Since the re-merger of Viacom and CBS three years ago, Shari Redstone’s company has looked like a major acquisition target.
So why, despite an impressive corporate content catalog that, according to Parrot Analytics, ranked third behind only Disney and Warner Bros. Discovery in Q3, Paramount Global hasn’t come close to materializing sales? Let’s break it down.
Linear Attachment and Licensing Issues
netflix held takeover talks A one-time, but first-loving streamer with Paramount Pictures was only interested in the company’s library of content, not its linear broadcast (CBS) and cable networks (Paramount Network, Comedy Central, Nickelodeon, BET, MTV, VH1, Showtime). , Smithsonian Channel). Clearly, a streaming company that champions over-the-top (OTT) viewing via the Internet has no desire for legacy entertainment entanglements. As former Viacom digital media executive turned media analyst Andrew Rosen recently wrote in his PARQOR Newsletter, “What happens when AMC Networks or Paramount Networks goes missing due to lack of demand?”
On top of that, any interested parties already have to sort through a web of complex licensing agreements. For example, some Paramount Pictures movies still starting on the cable network Epix go theatrically because of a pay-one deal that expires in 2024. Comedy Central’s “South Park” is aired on HBO Max until 2025. Paramount Network’s “Yellowstone” stream Peacock and many other titles are still licensed externally or non-exclusively. A potential suitor would need to pay top dollar for a company that hasn’t been in complete control of its greatest hits for many years.
As of now, Redstone isn’t interested in selling the company outright or in piecemeal. But in an interview on Wednesday Columbia Journalism School’s Night-Bezhot Gala DinnerCEO Bob Bakish Calls Paramount “very low ratedAnd there’s no denying that the company could be swept up in industry-wide M&A excitement. “Will there be further consolidation? Absolutely yes,” he said. “Who will be on top? Who will get it? Who the hell knows? Would any tech company do this? They got the balance sheet. (A representative for the company did not comment for this story.)
Linear Regulatory Issues
Comcast Allegedly Prior to the launch of Paramount+, Paramount Global was approached with the idea of placing the company’s titles on Peacock, which Redstone and Bakish vehemently rejected. two companies discussed Other ways in which their fledgling streaming efforts could reinforce each other rather than compete directly, resulted in the joint foreign venture SkyShowtime. (A combined NBCUniversal and Paramount Global corporate content library will account for an industry-leading 22.2% of all US audience demand in Q3).
frequent travel between companies convinced many The merger between Paramount Global and NBCUniversal parent Comcast made the most sense. However, in any such scenario, the new company would have to sell one of its broadcast networks – CBS (Paramount Global) or NBC (NBCU) to gain approval from US government regulators. The same goes for Disney, which owns ABC.
Of course, shutting down broadcast networks is a difficult proposition in the current environment. Can it stay an independent news and sports campaign la Fox? Would a company like Nexstar, which recently acquired a majority stake in The CW from Paramount Global and Warner Bros. How would such a deal even be structured? This path is marked by several unknown variables.
“One of the main barriers for Paramount Global’s buyer is CBS, and not necessarily all CBS you will notice, but rather CBS News operations and its 15 owned and operated local television stations,” said former M&A banker financial journalist William Turned. . D. Kohana wrote in March.
How Much Is Paramount Global Worth Without CBS?
CBS is a powerful Paramount+ content driver The network holds 17 of the top 30 titles. While on the streamer, about 25% of the streamer’s library is comprised of CBS titles. Linear Networks remains the most-watched broadcast network in terms of overall viewership and a consistent revenue driver, despite declining viewership.
In fact, Paramount Global is largely funding its direct-to-consumer losses through its linear TV profits. While the company’s direct-to-consumer segment lost $900 million in the first half of 2022, the linear model still generates billions in quarterly revenue ($10.9 billion in the first two quarters of the year).
This gives rise to a complicated Catch 22: How valuable is Paramount Global without CBS, which holds immensely important news, sports and written assets? On the other hand, similar to the Netflix conversation that went nowhere, how realistic are sales when Paramount Global is still so deeply engrossed in linear attachments?
big tech pushback
Netflix, Amazon and Apple are unlikely to be interested in broadcast networks and cable channels. But even if Redstone bucked and abandoned the company’s old connections, any takeover proposal from the Big Tech player would face significant scrutiny from the Justice Department and the Federal Trade Commission.
The Justice Department spent 15 months attempting to block AT&T’s acquisition of Time Warner on antitrust grounds, and current FTC chair Lena Khan is a known Critics of Big Tech. Any interest from FAANG (Facebook, Apple, Amazon, Netflix, Google) companies will set off alarm bells as regulatory bodies look to keep the market competitive and leave any growing monopolies behind.
“My argument is part of a larger recent debate as to whether the current paradigm in antitrust has failed,” Khan wrote In his now-famous 2017 Yale Law Journal article. “Although blamed on technocrats for decades, antitrust and competition policy has once again become a matter of public concern.”
Even if such a deal could evade regulatory oversight, Apple has never shown a great appetite for large outside acquisitions (its biggest was Beats By Dre at $3 billion in 2014), notably. One that could cost up to $30 billion.
Waiting on Warner Bros. Discovery
Despite the recent merger of Discovery Inc. and WarnerMedia (and subsequent comments from CEO David Zaslav), it is widely It is believed that That Warner Bros. Discovery is preparing itself for a potential spinoff or sale in the not-too-distant future. If so, a potential M&A partner for Paramount Global, such as Comcast, may very well be waiting. He Shoe to drop. Warner Bros. – with its collection of blockbuster intellectual property like “Harry Potter” and DC Comics, cable crown jewel HBO, and lack of broadcast network commitments – could be seen as a more lucrative asset.
This has more or less put Paramount Global into a holding pattern, assuming the company’s leadership is looking to sell at this point (Redstone Told His company has the “scale to succeed and win” in June.)
Paramount Global boasts of a growing direct-to-consumer business that reached 64 million customers worldwide as of Q2. Its the most-watched broadcast network on CBS. (The company will announce third-quarter results on November 3) The film studio has released a series of box office wins over the past 18 months, led by “Top Gun: Maverick” box office winner of the year. Despite all this, the company’s share price is down more than 40% year-over-year, closing Thursday at $19.11.
On its surface, the media empire appears to be a collection of lucrative properties potentially available at a discounted price. This should theoretically be a big deal. But in Hollywood, appearances have always been deceiving and the obstacle course of potential ramifications has given fans a warning for now.
