Paramount is already shopping around several of its assets, including BET and VidCon. Under Skydance Media, those efforts will likely continue as Ellison looks to shed non-core assets.
“Paramount’s assets will probably get broken up,” Ross Benes, eMarketer senior TV and streaming analyst, told ADWEEK. “I doubt Skydance will want to retain everything that Paramount currently owns.”
On a Monday morning call, Shell noted Skydance had identified $2 billion in cuts, which will be delivered “rapidly” and would include slashing Paramount’s linear media operations.
“There’s powerful businesses, but you have to make tough decisions,” Shell said.
Implementing cost savings efforts and shedding elements of the Paramount portfolio will allow Skydance Media to focus its attention on the streaming service Paramount+, which wants to narrow its hundreds of millions in quarterly losses.
“Paramount+ is among the better streaming services from a consumer perspective, but it is losing lots of money,” Benes said. “Skydance will look to reduce losses. Layoffs would not be surprising.”
What this means for the TV and streaming industry:
The heightened interest in acquiring Paramount comes as the streaming ecosystem continues to overtake the linear television industry, forcing companies with legacy assets to seek suitors before the value of holdings falls further.
The acquisition will provide Paramount+ with an injection of capital, strengthening its position in the streaming landscape. Still, to compete with peers like Netflix and Disney, the company will need to take steps to expand its reach, according to Mike Proulx, vp and research director of Forrester.
“This merger is the result of the need for restructuring in order to effectively compete with content scale and financial profitability as the underlying economics of entertainment portend a new playbook,” Proulx said.
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What happens now:
The agreement with Skydance includes a 45-day “go-shop” period during which the Special Committee of Paramount’s Board of Directors, with the assistance of its financial advisors, can evaluate alternative proposals. However, the Skydance deal reportedly includes a $400 million breakup fee if the deal falls apart.
As an additional way to widen its audience, Paramount+ could consider further mergers, such as a potential combination with Warner Bros. Discovery. However, such a tie-up would result in such a debt-laden company that it would have little chance of succeeding, according to Benes.