If the Paramount sale were a five-act drama, one would have to note that the plot is now heading towards the climax. Uncertain for both protagonists and viewers whether catharsis or catastrophe will occur. The bitterly evil media legacy series “Succession” with exactly this subject, based only on the Murdoch family, seems like a cuddle fest in comparison. What makes things really complicated is that Shari Redstone, CEO and majority owner, wants to prove to Father Sumner that she can do it all on her own. Only: He died in 2020.
The background: The patriarch actually had the empire, which includes, among other things, the film studio Paramount Pictures (“Titanic”, “Top Gun: Maverick”, “Iron Man”), telecom top dog Viacom and TV channels CBS, MTV and Nickelodeon , want to bequeath to his daughter Shari. The two argued and reconciled for years; In July 2015, Shari wrote in an email to her youngest son, Tyler, “Your grandfather said I would only become CEO over his dead body.” Redstone died in August 2020 at the age of 97; Despite all the arguments, Shari became his de facto successor, the most powerful person in the group with 77 percent of all voting shares owned by the family. In February 2022, Shari Redstone said, “We are on our way to new heights.”
“In 41 years of being in this business, I have never experienced a situation like this.”
The share price has fallen by more than 60 percent and is currently around $12.50. Recently, investment legend Warren Buffett sold his 63 million Paramount shares and said the investment was a mistake. First quarter loss: $417 million; The total debt is 14 billion dollars – also because the construction of the Paramount+ streaming portal consumed three billion dollars without generating the hoped-for income. Standard & Poor’s downgraded its debt rating to “junk” in Marchi.e. garbage, and John Rogers, founder and boss of Ariel Investment, one of the largest shareholders, says about the attempt to sell the group: “In 41 years that I have been in this business, I have never had a situation like this experienced.”
Enter David Ellison, son of Oracle founder and billionaire Larry – as already mentioned: “Succession” is a summer comedy compared to the real drama. The 41-year-old David was long considered the epitome of what they call “dumb money” in Hollywood: a rich guy who, after a few failures as an actor (he played alongside James Franco in the flop “Flyboys”), tries his hand at producing and finances practically any nonsense.
David Ellison has money, yes – but he is certainly not stupid, on the contrary: he used his father’s contacts (especially with media mogul David Geffen and Apple founder Steve Jobs), learned willingly and produced successful blockbusters such as “Mission Impossible : Ghost Protocol” and “World War Z” with Brad Pitt – the latter, due to the chaotic production, is seen as proof that the young Ellison made the right decisions under pressure. His company Skydance Media is now valued at almost five billion dollars through private financing rounds.
Ellison wants to take over Paramount – via a complicated deal in which Skydance first buys the Redstone group National Amusements and 80 percent of the voting shares in Paramount for two billion dollars, then Paramount would swallow Skydance in a five billion dollar share deal. “The deal feels like there is panic at Paramount,” says Ariel Investment founder Rogers. He and other investors protest violently; they believe the deal is only worthwhile for Ellison and Shari Redstone. In April, four board members resigned, and shortly thereafter CEO Bob Bakish resigned. A letter from major shareholder Blackwood Capital Management says: “The last thing we need is a film fan with a silver spoon in his mouth driving the company into the wall.”
There is a second offer: Sony wants to pay $26 billion together with Apollo Global Management – a simpler deal, complicated only by antitrust issues, which could, however, be solved by breaking up the company. It is said that Sony would sell both the TV stations around CBS and the legendary film studio site on Melrose Avenue in Los Angeles – financially worthwhile for Shari Redstone, 70, but of course the admission that her father’s empire would not be able to hold together to be able to; As of now, she definitely wants to prevent that.
The problem with Paramount’s streaming portal: It doesn’t have a treasury like Disney
It is said that Sony is considering a different, lower offer because of the strong reaction from its own investors – the share price briefly fell by more than twelve percent. The realization at Sony apparently, and quite a few entertainment companies are currently doing this: the difference between successful and valuable is huge. So: Between 1985 and 2010, MTV produced highly successful must-have pop culture programs, “Beavis & Butthead”, “The Osbournes” and “MTV Cribs”, but these days they are by no means in the sphere of other formats such as the TV series “Friends” or ” The Big Bang Theory” exists, for which streaming service Max pays $100 or $200 million per year in license fees.
The problem with Paramount’s streaming portal: It doesn’t have a treasury like Disney and doesn’t produce as quickly as Netflix. Worse still: The current Paramount mega-TV hit, the western drama “Yellowstone”, can be seen on competitor Peacock due to agreements before the launch of Paramount + – last autumn there was a “Yellowstone” episode during the first broadcast CBS even advertised: “All episodes are available on Peacock.” It’s as if “Tatort” showed that all other episodes could be found in the Pro Sieben media library. What Paramount is currently trying: streaming exclusive episodes of successful series; On May 24th there will be a “South Park” episode about the Ozempic weight loss injection.
There are heated negotiations behind the scenes; both bidders have now received insight into business figures that are not available to the public through an independent committee set up by the board. Time is of the essence: the annual investor meeting will take place on June 4th; the peripete of this drama.
Because of his contacts in the tech industry, Ellison’s offer promises transformation into a digital company and a share price of more than $30, but is (still) unpopular with investors because of the complicated structure. Sony’s could prevent Redstone due to its likely break-up. The third option remains: no sale, continue with Redstone and possibly also with the triumvirate that will run the business after Bakish’s departure. However, and for once almost everyone agrees, that would probably be the worst possible outcome.