No media company entered ’24 the subject of more rumors and speculation than Shari Redstone’s Paramount.
Will she sell to David Ellison and the team at Skydance? (Seems increasingly unlikely if you follow Bill Cohan at Puck, his column alone is worth a subscription.)
Will the ever ambitious and acquisitive David Zaslav and WB Discovery close the deal?
Comcast and Brian Roberts are always looming when there’s a potential deal. Will he make a play for Paramount?
Also, reports suggest that Shari is considering selling BET again. Byron Allen, Founder/CEO of Allen Media (and my former employer) is one of the bidders. Will she finally decide to part with it?
The Predatory Narrative of Media Mergers
The operating narrative behind all these machinations is that Paramount is like a fatally wounded gazelle that has fallen behind the herd and ripe for a predator to strike. Rather than waiting to be mauled by the lions, the conventional wisdom is it would be better for Shari to provide a soft landing for her family and unload the company before things get much worse.
Looking at Paramount’s recent financial performance and its relative scale compared to the competition, it’s easy to see why the narrative that Paramount isn’t big enough to survive is so compelling. On the other hand, if one looks at the results of the media companies that have gone through acquisitions it’s not a slam dunk that getting bigger has made them better. Just take a look at the performance of their stocks.
Who Really Wins
What the big media mergers mostly have produced are huge financial windfalls for the C-suite, board insiders, lawyers and investment bankers. But they have proven disastrous for impacted employees as well as all the ancillary vendors and people whose livelihood rely on these companies.
Make no mistake, merging with WB Discovery or Comcast would replicate more of the same. The staff overlap alone must exceed 90%. It would be a bloodbath of layoffs. Not to mention the impact of the other inevitable budget reductions.
I’ve never met Shari Redstone, but from everything I read she is enormously proud of her family’s legacy with Paramount. Maybe the financial realities are such that she doesn’t have much choice, but it’s hard to imagine she relishes the thought of a big player dismantling her company.
This is not to say that trimming expenses is inherently a bad thing and if one listens to the analysts, it’s clear that Paramount has overspent in a number of areas. But is effectively dismembering Paramount to serve short term financial goals really the best path forward for the company? Is it a fait accompli that there is no room in today’s media landscape for Paramount, or some version of it? I am not convinced.
The Scale Paradigm Questioned
Media execs have swallowed the scale argument hook, line and sinker. It has become the industry’s dominant operating paradigm the past decade. But maybe this moment in time with Paramount gives the industry a chance to reset and get back to its roots. Change the focus from a frantic rush for scale to making better product.
To that end, Paramount remains a world class producer of content. It makes a lot of great television shows and movies. Where it seems to be struggling is on the distribution side. So maybe it’s time to unwind that part of the business.
Sell to Byron, Forget the Rest
Sell BET to Byron. I’m biased from my experience working with him, but no one is better positioned to revitalize that brand than Byron Allen. Candidly Shari should consider either selling or entering into a joint venture with Byron involving all her cable and broadcast properties, but’s that a topic for another day.
Stop investing in Paramount+. Let it ride as is with the understanding that eventually it will be shuttered. Get back to the core strategy that built the business – make great content and sell it for a premium to distributors.
Rather than be part of someone else’s strategy to scale up to be, at best, the #3 or #4 player in streaming, scale down and focus on becoming the #1 studio in the world. It’s the classic Jack Welch/business school strategy – only focus on businesses where you can be the market leader.
With all due respect to the execs at WBD and Comcast, it’s hard to see a future where they overtake Netflix or Amazon, even with a Paramount acquisition. Netflix, Amazon and the other tech companies are playing a much different game, one I don’t think traditional media companies can or should try to win.
Admittedly I’m no financial or M&A expert nor do I pretend to have all the answers, but if the best argument Paramount’s potential suitors can offer is scale and expense reduction, I don’t think that’s an outcome history will look kindly on. So, my unsolicited advice to Shari for 2024 is to ignore Zas and Brian, talk to Byron, and most of all, keep the faith.