Paramount CEO David Ellison ratcheted up the pressure in his merger battle on Wednesday by hinting that he’s ready to pack up and leave California. If history — and his father — are any indication, things could go his way.
The company informed the offices of Los Angeles Mayor Karen Bass and California Attorney General Rob Bonta that it is prepared to formally announce its plans to leave the state. This comes with the prospect of a $7 million daily “ticking fee” starting on Oct. 1, two weeks before settlement talks were originally scheduled to begin.
The big question is whether Paramount is truly prepared to pick up stakes and move. Or if this is Ellison upping the ante in hopes that Bonta will blink and move to settle.
“It reads as a pressure play. Companies don’t tell the mayor and the attorney general they’re leaving unless they want that message delivered,” regulatory attorney Braden Perry told TheWrap. “A company that just wants out announces it and goes. Telling the other side first is a bargaining move.”
It’s a game plan ripped straight out of the playbook of Oracle co-founder Larry Ellison, David’s father, who over decades has built a reputation as an aggressive negotiator willing to play hardball. Historically, Larry Ellison has viewed negotiations as a competition where absolute victory is a must. And with Paramount, both he and David understand they hold a lot of cards.
Paramount leaving Hollywood would be devastating. Its departure would mean the loss of as many as 58,000 jobs and $21.2 billion in yearly economic output, according to a study conducted by the Los Angeles County Economic Development Corp. that leaked a few days ago (but was reportedly commissioned by the company).
It’s why California Gov. Gavin Newsom, gubernatorial candidate Xavier Beccera and Bass have pushed for a resolution, even as Bonta has held firm alongside 11 other state attorneys general and the Writers Guild of America in opposing the merger without concessions.
A Paramount spokesperson had no comment when asked about the plans to move or the various reports of the company looking at other cities, while a spokesperson for Bass told TheWrap she is “focused on protecting and fighting for jobs in L.A., including critical jobs in the entertainment industry that have been a vital part of Los Angeles’ economy.”
“She’s been engaged on this issue and will continue to fight to make sure L.A. is home to Hollywood,” the spokesperson added.
A spokesperson for Bonta’s office declined to comment on Paramount’s plans, but told TheWrap it’s “no secret that Paramount has been making this threat, despite its alleged commitment to California and Hollywood.”
A similar situation played out more than a decade ago in San Francisco — with the Ellison family getting the better of the deal.
This has happened before
The most apt comparison to what David is doing happened in 2010 when San Francisco wooed Larry to choose it as the host city for the America’s Cup yachting competition. He had won the previous America’s Cup trophy and with it the right to choose the location for the next competition to be held in 2013.
Hosting the America’s Cup would bring tourism dollars and prestige, but to the older Ellison that privilege wouldn’t come for free. In exchange for granting it to San Francisco, he had sought wide swaths of the city’s waterfront for real estate development.
The terms included developmental rights and leases of up to 75 years for some bay front property, according to NBC, which noted the event could bring $1 billion in revenue for the city.
The city pushed back, kicking off an ugly fight.
“Larry Ellison, the Oracle chief executive, has leveraged his skills as a dealmaker to become a dominant force in the technology business and the richest man in the Bay Area,” The Bay Citizen Editor-in-Chief Jonathan Weber wrote in an op-ed in the New York Times. “But his negotiations with the City of San Francisco over staging the America’s Cup sailing competition have been anything but artful.”
After a protracted battle, Ellison threatened to take the America’s Cup to Newport, R.I., or even Italy.
Sound familiar?
Ultimately, San Francisco relented, and Ellison won a rich swath of property, even though he had to scale back some of his plans to clear other regulatory hurdles. But in that case, San Francisco blinked.
The mayor at that time? Gavin Newsom.
Could it happen again?
Given the state of Hollywood, which is still rebounding from the pandemic, two strikes and the impact of streaming, the thought of losing one of its historic studios is cataclysmic.
Paramount is making sure to show that it’s serious about the move. TMZ reported that a formal announcement was slated for as early as Tuesday, but it did not end up happening. Deadline reported that a deposit was put on moving trucks in Los Angeles.
That could mean Paramount means business or is getting very theatrical with its threat.
If Paramount ends up leaving the state, insiders previously told TheWrap that it would likely set up shop in Nashville or Atlanta. David Ellison has already received an invite from Tennessee to set down roots in the Volunteer State. Oracle is in the midst of relocating to Nashville and is expanding its facilities there after previously moving from Redwood Shores, Calif., to Austin, Texas, in 2020. Paramount is now reportedly looking at office space there, according to Politico.
Texas has also thrown its hat in the ring, with Gov. Greg Abbott’s press secretary Andrew Mahaleris previously telling TheWrap it offers “the best business climate in America” with no corporate or personal income taxes. The Hollywood Reporter said a sit-down with Texas Lt. Gov. Dan Patrick last month was on the books.
Texas is also, of course, the production hub of Paramount’s popular Taylor Sheridan suite of shows.
All of the noise indicates Paramount could pull the trigger — even as a last resort.
“I would characterize it as both a current pressure tactic and future contingency plan if Paramount and California don’t work out a deal approving the acquistion of Warner Brothers Discovery or if Paramount loses its antitrust trial next year,” said Los Angeles-based trial lawyer Neama Rahmani. “Why would Paramount stay in a state that’s been so adverse to its business interests?”
Perry likewise echoed the seriousness of the threat.
“My read is that Paramount is genuinely willing to leave, but leaving is still the fallback,” he said. “The smart play is to use a believable threat to get a settlement on favorable terms. If October passes without a deal, though, the accruing costs could turn the fallback into the plan.”
One Paramount executive insisted Ellison is “dead serious.” He would prefer to stay in California, the insider told TheWrap, but he feels his hand is being forced by the state AGs and their lawsuit.
Bonta, meanwhile, doesn’t appear fazed.
“What Paramount decides to do is Paramount’s choice alone,” said a spokesperson for Bonta. “We’ll continue to apply the law without fear or favor and continue to be open to coming to the table for good faith discussions.”
How confident will he be if those moving trucks start revving up?
