Variety: What Could Happen If Paramount Global Is Sold — Especially in Pieces

Story from Variety:

What does the future hold for Paramount Global? The odds of a seismic M&A event seem to be increasing: Private-equity firm Apollo Global has reportedly offered $11 billion for Paramount’s Hollywood studios. Short of carving up the “mountain of entertainment,” as the Paramount+ tagline boasts, analysts say the overture could drive up bidding for the entirety of Paramount Global — which is what Shari Redstone, who owns a controlling stake in the media conglomerate, is understood to prefer.

Given that backdrop, let’s consider what Paramount Global comprises — and the potential effect of selling it off in its entirety or in pieces. As it stands, Paramount Global, led by CEO Bob Bakish, is made up of three segments: filmed entertainment, TV media and direct-to-consumer streaming.

The company’s filmed entertainment unit, which includes Paramount Pictures, is its smallest, representing 10% of overall revenue in 2023. Last year, the segment generated revenue of $2.96 billion (down 20%) and an adjusted operating loss of $119 million (versus operating profit of $272 million a year earlier). The company blamed the decline on lower theatrical and licensing revenues, compared with 2022 when Tom Cruise’s “Top Gun: Maverick” banked $1.5 billion at the global box office.

TV media is Paramount Global’s biggest segment, at 68% of 2023 revenue. But it’s been steadily declining over the past several years. Last year it pulled in revenue of $20.1 billion (down 8%) and $4.79 billion of adjusted operating income (down 12%). The fast-growing direct-to-consumer segment (22% of 2023 revenue) had $6.74 billion in revenue, up 37%, and an adjusted operating loss of $1.66 billion (an improvement over -$1.82 billion in 2022).

Filmed Entertainment:

• Paramount Pictures
• Paramount Players
• Paramount Animation
• Nickelodeon Studio
• Awesomeness
• Miramax (a joint venture with BeIN Media Group)

The filmed entertainment portion consists of studios Paramount Pictures, Paramount Players, Paramount Animation, Nickelodeon Studio, Awesomeness and Miramax — but does not include Paramount Television Studios, CBS Studios or Showtime/MTV Entertainment Studios, which fall under the TV media division.

Apollo Group’s reported $11 billion for Paramount Global’s film and TV studio business (which Redstone reportedly is “unconvinced” about) would encompass Paramount Pictures’ library of more than 1,000 film titles with rights to an additional 2,500. That would include some of the studio’s biggest titles and franchises such as “Mission: Impossible,” “The Godfather” trilogy, “Indiana Jones,” “Titanic,” “Forrest Gump,” “Top Gun,” “Iron Man,” “Love Story,” “Beverly Hills Cop” and “Saving Private Ryan.” The filmed entertainment segment includes the Paramount Pictures Studio lot at 5555 Melrose Ave. in L.A., spanning roughly 62 acres of land.

What’s unclear is whether Apollo bid is only for Paramount Global’s filmed entertainment division or whether it encompasses the studios housed in the TV media group. If it’s the latter scenario, such a deal would include a slew of TV properties like “Yellowstone,” “NCIS,” “FBI,” “Jack Ryan,” and tons of kids & family, unscripted and reality content.

TV Media:

• CBS Television Network
• CBS Stations (29 owned broadcast stations)

Paramount Media Networks:

• CMT
• Comedy Central
• Logo
• MTV
• Nickelodeon
• Paramount Network
• Paramount+ With Showtime (cable network)
• Pop TV
• Smithsonian Channel
• TV Land
• BET Media Group

International free-to-air networks:

• Network 10 in Australia
• Channel 5 in the U.K.
• Telefe in Argentina
• Chilevisión in Chile
• CBS Sports Network

Studios:

• CBS Studios
• Showtime/MTV Entertainment Studios (includes MTV Documentary Films)
• Paramount Television Studios
• CBS Media Ventures

If Apollo or another buyer were to swing a deal for Paramount’s filmed entertainment group plus the television studios, the TV media division would end up comprising: the CBS broadcast network (which currently holds some pricey NFL rights), 29 owned-and-operated local CBS Stations, a handful of international free-to-air networks, the cable portfolio of Paramount+ With Showtime (formerly known as Showtime), MTV, Comedy Central, Paramount Network, Smithsonian Channel, Nickelodeon, BET Media Group and CBS Sports Network. It also would include CBS Media Ventures, which produces and distributes first-run syndicated programming, plus digital properties CBS News Streaming and CBS Sports HQ.

Without the studio business, Paramount Global — as a collection of channels and platforms — “may appear hollow,” MoffettNathanson analysts led by Robert Fishman and Michael Nathanson wrote in a note. Would there be enough there for another media company or private-equity firm to be interested in a deal?

Direct-to-Consumer:

• Paramount+
• Pluto TV
• BET+

A buyer may opt to bid for not just the TV media assets but also the DTC business: Paramount+ (now with Showtime), Pluto TV and BET+. (Paramount Global is shutting down Noggin, its subscription service for preschool-age kids, in a cost-cutting move.) But again, whoever bought those assets would not own the content engine that supplies a good chunk of programming to them.

That might be less of a concern to buyers who know that the rights situation at Paramount has become “complex” over the past few years, per one rival studio source. Franchises like “Mission: Impossible” have had rights sold off to partners like Skydance, and dozens of similar third-party deals have been done over the past 20 years that whittle down the content that’s actually owned outright by Paramount’s studios.

Then there’s cross-platform intellectual property to consider, like “Star Trek,” which Paramount has a firm hold on — but its film franchise is part of Paramount Pictures, while the TV universe, including “Discovery,” “Below Decks,” “Picard” and “Prodigy,” is under the aegis of CBS Studios.

But if Redstone has her druthers, none of this will be an issue: At the moment, it seems Redstone is preferring to continue negotiating a deal with Skydance’s David Ellison, in partnership with RedBird Capital and Tencent, to sell National Amusements Inc. (which owns nearly 80% of the voting power in Paramount Global). The plan would then be to merge Skydance with Paramount Global.

If Ellison and his partners take the whole package, the messiness of breaking up the mountain goes away. However, that doesn’t mean the company would remain as it is today: A new owner could further downsize the staff or make other drastic changes at the networks or the streamers — or try to sell off the less valuable assets.