What Lies Ahead for Paramount Global?

Recent reports suggest that Sony and Apollo might be considering making a substantial bid for Paramount Global, a move that could have significant implications for the entertainment industry. While the specifics of their strategy are yet to be revealed, the rumor is that the two companies plan to maintain a steady output of theatrical releases for both Sony and Paramount, without any reduction. However, to streamline operations, they might explore the possibility of divesting assets like CBS, MTV, and Paramount Plus streaming service through an auction.

Clash of Business Approaches

According to various sources, the potential merger between Sony and Paramount is causing concern within the Hollywood community. Many industry insiders, including exhibitors, fear that the consolidation could lead to a decline in movie releases, similar to what happened following the 2019 Disney-Fox merger. The reduced output resulted in a meager number of 12 titles in 2024 from 20th Century Studios, Searchlight, and Disney. The industry, already grappling with post-strike and post-pandemic recoveries, cannot afford to lose another major studio, and the repercussions could be far-reaching with roughly another ten titles disappearing from the marketplace.

Competing with the Streaming Giants

Despite concerns, sources close to the matter reveal that a potential Sony-Paramount merger would not lead to scaling back. In fact, the aim is to increase output to compete with streaming platforms. The vision is to have around 20 wide releases per year, surpassing the 12 they currently have combined. Unveiling a growth-oriented strategy, both studios want to differentiate from Disney-Fox practices. By amalgamating, they could potentially gross $4 billion worldwide, placing them in the same league as industry giants Universal and Disney.

Awaiting Financial Discussions

Formal nondisclosure agreements and financial discussions between Sony and Paramount are yet to commence. This preliminary phase, including the required due diligence and book examination, is expected to take several weeks. It is suggested that in case of a Sony-Paramount merger, Sony would operate the combined entity as a joint venture with Apollo. Apollo would likely hold a small stake in the venture, which might be sold to Sony or another buyer in the future. Furthermore, marketing and distribution operations would be merged, enabling the studios to leverage synergies.

Alternate Scenarios

While a merger with Sony and Apollo seems a strong possibility, some insiders posit an alternative scenario. They propose that Shari Redstone, a prominent figure affiliated with Paramount, might opt to retain autonomy and forgo a deal with Sony and Apollo or even Skydance. However, the uncertainties regarding the longevity of such a solo path remain an open question.

The Content Licensing and Over-the-Top Dimension

Renowned for its content licensing strategies with platforms like Netflix and Disney, Sony is recognized as an arms dealer of quality entertainment. In light of a potential Sony-Paramount merger, industry observers envision that Sony’s ongoing licensing tactics, including its rich partnership with Netflix, would remain unchanged. Consequently, Paramount’s over-the-top service might be offloaded to platforms such as Comcast’s Peacock or Warner Bros Discovery’s Max, efficiently utilizing the combined intellectual property.

Potential Challenges from Regulatory Bodies

Should the merger bid proceed, it would require clearance from various regulatory bodies, including the Justice Department’s Antitrust division, the Federal Trade Commission (FTC), and the Federal Communications Commission (FCC). The prevailing sentiment in the Biden administration, known for its anti-merger stance, hints at a rigorous evaluation process. Authorities particularly scrutinize horizontal mergers that might result in job losses or pose threats to industry competition.