A leading Wells Fargo analyst says that the company leaders can wait or get on with it, but a break-up is inevitable.
The same analyst who said he believes Paramount should just shut down its streaming business has further thoughts on the future of Paramount Global: It doesn’t have one.
Equity analyst Steven Cahall of bank Wells Fargo gives Paramount Corp. another “1-2 years” of throwing “good money… after bad,” chasing a streaming profit that may never come, and riding out the last gasps of linear television, before “the break-up becomes inevitable.”
The “good money” within Paramount Global lies inside its studios, which Cahall sees as worth about $30 billion in a sale, per a note he sent to clients on Thursday. We obtained said note; Cahall sees the whole of the company as currently structured as worth $22.3 billion. Yes, that’s the bad. (Paramount itself tours an enterprise value of about $28 billion.)
Unlocking value is the trend in the media landscape these days: look no further than Lionsgate for another example of a studio considered worth more alone than the entire umbrella company in which it resides.
An alternative to burning lots of cash for little return? Paramount could pull a Lionsgate and divvy up itself now. (It wasn’t long ago that we wrote Paramount might consider acquiring Starz from Lionsgate. Business is changing at a pace that rivals The Flash.) Sure, the linear television channels and direct-to-consumer businesses would be “sold at deep discounts,” but “a rare gem” in Cahall’s words, are Paramount Studios and CBS Studios.
Those pieces could see “significant” interest from streamers if put on the sales block. Business Insider on Wednesday reported that Netflix was once very much in the market for those pieces. The problem was — or perhaps still is — that Netflix had no use for Paramount’s other assets.
That’s the general consensus surrounding Paramount Global: It’s got great studios and a deep library, but the suite of cable channels and other antiquated assets belong in the bargain bin. Even broadcast network CBS, despite regularly drawing the most viewers on television, is more of a burden than a blessing in potential M&A activity.
For example, NBCUniversal parent Comcast would have good reason (and good money) to buy Paramount Global in its entirety — heck, Paramount+ could even be the thing that saves Peacock — but owning both NBC and CBS is an FCC no-no.
Paramount Global has been working to build up its balance sheet. The company has tried to sell off publisher Simon & Schuster for years and appears to be nearing another billion-dollar-plus deal — one that hopefully won’t get caught up in regulatory red tape. (Last November, the Department of Justice killed a $2.2 billion sale to Penguin Random House for reasons similar to why the Federal Communications Commission won’t allow two broadcast networks to operate under one roof.)
The company is also unloading its famous New York City headquarters. Paramount’s studio lot in Los Angeles was reportedly among the assets Netflix was interested in acquiring.
A Netflix rep did not immediately respond to IndieWire’s request for comment on the prior talks. A spokesperson for Paramount Global likewise did not respond to us for this story.
Paramount is currently seeking bids for its BET Group for in the $3 billion-plus range; Tyler Perry, who already owns 25 percent of BET, appears to be the auction’s frontrunner. Paramount’s preschool brand, Noggin, is also seeking a new owner. And last month, Paramount Global controller National Amusements Inc. got a $125 million cash infusion from merchant bank BDT & MSD Partners.
These sales and investments are merely buying of Paramount Global non-executive chairwoman Shari Redstone — and by proxy, Bob Bakish — more time to delay the inevitable, in Cahall’s eyes. Or in his words: “To stay the value-destructive course.”
