Skydance Says It’s ‘Stronger’ and ‘Smarter’ After Merger Talks Collapsed. Is Paramount?

Call it trial by fire: Skydance said it is “stronger” for having gone through the Paramount fiasco, Skydance CEO David Ellison wrote in a note to his employees (obtained by IndieWire). But is Paramount?

What say you, three Paramount Global CEOs?

“As we look ahead, we are confident about what’s in store for Paramount,” reads a studio memo released Wednesday to staff (also obtained by IndieWire). “We believe in you and we believe in Paramount.”

This vote of confidence comes after Shari Redstone said “I’m out” at the last minute, most likely fearing a lawsuit should any unhappy minority shareholders sue to block the deal.

Shareholders may not have liked it, but a Paramount-Skydance merger was potentially the best option for the industry as a whole. Small-scale consolidation should mean small job losses — especially considering Paramount has already laid off hundreds in anticipation. Had Paramount Global gone to Sony and/or the slicers and dicers in private equity, it would have been a different story.

Instead, Paramount is just Paramount. It is one (struggling) company with three CEOs: Brian Robbins of Paramount Pictures, Chris McCarthy for Showtime/MTV Entertainment Studios, and George Cheeks of CBS. For now.

“When I look at the decisions being made at Paramount and the attempts to manage it, it does seem to be missing real leadership,” J. Christopher Hamilton, an attorney, former entertainment industry executive, and professor at Syracuse University’s Newhouse School, told IndieWire.

“A lot of the poor decisions that have been made in the last year or so reflect that,” Hamilton said. “There’s really no one at the helm with the authority, with the credibility, and the right lens making the tough decisions. And I think it’s going to continue to suffer from that lack of leadership, no matter how smart George is, and Chris, and Brian.”

Lightshed analyst Rich Greenfield is among those who do not see Paramount Global’s “Office of the CEO,” the trio filling Bob Bakish’s blazers, continuing. He doesn’t even think the next Paramount CEO will come from said office, but the board is a different story.

Greenfield’s CEO pick is Charles Phillips, a tech guy, who sits on the company’s board. More C-suite heads are gonna roll, Greenfield predicted in a Wednesday note — he also thinks Paramount CFO Naveen Chopra is a goner and will be replaced by an outsider.

It is not just humans who will be shown the door; platforms, too. Paramount+ either has to go, or it has to go into a joint venture. Greenfield expects an “aggressive battle” between Amazon Prime Video, Max, and Peacock to license Paramount’s studio content or straight-up merge with Paramount+.

A source with knowledge of the situation told IndieWire that Pluto TV has quietly been on the market since last year; a Paramount Global spokesperson has denied it is for sale. Greenfield says he “would not be surprised” if Pluto gets auctioned off.

BET has value and will sell; non-CBS local television stations can be sold off, Greenfield suggested. And with former Viacom International chief Bakish counting his golden parachute severance pay, there is no one (and no reason) to protect any underperforming overseas businesses.

Before it was integrated into Paramount+, Showtime had a great offer on the table. The premium-cable brand’s former leader David Nevins wanted to buy Showtime for $3 billion, but Bakish put an end to that. Well, yesterday Nevins left his new job as CEO of Peter Chernin’s North Road. Interesting timing.

Greenfield believes National Amusements will probably sell Paramount “eventually.” Perhaps in another 18 months, he said, or perhaps sooner than later with another Trump presidency. (Trump’s regulatory would be friendlier to such M&A than Biden’s.)

There are some remaining suitors. As far as we know, Paramount still has the $26 billion Sony/Apollo offer. Additionally, Seagrams heir Edgar Bronfman Jr., has expressed interest in buying NAI and its control of Paramount; same for Hollywood producer Steven Paul. And we don’t think Byron Allen has officially withdrawn his $30 billion offer for the whole shebang. No one thinks Allen has the funding, but at least he’s passionate about linear TV.

For what it’s worth, he said Sony’s offer may face more regulatory hurdles but might actually be “simpler” when it comes to the threat of a shareholder lawsuit that Redstone wants to avoid. Hamilton believes Redstone was exposed to Class B shareholder lawsuits because the Skydance deal enriched her, not them. “There was some real jeopardy there,” he said.

But other potential buyers may be turned off by how this saga played out. Who wants to go through that? “It doesn’t look good any time you get that far down the road… and you end up shutting the deal down,” Hamilton said. Other suitors won’t want to waste their time and money.

“The town is small and people talk,” he added.

For now, all that the frustrated Paramount Global shareholders have to hang their hat on is the Office of the CEO’s contingency plan, as laid out during last week’s investor day: Find a Paramount+ partner, execute a boatload more in cost-cutting, and pay down debt. In their Wednesday memo, the fellas reiterated the three-point plan.

“Work is already underway, as we focus on three pillars: Transforming our streaming strategy to accelerate its path to profitability; Streamlining the organization and reducing non-content costs; Optimizing our asset mix, by divesting some of our businesses to help pay down our debt,” the memo read.

The CEOs will host a global town hall on June 25 that promises more detail.

None of this solves the problem that linear TV is rapidly declining, and Paramount Global is heavily tied to linear TV. And it’s not like linear’s replacement, streaming, is doing any better at Paramount (save Pluto TV).

Paramount+ “continues to burn cash,” the media analysts at MoffettNathanson wrote in a Tuesday note shared with IndieWire, and Paramount Pictures can only see so much upside from some of its recent hits.

It makes Paramount look like “a wounded animal ripe for acquisition,” as Hamilton put it without even Ellison able to come and save the day.

“One thing that’s clear out of all of this… no one seems to be really focused on turning that business around and making it a competitor,” Hamilton said. “They just want to get it sold.”

Read Ellison’s memo here:

Team,

As you all know, for the last several months we have been actively exploring a transaction to acquire NAI and merge with Paramount Global, and today that chapter ended.

While I was focused on this effort, you all doubled down on Skydance. In just a short time since we went back to work after a historic two guild strike, you have delivered more TV product in our company’s history, hit video game franchises, Emmy-winning sports content, and a feature film slate that is our industry’s finest. For all of this and more, I thank you.

Skydance is stronger than ever because of you, and we are stronger because of this process. For starters, we are smarter. We know more about our business, our potential, and the marketplace at large. We are more confident than ever – not just about Skydance but about the future of entertainment and our ability to continue building a next generation content company on our terms, with the greatest capital, creative and technological resources and talent in the industry. The bottom line: our future is incredibly bright and tomorrow we will keep building to make it even better.

Paramount will always hold a special place for me, we had our first slate deal with the studio and continue to co-own several marquee franchises together. I have great respect for the legacy of Paramount, value our ongoing partnership and wish them the best.

Finally, again, I want to thank each of you for your patience and support as we chart the next phase of Skydance. We have a lot to look forward to.

Best,

David Ellison
Chief Executive Officer, Skydance Media

Read the memo from Paramount’s Office of the CEO here:

Hi Everyone,

As promised, we want to be as transparent as possible and share information whenever we can.

As you heard yesterday, the proposed transaction with Skydance Media is not moving forward. So, what does this mean for Paramount? While the Board will always remain open to exploring strategic alternatives that create value for shareholders, we continue to focus on executing the strategic plan we unveiled last week during the Annual Shareholder Meeting, which we are confident will set the stage for growth for Paramount.

Work is already underway, as we focus on three pillars:

Transforming our streaming strategy to accelerate its path to profitability
Streamlining the organization and reducing non-content costs
Optimizing our asset mix, by divesting some of our businesses to help pay down our debt

As we advance each of these initiatives, we will continue to prioritize investment in our world class franchises, films, series and sports, which are the core of our business.

Importantly, we want to thank you for your hard work and your continued focus. We recognize that the last several months have not been easy as we manage through ongoing change and speculation. And, we should all expect some of this to undoubtedly continue as the media industry and our business continue to evolve.

As we look ahead, we are confident about what’s in store for Paramount. We believe in you and we believe in Paramount. We have the content, the people, and the right plan to ensure a strong future. And, we look forward to discussing our strategy in more detail at our Global Town Hall on June 25.

In the meantime, we hope you’re able to participate in Community Day and spend time with colleagues while giving back to local communities around the world.

Thank you again for all that you do.

Best,

George, Chris, and Brian