FCC lets Paramount sell 49.5% equity stake to Saudi Arabia, UAE, and Qatar

The Federal Communications Commission yesterday approved Paramount Skydance’s plan to sell large equity stakes to the sovereign wealth funds of Saudi Arabia, the United Arab Emirates, and Qatar.

Under US law, companies with licenses to run broadcast stations need FCC approval to have direct or indirect foreign ownership exceeding 25 percent of the company’s stock. Paramount says its indirect foreign ownership will reach 49.5 percent after it receives investments from the sovereign wealth funds and filed a petition asking the FCC to waive the foreign ownership limit.

Paramount, the owner of CBS, holds FCC licenses for the 28 local CBS stations that it owns and operates. Paramount is buying Warner Bros. Discovery in a $111 billion deal that is being partially financed with foreign investment but hasn’t completed the acquisition because US states filed a lawsuit that aims to block the merger. Trump’s Department of Justice approved the merger.

The FCC is letting Paramount sell indirect ownership stakes to “some of the most repressive governments in the world,” FCC Commissioner Anna Gomez, the only Democrat on the commission, said yesterday. “An investment this large in one of America’s biggest media companies doesn’t just buy equity, it secures influence over what gets said and what gets made.”

The Paramount/Warner deal would combine two of the largest movie studios, merge streaming service Paramount+ with HBO Max, and give Paramount ownership of CNN and other TV channels.

“The funds plan to invest $24 billion in the Paramount/Warner deal,” the Los Angeles Times wrote. “Saudi Arabia’s Public Investment Fund is set to contribute $10 billion, while the Qatar Investment Authority and Abu Dhabi’s L’imad Holding Co. will separately add $7 billion.”

Concern about foreign influence

Although the Trump FCC has taken a hard stance against foreign-made equipment, such as routers and drones, it said in an order yesterday that granting Paramount’s request is in the public interest. “Paramount asserts that, as its Petition makes clear, its ‘new foreign investors, which will receive only non-voting equity, will not have any ability to influence the company’s editorial decision-making or news or entertainment content or to access its viewers’ personal data,’” the FCC said.

The Ellison family and RedBird Capital Partners will continue to own 100 percent of Paramount’s Class A voting shares, while the foreign investors will hold Class B non-voting shares. The FCC approved Paramount’s petition in a declaratory ruling issued by the Media Bureau. FCC commissioners did not vote on the item.

Gomez said that because foreign owners could hold influence over the company, she “called for this new and novel issue to go to a full commission vote given what’s at stake. Instead, the FCC snuck this ruling out as a staff-level decision, with no public vote and no accountability for a call of this magnitude.”

Senate Democrats said in a May letter to FCC Chairman Brendan Carr that “the foreign governments behind this investment systematically suppress press freedom in their own countries and have made a series of investments and gifts to entities controlled by the president and his family, raising serious concerns about their influence over the independent American media and the potential for corruption.” But yesterday’s approval has been expected since Carr in March said, “I think this is a good deal, and I think it should get through pretty quickly.”

The FCC said its order “permit[s] up to 100 percent indirect foreign equity interest of Paramount, in the aggregate.” While Paramount said it expects 49.5 percent of shares to be owned by foreign investors based on its current deals, it told the FCC the number could change “in light of routine fluctuations in publicly held equity interests and to account for potential future investments.”

FCC says opposition “unconvincing”

The FCC Media Bureau order rejected concerns that the investment will buy “practical influence,” even without voting control. “We find this argument unconvincing. The Proposed Investment is not a loan, which must be repaid, but a purchase of stock that has no voting rights,” the order said. “We are persuaded by Paramount’s argument that the Foreign Investors therefore will not be able to wield any influence, let alone control, over decisions involving the Licensees. Paramount has further demonstrated that David Ellison will retain control over Paramount and that the Ellison family will continue to own a majority of the voting stock.”

The FCC cited Paramount’s commitment to “ensure that there will be no interference with the editorial or decision-making policies of its broadcast stations (or CBS News or any other facets of Paramount news and entertainment programming).” The order said the FCC “has long recognized that foreign investment in US companies and networks, including broadcast, fosters technical innovation, supports job creation, and strengthens the US economy.”

Paramount agreed to a few terms to ensure compliance. The FCC said that “Paramount must monitor foreign ownership to ensure continued compliance with the Commission’s rules.” It must also ensure that “Foreign Investors will not have any influence, direction, or control over or provide any commentary or guidance on Paramount’s content decisions, company management, or have any Access to Paramount’s non-public US Person Data.”

Paramount would need to seek additional FCC approval “in the event it proposes to change any voting, governance or information rights of the Foreign Investors,” and before any change that results in “its foreign ownership exceed[ing] the terms and conditions of this Declaratory Ruling,” the FCC said.

Media advocacy group Free Press said in an FCC filing that “Paramount will begin its ownership of WBD with nearly $80 billion in debt, which will require deep cuts to Paramount’s pre-merger holdings and existing operations. These cuts will negatively impact the public interest, particularly at Paramount’s broadcast units.”

Judge found merger likely illegal

The Paramount merger with Warner Bros. was approved by the Justice Department in June, but a group of 12 states led by California filed a lawsuit that seeks to block the deal. A federal judge ruled that the merger is likely to reduce competition substantially and violate antitrust laws.

The judge halted the deal while litigation continues in the case, which could ultimately be decided by a federal appeals court. Paramount has been threatening to leave California if the state doesn’t back down, while California Attorney General Rob Bonta accused the company of trying to “blackmail the state into letting an illegal deal through.”

The FCC last year allowed Paramount to buy Skydance for $8 billion after the company agreed to install an ombudsman at CBS. Carr, who has repeatedly threatened to revoke broadcast licenses from news companies that Trump doesn’t like, described the required ombudsman as a “bias monitor.”

Paramount obtained FCC approval to buy Skydance shortly after it reached a $16 million settlement with Trump in a lawsuit accusing CBS of deceptively editing a pre-election interview with Kamala Harris. Paramount settled with the president even though CBS had rebutted Trump’s claims by releasing an unedited transcript and camera feeds of the interview.

Jon is a Senior IT Reporter for Ars Technica. He covers the telecom industry, Federal Communications Commission rulemakings, broadband consumer affairs, court cases, and government regulation of the tech industry.