The Purge of Paramount in Preparation for 'New Paramount'
Brian Steinberg
With Skydance/Paramount now official – well, as official as it can be with a 45-day "go shop" window and if the deal survives that, another 9-10 months until it closes – a couple interesting tidbits as the vision for "New Paramount" comes into focus:
Skydance executives who are set to take over the owner of CBS, Nickelodeon and MTV have identified at least $2 billion in cost cuts that can be made at the company, much of it from its linear media operations, according to Jeff Shell, who is slated to be named president of the new entity. Skydance and Shari Redstone, Paramount’s current controlling shareholder, struck a deal Sunday that will have the former take over National Amusements, Redstone’s investment vehicle, and inject capital into Paramount.
Executives believe in the potential for linear media, said Shell, but need to make changes to wring cash flow. The cost cuts,, targeted with the help of consultants at Bain & Co., can be made “quickly,” Shell said. “Linear is going to keep declining,” he added during a call Monday with investors. Managed properly, he said, “I personally think the linear business” will be strong for years to come. “We don’t think it’s going to worsen, but we don’t think it’s going to get better either.”
That $2B in cuts is on top of the $500M in cuts the current triumvirate of CEOs are still planning to make as they continue to operate the business until the deal closes next year.
Skydance suggested new business moves were on the horizon. Shell indicated a willingness to sell certain non-strategic assets — which he did not immediately identify — and suggested the company hoped to add to the CBS Sports portfolio, which boasts the Masters golf tournament, Big Ten football, part of the NCAA March Madness tournament and NFL rights. “Sports if the foundation of our business,: he said, and with Gerry Cardinale’s RedBird investment vehicle involved in the Skydance deal, the new Paramount “will likely be a buyer, rather than a seller” when it comes to sports rights.
That makes it sound like the rumored sale of BET will likely move forward (as part of the deal, Skydance/RedBird get sign-off on deals that will significantly alter Paramount). But it also sounds likes CBS isn't going anywhere – and if anything, 'New Paramount' may aim to bulk up with regard to sports content. Certainly the presence of RedBird Capital, with its deep sports ties on the investing side, would indicate as much.
That's not great news for Warner Bros Discovery, which needs more sports content as it prepares to lose the NBA on their TNT channel next year. CBS' NFL rights could have been a big boost to their offering – including the new Venu sports bundle. Speaking of, does 'New Paramount' figure out a way to get in on that deal now? That would leave Comcast/NBC as the odd man out, which I'm sure Disney would be just fine with as the two sides continue to haggle over the price of Hulu.
And executives appear poised to investigate opportunities for Paramount+, the company’s primary subscription-based streaming vehicle. Shell articulated a plan to seek out potential partnerships with other streamers, while Ellison vowed to overhaul the company’s technology offering, citing a crucial need to blend content with a top digital platform.
In time, Shell suggested, many of the streaming services were likely to be bundled together. The current streaming experience “‘is not great,” he said, with consumers forced to pay high fees to continue to receive most services. The current consumer experience “is not sustainable,” he added. “I think you already see the bundling process starting to happen,” he said, because consumers may have favorite media brands, but still crave a unified experience. “If you’re in that bundle you’re going to win, and if you’re not, you’re going to be in trouble.”
WBD could still figure out a path to bundle Max with Paramount+. But again, will Comcast try to beat them to it to bolster Peacock? Does Amazon try to enter into this mix in some way? Someone else?
Once we pass that 45-day window, I suspect there will be a lot more deals being worked on behind the scenes as they cut old Paramount down to the bone, in order to best build it back up as 'New Paramount'.
One more thing: while they are saying 'New Paramount' is the working name, what will they actually choose for a moniker if/when this deal closes? 'Paramount' remains a great name/brand, so you have to imagine it doesn't go away. But 'Skydance' is also a solid name, and has done a good job building up its own brand over the years, and the name has clear emotional ties for Ellison. You could easily see them doing the sort of standard 'Skydance Paramount' hybrid, though I sort of wonder if they don't move 'Paramount' back to being the name for the actual movie studio, while everything else falls under 'Skydance' (including continuing to use that name for film production that's done in-house). Either would be fine. We just better not get 'Skymount' or 'Paradance' or the like. Or Skydance Paramount sponsored by Oracle?
M.G. Siegler