Charter Communications is about to play a guest-star role in the corporate drama surrounding Paramount Global.As if Shari Redstone’s media empire wasn’t under enough pressure, Paramount Global now is in the final few weeks of its most recent carriage agreement with Charter, the nation’s second largest cable operator behind Comcast. The two companies are in renewal discussions, the outcome of which will have significant influence on Paramount’s ability to deliver the free cash flow that media investors are expecting from the company that has lately posted big losses on streaming operations. The company warned investors in February that it expects to take a nearly $1 billion write-down in its Q1 earnings report to adjust for the diminished value of programming on its books (roughly $800 million) as well as in restructuring costs ($200 million). But CEO Bob Bakish has also vowed that Paramount+ will be profitable in the U.S. by the end of next year.Paramount Global took a big step this week toward striking a complicated sale pact with David Ellison’s Skydance Media. The companies earlier this week agreed to an exclusive 30-day negotiating window on April 3.On Friday, the Wall Street Journal reported the sides were moving toward a deal that would see Skydance acquire Redstone’s holding company National Amusements Inc., which holds her controlling interest in Paramount Global. Paramount Global would then acquire the enlarged Skydance Media in an all-stock deal that would value Skydance at $5 billion. Redstone would wind up with $2 billion from the Skydance-NAI transaction, which would buy out her preferred shares that amount to about 77% of voting shares and 10% of the economic value of Paramount Global shares, the Journal reported. The Journal and CNBC noted that while the broad strokes of the two-step transaction are outlined, there are still points to work out.Given the swirl of speculation and financial maneuvering around the company, the Charter deal negotiations come at a rough time for team Paramount. Reps for Charter, Paramount Global and National Amusements declined to comment.If Charter achieves a significant cut in fees and distribution for Paramount channels, it could trigger favored-nations clauses with other pay-TV providers that collectively paid the company $2 billion last year in carriage fees for CBS and Paramount cable channels. Paramount Global also faces carriage deal renegotiations with DirecTV later this year, according to industry sources.The company’s cable stalwarts — MTV, VH1, Nickelodeon, BET, Comedy Central and CMT — are struggling like other traditional cable brands amid the industry’s transition to streaming. Charter itself is facing its own fundamental transition as its video subscribers steadily decline. The company’s priorities have turned to delivering business and consumer broadband services and serving as a gateway to a menu of streaming apps rather than paying increasingly higher fees to Hollywood’s programming giants to maintain channel access.Charter is likely to push hard to cut the monthly subscriber fees it pays Paramount Global by trimming its monthly per-sub fee as well as cutting back distribution for low-performing channels. And it is likely to push for some kind of content pact with the Paramount+ streaming service that now carries most of the company’s most high-end productions — such as Taylor Sheridan’s drama series and “Star Trek” franchise shows. Charter set the tone last year with its 12-day blackout of Disney channels including ESPN and ABC. In the final deal, Charter dropped numerous low-profile Disney cable channels including Disney XD, Nat Geo Wild and FXM and gained distribution access to the Disney+ streaming service.“The new Disney/Charter template could have a meaningful impact on the company should Charter choose to either drop Paramount’s long-tail cable networks and/or force Paramount+ to be bundled at a heavily discounted wholesale price to Charter subscribers,” Robert Fishman, analyst with MoffettNathanson Research, wrote in an April 4 research note.The special committee of the Paramount Global board of directors late last month rejected a $27 billion offer for the entire company from private-equity giant Apollo Global Management. The board members opted to bet on taking 30 days to work it out with Ellison. Paramount and Skydance have worked together for 10-plus years as production partners on “Mission: Impossible” and “Transformers” franchise movies as well as 2022’s “Top Gun: Maverick.”Even with the Charter deal pending, the board is betting on getting it done with Skydance. As noted by the Journal and CNBC, Ellison’s father, Oracle business software mogul Larry Ellison, is expected to help inject some capital and other resources into Paramount Global, which is shouldering more than $14 billion in long-term debt.By multiple accounts, Paramount Global’s special committee “reached the point of no return” last month and decided that the time had come to figure out the best sale option for the company. If the Skydance Media scenario comes to pass, multiple sources confirm reports by the Journal that former NBCUniversal CEO Jeff Shell will take on a key operational role alongside David Ellison as CEO.
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Saturday, 6 April 2024
Variety: Paramount Global’s Cable Carriage Talks With Charter Could Play Key Role in Skydance Transaction
Story from Variety: