Skydance Kicks the Tires and Lights the Fires -- Again

Will Paramount be sold this time? And/or will other partners emerge?
Skydance Kicks the Tires and Lights the Fires -- Again

We're now approaching the Fast & the Furious franchise in terms of number of sequels in the saga that is the sale of Paramount. I had just written the below post yesterday with the thought that I could publish it today – silly me. I should have known that of course the Skydance/Paramount deal would be back on. After all, it went down in flames just a few weeks ago. As I concluded at the time:

The plan now, it seems will be to try to find a partner for the Paramount+ service. And that sure sounds like either Warner Bros Discovery's Max or Comcast's Peacock. But WBD now finds itself in a more precarious place as well versus when they were clearly telegraphing the intent to take over Paramount. Notably, Paramount+ has no sports. WBD needs sports. So unless the partnership includes CBS (which includes the NFL), we may be getting Paracock/Peamount after all...

Meanwhile, Skydance now moves forward with their partner Paramount on the next Mission: Impossible and Top Gun movies. Not awkward at all.

Time to buzz the Paramount water tower?

Sure enough, it's time for that fly-by. Another one! As Jessica Toonkel and Lauren Thomas report:

David Ellison’s production company has reached a preliminary agreement to buy National Amusements, according to people familiar with the matter, rekindling deal talks that fizzled last month. It then plans to merge Skydance with Paramount Global, a deal subject to approval by a special committee of Paramount’s directors.

National Amusements, which owns about 77% of the voting shares of Paramount, has referred the new deal to the special committee for review. The panel met Tuesday evening to discuss it, the people said.

Under the proposed terms, Skydance would pay $1.75 billion for National Amusements, the people said. Skydance, known for popular titles such as Amazon’s “Tom Clancy’s Jack Ryan,” and National Amusements have also agreed to a 45-day “go-shop period” in which other interested Paramount bidders can make offers for the company.

So Skydance upped the price slightly, but more importantly, they agreed that the majority of shareholders not named Shari Redstone would not have to approve the deal. This opens Skydance to lawsuits – which will come, because they always come in M&A – while better protecting Redstone.

That 45-day "go-shop" is important there, since Paramount can try to find a better offer. And there are a lot of offers out there, per below. But Skydance seems convinced that their's will be the best. They're probably right, but a lot of the below could come into play in other ways. For example, Skydance could spin-out/sell-off/partner on Paramount+. Perhaps with WBD or Comcast for Max or Peacock, respectively. The big question remains what becomes of CBS? Does Skydance hold on to it – and its NFL rights? Or can WBD convince them to handoff?

Anyway, back to the original post as we sit back to enjoy the next month and a half of barrel rolls here...

Just when you thought the music had paused for a bit, the game of musical chairs continues for the various streaming services. There are about four or five chairs and six or seven large players remaining. Those butts need to find seats.

Well, as Alex Sherman reports, WBD is back, circling:

Paramount Global leadership is having active discussions with other media and tech company executives to determine if a structure makes sense for both parties where Paramount+ can be merged with another streaming entity and potentially co-owned, according to people familiar with the matter, who asked not to be named because the discussions are private.

One of the companies that has expressed a desire to reach a deal is Warner Bros. Discovery, according to people familiar with the matter. Combining Max and Paramount+ could strengthen both services by allowing them to better compete with Netflix and Disney’s suite of platforms (Disney+, Hulu and ESPN) for eyeballs and future content.

WBD has always made sense as a partner for Paramount. Beyond the clear telegraphing mentioned above by CEO David Zaslav and extremely influential Board member John Malone, unlike Comcast, WBD doesn't own another major television network (just several cable ones), so scooping up Paramount's CBS could work too. And yes, the move makes even more sense now that WBD is on the verge of losing the NBA rights for TNT – which was the key element they brought to the forthcoming Venu sports streamer with Disney and Fox. If WBD was able to grab CBS and thus, their NFL package, that would suddenly make Venu make a lot more sense. And so Disney and Fox should want this deal to happen too!

But hurdles remain, back to Sherman:

Paramount Global is also considering partnering with a technology platform, the company’s co-CEO Chris McCarthy said at an employee town hall on June 25.

“What they don’t have is our scale of content, and together we will make for a very powerful combination to drive more minutes and greater profits,” McCarthy said of a potential tech partner at the town hall, according to a transcript of the event obtained by CNBC.

A merged streaming service would mitigate churn by giving customers more diverse programming and fewer reasons to cancel each month, and it could take Paramount+ losses off Paramount Global’s balance sheet by giving it new ownership.

It doesn't feel like a deal Apple or Netflix wold do. But Amazon? Absolutely. Again, especially if they got CBS – not only for the NFL, which would complement their own package and sports push, but the overall CBS content is pretty in-line with the original stuff Amazon puts out there. The Jack Reachers and Jack Ryans of the world. Oh and Bosch. Don't forget Harry Bosch. Very CBS-demo.

Of course it may not be as easy as buying the whole thing now, as Skydance just learned in the most painful way possible. It may end up that only Paramount+ is for sale and/or available to partner to create a new entity.

While a structure for a hypothetical joint venture with Warner Bros. Discovery hasn’t been discussed in detail, ownership likely wouldn’t be a 50-50 split given the existing natures of the streaming assets and their finances, according to people familiar with the discussions.

Warner Bros. Discovery’s direct-to-consumer business made $103 million in annual adjusted EBITDA in 2023 after losing $2.1 billion the year before. Paramount Global reported a loss of $1.67 billion in direct-to-consumer operating income before depreciation and amortization in 2023, narrower than its $1.8 billion loss a year prior.

Max has about 100 million global subscribers, with 52.7 million based in the U.S. Paramount+ ended its first quarter with 71 million subscribers.

That sounds less attractive than getting Paramount and CBS – especially given the losses on the Paramount+ side and WBD's debt issues. But the scale and "synergies" could still make it worth a go. As I laid out back in November, this gives us the following landscape:

Major Straightforward Streamers:
- Netflix
- Disney+ (with Hulu content)
- Amazon Prime
- Apple TV+
- Max (with Paramount+)

In such a world, Comcast will have to figure out what to do with Peacock. They could acquire a few other smaller players like AMC and/or Starz, but that still wouldn't be all that interesting. Perhaps some sort of partnership with Apple? Despite having pretty solid content, Apple TV+ has been in need of a boost. And they just agreed to the weird bargain basement bundle with Comcast (and Netflix, of all players). Then again, it's Apple. Would they really want such a partnership? Especially as it seems like Apple TV+ is finally starting to grow into a meaningful player on its own. So in that world, maybe Amazon is a partner with Peacock?


“There may be some combination of Paramount, Peacock and Max,” said Peter Chernin, former CEO and chairman of Fox Group, in an interview with CNBC last year.

The branding possibilities are fun there...

It's also worth considering how advertising plays into all of this. Since after years of pushing customers towards premium (read: paid) offerings to battle Netflix, everyone (including Netflix) now seems to be zagging the other way to offer cheap and/or free services to boost viewership to be able to sell ads. Paramount and Peacock bring a lot of content to the table. Apple probably needs it the most (and has from the get-go), but they're also going to be the slowest to move into ads. So again, Max + Paramount and/or + Peacock makes sense from that angle too.

One more thing: Are we ready for a potential twist ending? Because here comes Barry Diller. Yes, like all good sequels, he's back... As Lauren Hirsch and Benjamin Mullin report:

A bid to take control of Paramount would be a coda of sorts for Mr. Diller, 82, who tried to acquire Paramount Pictures in the early ’90s. He was outbid by Sumner Redstone, the bellicose media mogul whose daughter, Shari, now controls the company.

Mr. Diller was named head of Paramount Pictures in 1974 at the age of 32. He was credited with rejuvenating the studio, developing a cadre of talented lieutenants, like the future Disney chief executive Michael Eisner and the studio wunderkind Jeffrey Katzenberg, that became known as the Killer Dillers.

After Mr. Redstone outbid him for the company, Mr. Diller set his sights on continuing to build his new media empire, striking a series of audacious deals to expand IAC.

“They won,” Mr. Diller said in a statement after losing out to Mr. Redstone. “We lost. Next.”

Next, indeed! But that would be a pretty incredible narrative arc for Diller. And it's entirely possible that if he did buy the entire thing, he would still try to spin-out/merge Paramount+ with one of the players above. Drama!

So there we go. Skydance has a deal to buy Paramount. But they had one before and then it collapsed in quick, weird, and comical ways. Now WBD and IAC have some time to try to make a better offer. Or figure out other ways to partner up. Does Sony come back to the table too? Edgar Bronfman Jr.? The Baby Geniuses guy? Byron Allen? Especially as he was just spurned on buying BET from Paramount – or is that deal now in limbo too with this larger deal looming?

There are no points for second place. It's time for someone to take Paramount to bed or lose them forever. Before she's lost that loving feeling, again.

Update July 9, 2024: With the deal "official", some thoughts on the next steps:

The Purge of Paramount in Preparation for ‘New Paramount’
Fewer people, more sports, more partnerships, more tech…