another state. Tennessee, Texas, and Georgia are on the shortlist. However, leaving Los Angeles would be costly given the concentration of talent and deals around L.A. Tennessee has expressed its commitment to collaborating with companies exploring investment opportunities.
Amid protests, pro-merger and anti-merger activists showed contrasting opinions. The organization Neighbors for Strong Communities encouraged Californians to press Bonta to abandon the case. Speakers focused on the potential consequences if Paramount exits. Keyla Wood, who moved from Mexico to L.A., worried about the impacts of economic challenges.
Daniela Kelly highlighted L.A.’s global reputation as a dream platform and expressed concern over the potential studio departure. Businesses such as Kelly’s video and podcasting space, Kreashen Studios USA, depend on the region’s entertainment economy. Kelly supports Paramount’s presence due to its vital role in Hollywood.
Opponents argue the merger could worsen L.A.’s already dire production outlook. Paramount has pledged to reduce costs by $6 billion, excluding ticking fees costs, which could add $650 million quarterly on top of the anticipated $81 billion payment to Warner shareholders. L.A. City Councilmember Adrin Nazarian noted previous mergers resulted in job losses.
The Los Angeles County Department of Economic Opportunity predicted merging Paramount and Warner could cut nearly 4,500 positions over three years and risk 5,865 jobs in related businesses. The potential economic impact is massive, with an estimated $4 billion loss in economic output and $550 million in lost tax revenue at the local, state, and federal levels.
If Paramount relocates, tax revenue could decline further. Klowden warned against Ellison moving management and productions, as losing tens of thousands of jobs would devastate L.A. A report by Los Angeles Economic Development Corp. forecasted even steeper losses if the studio relocated out of state entirely.
Paramount might shift its corporate headquarters for incentives while keeping large teams in creative hubs like Los Angeles and New York. Ellison moved operations to L.A. after acquiring Paramount from the Sumner Redstone family last year.
Ellison’s dilemma mirrors Oracle Corp.’s strategy. Oracle, co-founded by his father, Larry Ellison, moved from Redwood City, California, to Austin, Texas, after thriving for three decades. Oracle planned another move to Nashville, but it hasn’t been finalized.
Paramount risks losing its skilled workforce by fleeing L.A. Klowden suggested a possible “talent bleed-out” if creative professionals hesitate to move and face limited opportunities if conditions worsen. He cited Nissan’s headquarters relocation in 2006, where fewer than half of Southern California employees moved to Tennessee.
A magistrate judge urged both parties to pick late October dates for court-ordered settlement negotiations, aiming to avoid prolonged legal battles. Bonta urged Paramount to divest assets to reduce market concentration, potentially selling rights to franchises or channels. As part of a settlement, Paramount might discard its intention to leave L.A.
Assemblymember Zbur hopes for a resolution ensuring Paramount and Warner Bros. maintain operations and remain significant contributors to Los Angeles’ economy and employment.