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>>> Paramount needs 'even greater scale' after messy history


Yahoo Finance

by Alexandra Canal

February 20, 2023


https://finance.yahoo.com/news/paramount-needs-even-greater-scale-after-messy-history-author-134135833.html


Paramount Global (PARA) has been in the spotlight over the last week. Not only for a dismal quarterly earnings report, but also for a new book documenting the various power struggles to control the embattled media company. In "Unscripted: The Epic Battle for a Media Empire," New York Times reporters James B. Stewart and Rachel Abrams break down the drama, dysfunction, and misconduct surrounding the late Sumner Redstone.

In an interview on Yahoo Finance Live last week, Stewart noted the challenges that faced Redstone's daughter Shari as his health declined during the 2010s.

"I think Shari deserves a lot of credit," Stewart said, highlighting the many obstacles the 68-year-old had to overcome in order to not only control Viacom and CBS, but eventually merge the two companies in 2019.

"I think almost everyone agrees that made sense —Viacom and CBS needed greater scale. They probably need even greater scale than they have, but they needed it. They probably needed it sooner," he said.

Sumner Redstone died in August 2020 at the age of 97.

Shari Redstone currently serves as the non-executive chairwoman of Paramount Global, in addition to president of her family's holding company, National Amusements.

The author credited Shari Redstone with the hiring of Bob Bakish as Paramount's CEO, in addition to the company's successful franchises with spinoffs for popular series like "Yellowstone," "Dexter," and "Billions" currently in the works amid the Showtime/Paramount+ rebrand.

Still, Stewart warned streaming "is a scale business" and Paramount might not have enough resources to adequately compete.

"Companies are spending billions on content. You've got to amortize that over large subscriber base — the bigger the better. They're running up against Amazon, Netflix, Disney+ and they're in a second or third tier compared to that," Stewart said.

As a result of Paramount's small size relative to competitors, the company has long been rumored as a potential acquisition target.

The media giant boasts a current market cap of just about $15.5 billion, which pales in comparison to Disney's (DIS) $192 billion and Netflix's (NFLX) $155 billion.

"Consolidation has been the rule in business for a long time, certainly been the rule in media," Paramount CEO Bob Bakish revealed during a UBS media conference late last year. "So, it's hard for me to bet on anything other than consolidation will happen in the future."

Stewart surmised Paramount Pictures could be an attractive asset for a streamer like Netflix, which does not own its own studio.

"Amazon bought MGM, Disney obviously has the Disney studio. That would seem to be an obvious pairing if they could get by the regulators — which is a big if," Stewart said.

He added: "[Another] big obstacle is that the stock price was so depressed. It got down to $15 and Shari, effectively the controlling shareholder, is not going to sell [to] anyone at that price."

Paramount closed at just $24 a share on Friday, up nearly 40% year-to-date but still down about 16% compared to this time last year.

Nevertheless, Stewart said Shari has repeatedly said she would sell at the right price: "She's not determined to cling to mogul status, no matter what."

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