Skydance Deal Done, What Next For Paramount Global?

Forbes

3 days ago

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It's been a long, brutal, wildly partisan, and wholly unlikely slog to get here, but Shari Redstone finally gets to preserve her family fortune by selling her patrimony, the media empire laboriously assembled by father Sumner, for about $8.5 billion and goodness knows how much cortisol and angst.
So now what? Where does Skydance Entertainment, the media company assembled by mogul-in-the-making David Ellison, scion of another wealthy industry pioneer, take Paramount Global now that the Federal Communications Commission has finally signed off on the deal, clearing the way for it to close on Aug. 7?
Some big moves already have happened, just in the past several days:
Up next: widespread whacking. Ellison's deal proposal called for a merger of Skydance and Paramount that would enable a massive $2 billion in cost savings.
Likely targets include those former Viacom networks that Sumner Redstone turned into a 1990s cable powerhouse, financing his subsequent acquisitions of the storied Paramount Pictures studio and lot, and CBS broadcast operations.
These days, however, cord-cutting has turned much of cable into dead networks walking.
Comcast's NBCUniversal has already spun off nearly all its cable operations other than Bravo into a standalone company called Versant. Warner Bros. Discovery has reorganized in similar fashion, and announced plans to split off its Global Networks unit into a separate company under CFO Gunnar Wiedenfels, along with a boatload of debt and a 20-percent stake in the remaining Streaming & Studios unit that it's supposed to sell within a year of the split.
LightShed Partners analysts led by Richard Greenfield posted a quick note last week, revisiting the 2013 Netflix prediction of linear TV's eventual demise, suggesting that Colbert's imminent departure is one of those big signs that it's actually starting to happen, except in live news and sports.
'Over the next few years, we expect virtually all linear TV programming outside of sports and news to shift to catalog content and reruns of what appeared on streaming; there simply will not be a business model to support original entertainment programming on linear TV," the LightShed note reads. "That will lead consumers to seek increasingly smaller (skinnier) bundles of channels focused on broadcast networks, sports channels, and news channels. Makes you wonder why any investor would want to own the plethora of coming standalone cable network companies.'
Yes, indeed. It seems highly likely that Paramount holdings such as Comedy Central, MTV, and Nickelodeon depart the mothership in similar fashion, perhaps in a Titanic-sized merger of sinking ships with Versant and/or Global Networks. Ellison has proved a savvy enough operator that he likely wouldn't lead or finance that sort of rollup, but perhaps he could use a spinoff to lighten debt loads and position Paramount Global for a media future where cable delivery matters less and less.
And while Ellison has committed to beefing up local news operations, what's he going to do with CBS News? Both its morning show and its evening news are mired in third place, with on-air talent that, at least traditionally, enjoyed extremely generous contracts. Will CBS News do more (or, more likely, less) with less? Numerous notable on-air personalities have departed recently across all the broadcast networks, including CBS News' Nora O'Donnell and NBC's Hoda Kotb. Expect more of that to continue.
The Paramount Studios lot has long been home for both film and TV production, but in truth, has often used as a site for various conferences, food festivals and the like, suggesting its facilities haven't been fully exploited for many years. Does Ellison amp up the film-production spending, at a time when movie theaters in the United States are still generating subsequently lower revenues than they did before the pandemic (that was one of Redstone's challenges; her family's National Amusements, which has had a controlling share of Paramount, also owns hundreds of underperforming theaters)
Skydance will bring some areas of focus that haven't been part of any corner of Paramount lately, including a videogame unit and feature animation (though South Park's creators pungently reminded everyone last week they can still dish out the satire, even if it will be available mostly on streaming going forward).
The changes ahead are likely to be deep and painful, particularly amid a deep recession afflicting the entertainment business in Hollywood, in whose literal physical neighborhood the Paramount lot sits. But perhaps the relatively young and tech-savvy Ellison, a hugely successful movie producer (recent Mission: Impossible movies and much else) and son of one of the world's handful of richest people, is just the person to take a century-old movie studio into this uncertain future. Plenty of work lies ahead.