Paramount Skydance and California officials are in advanced talks that could resolve a multistate antitrust lawsuit blocking Paramount’s proposed acquisition of Warner Bros. Discovery, according to fresh reports Friday. The negotiations could produce an agreement as soon as this weekend, Reuters reported, but neither the company nor the California Department of Justice has announced a settlement.

The distinction matters. A negotiated deal would remove one of the transaction’s last major legal barriers, yet the reported terms remain fluid and a federal judge would still have to address the litigation. California’s Justice Department told Reuters that potential settlement talks are confidential and declined to confirm whether they are occurring; Paramount also declined to comment.

What negotiators are discussing

Terms under discussion include independent monitoring of CNN’s content and a commitment on the number of movies the combined company would release in theaters, Reuters reported. The monitoring proposal reflects political concern over how Paramount would manage CNN after taking control of Warner Bros. Discovery, while the theatrical commitment is intended to answer fears that combining two major studios would reduce film output.

The proposals are not equivalent to a final consent decree. California Attorney General Rob Bonta has repeatedly favored structural remedies—such as selling assets—over promises about future conduct. A separate Journal report said Paramount has discussed operating the two film studios separately for a period, another possible safeguard whose duration and enforcement remain unresolved.

Markets treated the reports as evidence that a major obstacle may be easing: Paramount shares rose nearly 7% in after-hours trading Friday, while Warner Bros. Discovery gained 8.4%, according to Reuters. Those moves measure investor expectations, not the likelihood that any particular remedy will satisfy the states, the writers’ union or the court. Negotiations can still fail even after parties exchange detailed terms.

A deal built around scale

Paramount and Warner announced their definitive agreement on Feb. 27. The companies’ SEC filing valued Warner Bros. Discovery at an enterprise value of $110 billion and said Paramount would issue $47 billion in new Class B shares backed by the Ellison family and RedBird Capital Partners. The filing also promised at least 30 theatrical releases annually.

Warner’s own transaction notice described the combination as a way to compete more effectively in streaming while continuing third-party distribution. If completed, the merger would place Paramount+, HBO Max, CBS, CNN, two major film studios and extensive sports rights under common ownership. That scale is the strategic attraction for Paramount and the core of the states’ competition concern.

Why the states sued

California and 11 other states filed a July suit, arguing that the combination would concentrate theatrical-film distribution and cable television ownership. The states contend that a larger supplier could demand a greater share of box-office receipts from theaters and raise prices for cable distributors and consumers. Paramount disputes those claims and says the merged company would be a stronger rival to Netflix and Disney.

The Writers Guild of America filed a separate challenge, warning that consolidation could reduce bargaining opportunities and worsen pay and working conditions. The cases are scheduled for trial in March. Those claims have not been adjudicated, and settlement talks do not establish that the merger is either lawful or unlawful; they indicate that the parties may prefer negotiated safeguards to the delay and uncertainty of trial.

The cost of delay

Paramount faces a powerful financial deadline. Beginning after Sept. 30, it must pay Warner shareholders a $7 million daily “ticking fee” until the deal closes. The company asked the court to require the states and the writers’ union to post a $1.88 billion bond to cover potential losses if their challenges fail. The plaintiffs argued in an Aug. 31 court filing that Paramount accepted those costs voluntarily and should not shift them to public agencies or a nonprofit union.

That pressure helps explain why the reported talks accelerated. It does not guarantee an agreement: the parties could still disagree over asset sales, the independence of any monitor, the duration of separate studio operations or the enforceability of a release commitment. A promise to produce 30 films also leaves open questions about budgets, distribution and whether titles receive meaningful theatrical runs.

Federal approval did not end the dispute

The Federal Communications Commission on Thursday approved Paramount’s request to allow large indirect foreign equity stakes connected to the transaction, while barring those investors from voting rights or control. An AP report said sovereign funds from Saudi Arabia, Qatar and the United Arab Emirates have committed about $24 billion. The FCC decision addressed broadcast ownership and foreign investment, not the states’ antitrust allegations.

For moviegoers, creators and workers, the eventual settlement language will matter more than the fact of a deal. A durable agreement would need measurable obligations, independent enforcement and consequences for noncompliance. Until such terms are filed or announced, the clearest conclusion is narrower: Paramount and the states appear closer to resolving their fight, but the future structure of two of Hollywood’s largest studios remains unsettled.