Paramount is currently in exclusive negotiations with Skydance over a possible merger, but there’s another competitor lurking – one coming from far out of left field.
The New York Times reported Thursday that Sony Pictures Entertainment was in talks with Apollo Global Management to partner on a possible joint bid to purchase Paramount. No official offer has been put on the table due to exclusive formal negotiations, but this one threatens to be seismic. There is some degree of separation between the potential joint venture: Sony and Apollo-backed Legendary Pictures already have a distribution deal.
Contacted by IndieWire, Sony had no comment on the report. Same at Paramount, and Apollo did not immediately respond to our request. We understand: we too are left a little speechless.
A combination of Sony Pictures and Paramount Pictures studios would be an instant Hollywood juggernaut. (So much so that the DOJ and other government entities might have something to say about it.) And yes, further consolidation in Hollywood is expected – David Zaslav, who just freed himself from merger handcuffs and acquisitions (but still carries significant debt) had a cup of coffee with Paramount over a potential alliance – but that doesn’t make sense between Sony and Paramount.
Sony made a conscious decision in 2019 to exit the streaming business by selling off its Crackle to Chicken Soup for the Soul. Sony knew it could never scale Crackle to compete with Netflix, Hulu and other emerging streamers (Disney+ launched later that year). Instead of chasing Netflix like everyone else, Sony has essentially become an “arms dealer” for the platform, producing and licensing its content to Netflix from the relative safety of behind the scenes of the streaming wars. (Sony still has a theatrical release strategy, but their release deal makes Netflix the first stop in the streaming window.) It’s better to be there than on the front lines — just ask Paramount+, which is losing still hundreds of millions of dollars every quarter.
Sony’s strategy has generally worked. In the most recently reported quarter, Sony Pictures’ profits soared 56% to $281 million. “Grow or die” was the case two years ago; just make money, baby.
Many analysts believe that Paramount+ should never have launched and should shut down now. They see the same arms dealer strategy as best for Paramount Pictures. In this sense, the consolidation of companies begins to make a little more sense.
What to do with Paramount+ is perhaps the least of a buyer’s concerns. You know, what’s an even worse business to get into in 2024 than streaming? Broadcast and cable TV, where Paramount Global has a big presence. What would Sony want with CBS, let alone MTV, VH1, Comedy Central, BET, Nickelodeon, etc.? ? It was Paramount’s television and streaming businesses that put it in a vulnerable position to be acquired in the first place. Sony makes a few TV shows, but the best ones are game shows like “Jeopardy!” » and “Wheel of Fortune”. Syndication is cool, but synergy is better.
(Tony Vinciquerra, the president of Sony Pictures Entertainment who the New York Times reported was involved in the Apollo conversations, has television experience having previously worked at Fox and CBS.)
Finally, it would sure be cool to own the iconic Paramount Pictures lot in Hollywood, of course, but Sony’s own studio is just 10 miles away on the 10 (with a bit of Wilshire on the way).
Reality is just because you buy something doesn’t mean you have to do it keep he. The modus operandi of private equity firms like Apollo is to unlock value, which often means taking the car apart from all its parts. Paramount’s television and streaming assets would likely be the first to go. If anyone wanted to buy them (at a decent price), Sony (and Apollo) might have something here.
Apollo first attempted (alone) to purchase Paramount’s studio assets for $11 billion. No: Shari Redstone, who controls Paramount Global through her voting shares of National Amusements Inc., has been reluctant to sell the crown jewel. Apollo came back with $26 billion to buy the entire company.
But Paramount’s board, according to the New York Times, questioned whether Apollo had the financing to support such a bid (a sentiment Byron Allen knows well) and instead focused on Skydance’s bid, which was later in the conversations. David Ellison is attempting to buy National Amusements itself for a much lower purchase price, then leverage that corporate control to merge his Skydance with Paramount.
The participation of Sony, a company worth $100 billion (in terms of market capitalization, where Paramount Global is worth only $8 billion), certainly helps to allay financial fears. Sony is also Skydance on steroids.
The New York Times claims the Apollo-Sony deal would be an all-cash bid for Paramount stock and would effectively take the company private. This could mean Apollo would get a minority stake in the joint company, with Sony being the majority shareholder and operating the combined studios. It is still possible that Sony and Apollo will not make any offers.