After a months-long negotiation process, Paramount Global and Skydance Media have finalized their merger, marking the end of the Redstone family’s control over the iconic studio. This $28 billion deal is set to redefine Paramount’s future.
David Ellison’s Bold Vision
David Ellison, founder of Skydance and son of Oracle co-founder Larry Ellison, is stepping up as the new CEO. Jeff Shell, former NBCUniversal CEO, is joining him as president. Ellison plans to turn Paramount into a cutting-edge media and technology powerhouse.
On a call with investors, Ellison emphasized the need to enhance Paramount+’s technology to stay competitive. He plans to improve the streaming service’s algorithm and ad tech to keep viewers engaged and reduce churn. He also aims to use cloud-based production and AI to streamline operations and boost creativity. “Combining art and technology is essential for our future,” Ellison said.
Much easier said than done, by the way.
Industry Concerns
It’s not just Bob Bakish who’s not thrilled. The National Association of Theatre Owners (NATO) worries that this merger could lead to fewer movie releases. Michael O’Leary, NATO’s CEO, said, “Fewer movies mean less revenue and fewer jobs across the industry.”
Shawn Robbins from Box Office Theory noted that the industry is cautiously optimistic about how the new Paramount-Skydance entity will handle its movie slate.
Paramount’s Challenges
Paramount has its share of challenges. They’re dealing with declining TV viewership, significant debt, and a struggling streaming service. Jessica Reif Ehrlich from Bank of America Securities noted, “They have great assets, but they haven’t been well-managed.”
Tackling Debt
Ellison’s first task is to tackle Paramount’s debt. The merger brings a $1.5 billion cash boost from Skydance, RedBird Capital Partners, and KKR. Paramount’s current leadership has already started a $500 million cost-cutting plan, including potential asset sales and layoffs. Skydance execs have identified $2 billion in potential savings.
Kenneth Leon from CFRA Research is cautiously optimistic, saying, “There are big opportunities, but it’s a tough industry.”
Cable Networks: A Mixed Bag
Paramount’s cable networks, like CBS, Nickelodeon, BET, and MTV, are still making money; however, that revenue is in perpetual decline. Last year, these networks brought in $20 billion – 68% of Paramount’s total revenue. Laurent Yoon from Bernstein says, “The TV business is declining, but it’s not all bad news for Paramount. They just need to manage it smartly.”
Revamping Paramount Pictures
Paramount Pictures has a legendary history but needs a refresh. Last year, their film segment made about $3 billion, down 20% from the previous year. Jessica Reif Ehrlich thinks they need to rethink their creative strategy and budgets.
Laurent Yoon sees potential, saying, “Paramount has a great heritage in moviemaking. They should be doing better, and with the right tweaks, they can stabilize.”
The Streaming Struggle
Paramount+ has been a tough challenge. They’re late to the streaming game and losing money fast. Ellison plans to upgrade the service’s tech, including better ad tech and recommendation algorithms. There’s talk of a possible joint venture, similar to deals between Warner Bros. Discovery and Disney.
Laurent Yoon believes Paramount+ could be profitable by 2025 but warns, “Profitable can mean different things. They need to boost those margins.”
Looking Ahead
With the merger expected to close in late 2025, all eyes are on how this new entity will handle the modern entertainment landscape. The Paramount-Skydance merger isn’t just a leadership change; it’s a move towards innovation and tech integration in Hollywood.
The Take
The Paramount-Skydance merger marks a significant shift in Hollywood, with David Ellison pushing for a tech-driven future at Paramount. There are big questions about market consolidation and its impact on movie production. Addressing debt, optimizing cable networks, and revitalizing Paramount Pictures are crucial to ensure Paramount thrives in the digital age.
