Controlling shareholder of Paramount Global, Shari Redstone, has shown a willingness to consider either merging or selling the entertainment behemoth. This sentiment isn’t new; she’s harbored it for several years, according to sources close to the matter who chose to remain anonymous due to the private nature of these discussions. Neither Redstone nor Paramount Global representatives have commented on these speculations.
Market Challenges: A Barrier to Optimal Deal Making
While the intent may be clear, realizing it has been hampered by the prevailing market dynamics. Navigating the complexities of achieving a deal that satisfies shareholders has been daunting, given the market’s unfavorable stance towards such transactions.
Jon Miller, CEO at Integrated Media and senior advisor at Advancit Capital, which Redstone co-founded, stated, “The market landscape today is clamoring for the reformation and consolidation of media conglomerates. Yet, significant transactions seem nearly impossible due to concerns like ad sales fluctuations, subscription video figures, and soaring debt costs. The current market valuations of these companies are far from enticing for potential deals.”
Paramount Global: A Snapshot
A reflection of the broader industry’s consolidation dilemma, Paramount Global boasts a diverse portfolio. Its assets span Paramount Pictures, CBS network, numerous CBS local stations, streaming platforms like Paramount+ and Pluto TV, and esteemed franchises including “Star Trek,” “SpongeBob SquarePants,” and Showtime. They even possess the physical Paramount studio property in Los Angeles.
Though individually these assets seem enticing and complementary to larger media entities, collectively they depict a more intricate story. Michael Morris, an analyst at Guggenheim, highlighted to CNBC that while Paramount has valuable assets, particularly in its content library and notable sports rights such as the NFL contract, its streaming service remains unprofitable. For it to truly appeal to investors, the company must strategize on optimizing content and capitalizing on pricing and penetration.
Current Hurdles
The dual blows of rising streaming service losses and the accelerated decline in pay-TV subscriptions, coupled with increasing interest rates, have placed Paramount Global in a precarious position. The company’s market value has plummeted to a mere $7.7 billion—a stark contrast from its nearly $30 billion valuation post the CBS and Viacom merger in 2019, orchestrated by Redstone.
The path forward remains uncertain. Even business magnates like Warren Buffett, CEO of Berkshire Hathaway and one of Paramount Global’s significant shareholders, expressed skepticism about the viability of the streaming business. Buffett emphasized that historically, entertainment company shareholders haven’t witnessed substantial gains.