The $8-billion Skydance-Paramount Global deal is finally closing. Now what?

Los Angeles Times

2 days ago

After finally getting approval from the Federal Communications Commission, Skydance Media is just weeks away from completing its $8-billion merger with Paramount Global, leading to sweeping changes for some of the most iconic media brands.
CBS, MTV Networks and Paramount Pictures are all bracing for upheaval when Larry Ellison and his son, David, take the keys from Paramount Global controlling shareholder Shari Redstone. The long-running ownership saga has played out while the rules of the media industry have been upended by streaming and, more recently, a White House unafraid to use its muscle to silence critics.
Skydance and its backer, RedBird Capital Partners, have promised investors that it will find $2 billion in cost savings, which means further belt-tightening and layoffs.
'This will be the most dramatic change to the organization since its inception,' said one longtime CBS insider who was not authorized to comment publicly.
Here is what Wall Street and the media industry will be watching for once the deal closes on Aug. 7:
Last year, Paramount+ added 10 million new subscribers to reach 77.5 million. Its subscriber count is now 79 million, thanks also to NFL programming, CBS shows such as 'NCIS' and original hits including '1923,' 'Landman,' 'Lioness' and 'Tulsa King.' Paramount has projected full-year U.S. profitability for Paramount+ this year, making it one of the fastest subscription services to get there.
But its relatively scant resources and thinner slate has made it difficult to truly compete with Netflix and the other biggest players. One potential solution: partnering with a rival streamer to increase its reach.
'Questions around the long-term scalability of Parmamount+ continue to loom large,' analyst firm MoffettNathanson noted in a report Friday. 'Will the new management team pursue external partnerships as a viable path forward?'
Ellison and his team have suggested that they will bring a tech-focused sensibility to Paramount. Technological prowess would help Paramount+ improve its user interface and recommendation process, which insiders acknowledge is currently underwhelming. As expected, the architect of Paramount+ original series strategy, Paramount Global co-CEO Chris McCarthy, will leave when the deal closes.
Analysts also want to see Skydance will increase investment in film and TV franchises to revive assets that have been constrained by Paramount's debt.
While Skydance will get a robust library of films and TV shows, it will also be faced with the slow-melting iceberg that is broadcast and cable TV, which continues to lose viewers. Streaming has surpassed broadcast and cable as the leading source of video consumption just as Skydance takes over CBS and Paramount Global's array of channels that include MTV, BET and Comedy Central.
Doug Creutz, an analyst for TD Cowen, believes the merged company should consider spinning off traditional TV businesses, similar to what Warner Bros. Discovery and Comcast are doing with their cable channels. Whether that will happen remains to be seen.
'There is a clear opportunity to improve Paramount's growth profile by letting those assets go,' Creutz wrote Friday. 'On the other hand, we suspect the Ellisons did not purchase Paramount in order to break it up for parts.'
A test of Skydance's commitment to broadcast may come if the FCC relaxes TV station ownership rules, which would likely lead to consolidation.
CBS News' '60 Minutes' received a vote of confidence with the naming of Tanya Simon, a respected veteran insider to take over as executive producer. She was the choice of the program's strong-willed correspondents.
Simon's appointment is expected to provide stability following the departure of longtime showrunner Bill Owens, who was forced out amid the push for a $16-million settlement over President Trump's lawsuit claiming the program deceptively edited an interview with former Vice President Kamala Harris to make her look better to voters.
'60 Minutes' remained tough in its White House coverage as negotiations went on. The question is whether that approach will continue with new owners. Larry Ellison has a friendly relationship with the president, and the new owners agreed to appoint an ombudsman to oversee news coverage.
Getting it right matters from a business perspective too, as '60 Minutes' remains the most profitable program on CBS.
With Simon in place, new management is expected to address other areas of the news division that can use improvement. The network's revamp of the 'CBS Evening News' has been a disappointment in the ratings and will likely see some changes.
In the longer term, there has been chatter that Skydance may set its sights on acquiring CNN from Warner Bros. Discovery and combining it with the broadcast news operation, an idea that has been considered numerous times over the last few decades.
CBS canceled 'The Late Show With Stephen Colbert,' upsetting his fans, progressive Democratic legislators and other late-night hosts who make their living lampooning President Trump.
The network said it was strictly a business decision, as the younger viewers who made late-night TV monstrously lucrative for decades are no longer showing up. The timing of the move made the company look as if it were capitulating to Trump, who long had the host on his enemies list.
But Colbert will remain on the air through May. The show has already been sold to advertisers for next season. The host has remained unrelenting in his mockery of Trump.
The season premiere of 'South Park' only upped the ante. The animated series made references to the '60 Minutes' deal, showed Trump in bed with the devil and aired its own version of a Trump-mandated PSA, showing a naked president with talking genitalia.
There is no question both shows will test the patience of the new owners.
Pulling Colbert off or censoring the 'South Park' creators, who just received a $1.5-billion deal to continue their show and move its library to Paramount+, would lead to a far greater backlash than what has been seen so far. Any attempt to curtail their voices will send a negative message to creative types who consider working with the company's movie and TV operations going forward.
Over the last few years, Paramount Pictures — home of franchises such as 'Transformers' and 'Mission: Impossible' — has ranked either fifth or fourth at the domestic box office. So far this year, the lone major movie studio still located in Hollywood proper has accounted for about 7% of ticket sales in the U.S. and Canada, according to box office website the Numbers.
Since the pandemic, the company has enjoyed a number of major hits, including 'Top Gun: Maverick' and 'Sonic the Hedgehog 3.' It has also had some solid singles and doubles, including 'Bob Marley: One Love.' But overall, the more-than-century-old studio has struggled from underinvestment in its intellectual property and movie brands.
The latest 'Mission: Impossible' starring Tom Cruise — the eighth and purportedly last in the series — grossed $589 million globally but cost $300 million to $400 million to make, not including marketing costs. Paramount's latest effort, an animated 'Smurfs' reboot, sputtered at the box office. Next up: a reboot of 'The Naked Gun.'
The unit's leader, Brian Robbins (also head of Nickelodeon at Paramount Global), is expected to leave the studio, though he has not officially announced his plans. David Ellison is a movie fan and is expected to take a particular interest in the operation, with plans to put Skydance's chief creative officer, Dana Goldberg, in charge of film at Paramount. Skydance has worked with Paramount on movies before, producing 'Maverick' and the 'Missions: Impossible' films
A transfer of ownership means the NFL can reopen its long-term deal with CBS, which has a Sunday package of games, the AFC Championship Game and two Super Bowls. The NFL is the lifeblood of broadcast television, providing a vast majority of the year's most-watched programs.
Without the NFL, CBS would face tremendous challenges in getting fees from pay TV operators who carry its stations. Revenue from affiliates who pay the network for its programming would also dramatically decline.
Although the NFL is known for taking a pound of flesh at every opportunity, NFL Commissioner Roger Goodell has signaled he will give careful consideration before making any changes.
'We've had a long relationship with CBS for decades and we also have a relationship outside of that with Skydance,' Goodell told CNBC earlier this month. 'We have a two-year period to make that decision. I don't see that happening, but we have the option and it's something we're going to look at.'
The NFL could wait until 2029 when it has the option to open up the contract with all of its media partners. The new media deal for the NBA — $76 billion over 11 years — has the NFL believing its pact is underpriced.
Times staff writer Meg James contributed to this report.