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| Welcome back to What I’m Hearing, a little early tonight because I’m in D.C. at Puck’s White House Correspondents’ Dinner event with WME and Snap. Thanks to my colleague (and Mr. WHCD) Dylan Byers for inviting me to last night’s private dinner at the Jefferson, where I high-fived CNN’s Chris Wallace for asking Larry David on his Max show how rich he is, which prompted Larry to respond, “None of your fucking business!” Tonight, fellow Puckster Peter Hamby and I are interviewing Aaron Sorkin (yes, there will be West Wing questions). We’ll turn that convo into an episode of The Town, so look for that tomorrow.
💫💫 Speaking of D.C., a big welcome to Puck’s new chief political columnist John Heilemann. I’m still mourning The Circus, so it’ll be great to read John and quiz him in Slack about the greasiest diners in New Hampshire and Iowa.
As always, if you were forwarded this email or are new to the WIH community, click here to become a Puck member.
I’m in D.C., so let’s begin with some big political news… |
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- Spielberg to tell Biden’s story at D.N.C.: Steven Spielberg hasn’t made a movie since The Fabelmans in 2022, so there’s a ton of speculation about what project he’ll tackle next. Surprise: It’s not a movie. I’m told the Oscar-winning filmmaker has been quietly but actively working with the Joe Biden campaign to help choreograph August’s Democratic National Convention in Chicago. Starting a few months ago, Spielberg has participated in multiple strategy sessions on how to best tell the president’s story, his accomplishments, and his vision for a second term. Spielberg is a big Biden fundraiser, of course, and his friend and former DreamWorks business partner Jeffrey Katzenberg is a chair of the Biden campaign. I’m told Spielberg also quietly consulted a bit on the 2020 convention, which was held virtually. But Steven will play a bigger role this time, according to a source familiar with the planning, and while there’s no short-film project in the works right now, he could even direct or produce something that would be shown at the convention, as he did in 2008 for Obama. (The Biden campaign and a rep for Spielberg both declined to comment.)
- Peacock’s bang for its (billions of) bucks: Comcast triumphantly announced today that Peacock hit 34 million paid subscribers, thanks in large part to that NFL wild card game, and its losses narrowed to just $639 million this quarter. Doing the math, analyst Rich Greenfield noted that Peacock has lost $8.3 billion since its launch in 2020 and wondered how much value could have been created if the Peacock content was licensed elsewhere instead. Taking that calculus a step further, Peacock has lost about $244 to generate each one of those 34 million subs. Not a metric that means anything—especially if Peacock eventually becomes profitable for Comcast—but a scary footnote in the eventual history of the streaming wars.
- Ari to Zaz: Hold my $84 million beer: We might need to start a This Week in Grotesque Executive Piggishness feature, given how high the C.E.O compensation numbers keep going. Hot on the heels of David Zaslav earning $50 million for possessing the strategic vision to slash costs and fire people at Warner Bros. Discovery, and Bob Bakish reaping $31 million for captaining the sinking S.S. Paramount Global, Ari Emanuel was paid a combined $84 million for running Endeavor ($19 million) and TKO ($65 million). That’s the same Endeavor whose narrative was rejected so soundly by the public market that Silver Lake was forced to take the whole thing private—which will, of course, generate an entirely new and possibly even more monstrous payday for Ari.
- ‘Snack-gate’ at Warner Bros.: Speaking of Zaslav’s pay, a Warners employee vented in my inbox: “Last week, WBD decided to cut all the free snacks and drinks available to employees and production staff. I’m fortunate enough to be able to afford my own, but for the thousands for which this was a nice perk, it’s outright shitty and disgusting they cut this. There was a ‘snack-gate’ all week… and then Zaz’s bonus was announced.”No, not great timing there. But when I reached out to a WBD spokesperson, she informed me that the snacks aren’t going away, they’re just gonna be… different snacks. Not that she’s nervous about the optics here, but she helpfully provided an itemized list of the snacks that employees can expect in Burbank and Culver City…
- Kind Bars
- Nature’s Bakery Fig Bars
- Stacy’s Pita Chips - Simply Naked
- Skinny Pop Popcorn
- Baked chips - BBQ, Doritos, Lays, etc.
- Famous Amos - Chocolate Chip Cookies
- Planters - Nuts & Chocolate
- Planters - Salted Peanuts
- Pistachios
- Fresh fruit - apples, bananas, plus seasonal offerings
- Coffee/tea bags/associated milk and sweeteners
Honestly, not bad! Generous, even. Hopefully, Zaslav won’t open this email and immediately start thinking about how his $50 million could be $52 million if only he downgrades Kind Bars and Famous Amos to gruel and hardtack.
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- Eriq on the Weinstein reversal: I certainly understood why the Weinstein trial judge allowed so many other women to testify. It seemed like Harvey operated with a consistent pattern. But with a few exceptions, evidence of “prior bad acts” tends to be inadmissible. Just look at the Bill Cosby conviction, which was overturned in Pennsylvania for a similar reason. Here, the appeals court determined that testimony from other accusers didn’t do more than establish Harvey’s “propensity to commit the crimes alleged.” In simpler terms, there’s got to be a substantive reason for their testimony beyond simply painting Weinstein as a bad guy. I’m inclined to agree that these judges are allowing witnesses in response to the #MeToo movement and the push to let women tell their stories. Harvey will stay in prison thanks to the California conviction, so the big question is what N.Y. D.A. Alvin Bragg will do next. Take this to the U.S. Supreme Court, where Cosby’s prosecutors failed? A retrial? We’ll see. —Eriq Gardner
- Box office over/under: Challengers, Amazon’s strike-bumped, $50 million-budgeted test of Zendaya’s star power (and her $10 million payday), is tracking at $15 million. I’ll take the over, given her fan base, the weak competition, and Rotten Tomatoes’ 92 percent fresh rating for Luca Guadagnino’s three-way tennis drama.
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| Now the latest in the seemingly endless Paramount saga… |
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| More than four months after I first reported that David Ellison and his Skydance Media backers were kicking the tires on Paramount Global, its controlling shareholder, Shari Redstone, has been presented with a stark choice. She can accept Ellison’s $2 billion offer for National Amusements Inc., which controls 77 percent of Paramount Global, the owner of the Paramount film and television studio, CBS, and other TV and streaming assets. (Paramount would then be merged with Skydance, giving Ellison’s new company a $5 billion valuation, and the whole thing would be kept public.) Or… there’s Apollo’s $26 billion offer to take Paramount Global private—$12 billion for the equity and the assumption of $14 billion of net debt. That bid might also include Sony Pictures, which could push the offer price up further. Very different options. And Shari, in choosing to negotiate exclusively with Ellison, clearly favors his bid.Both my colleague William D. Cohan and I have been writing a lot about the Paramount dealmaking, and it’s clear we have different perspectives on the best path forward. Bill, a former banker, has been critical of the Skydance offer and how Paramount’s non-Redstone shareholders might fare if Shari takes it and runs. I’m more of a Hollywood person, so I understand Shari’s desire to keep her father’s company intact. I also fear the impact of a private equity-owned Paramount, especially if the studio is merged with Sony Pictures, which would potentially eliminate yet another major buyer of film and TV projects, not to mention thousands of jobs.
Since the options are so different, I thought it would be interesting to invite Bill to debate and discuss them. An edited version of our chat is below. (And an audio version is here.) |
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| Matt Belloni: Welcome, Bill! Let’s dive in. My understanding is that Apollo and Sony are still talking, and there’s no formal partnership yet. But assuming they end up coming together to bid on Paramount Global, the question is: Which bid should Shari Redstone take? Neither suitor here is perfect.Bill Cohan: No, and both bids have major Achilles heels attached to them. I think that the Apollo combination with Sony will mean that their offer will be higher than $26 billion, and it’s for all shareholders. But Shari, as the controlling shareholder, can just kill it. And my sense is, she doesn't like it, and she is gonna say no.
Matt: Well, it’s not great for the legacy of her family. She sees Apollo as carving up the company. She likes the Ellisons because they seem like a better steward of the properties. And as a controlling shareholder, isn’t that what you pay for? When you buy Paramount Class B stock, don’t you buy it knowing there is a controlling shareholder that can essentially do with it what she pleases?
Bill: Not only the Class B, but also the Class A shareholders. In other words, if you’re buying into this mess, you’re buying into Shari Redstone.
Matt: Exactly! But then what are Mario Gabelli and the other shareholders complaining about? “It’s not great for me, this is self-dealing, I’m gonna sue.” I wanna say to these people, “Where have you been the past two decades?” Sumner Redstone was basically out of it with dementia for a long time. His girlfriends were pulling the strings on him like a puppet, and these shareholders weren’t saying anything then. Now they are going nuts?
Bill: They could sue, but I’m told by my Wall Street governance experts that Shari is likely to win that case because, you know, eyes wide open.
Matt: The other problem with the Apollo bid is that Sony is a Japanese company. So, they would have to sell CBS—
Bill: No, not necessarily. They could set up some sort of newco and drop those assets into it, with Apollo the majority owner of that newco.
Matt: Of course, we don't know where all of Apollo's money comes from, either. I don’t think we want to know.
Bill: I'm not worried about Apollo running afoul of the foreign ownership rules, but they’re going to have to be creative in terms of putting CBS and the TV stations in another entity, or maybe Sony puts up more capital but has only minority voting rights. So, I'm not exactly sure.
Matt: You think that hurdle is surmountable?
Bill: I'm told that they don’t think it’s a hurdle. Does that mean it’s not? No, it means that it could very well still be.
Matt: Legendary Pictures, which is backed by Apollo and could also be part of this deal, also has a Chinese owner in Wanda. We don’t know the exact breakdown there, but presumably, if Legendary was involved in this deal, they would have to buy out Wanda as well.
Bill: A lot of financial engineering has to occur. And guess what? This is what Apollo is expert at. But Shari can do whatever the hell she wants. And she likes the Ellison deal. Why? Because it buys out National Amusements at a 160 percent premium to where the stock is trading now. So, she’s going to get $2 billion for something that’s worth like $750 million.
And all the other Paramount shareholders would get nothing. They’d get a PowerPoint presentation: “Paramount is still gonna be a publicly traded company that we’re gonna control, and we’re gonna do x, y, and z things: We’re gonna bring in a new management team, we’re gonna maybe shut down Paramount+ or merge it with Peacock, and what’s now a $10 stock will be a $30 or $40 stock. So, stick with us.”
Matt: You’re skeptical of that arrangement, but looking at this long-term, wouldn’t you want to be in business with fresh blood, new money, the 10th-richest man in the world in Larry Ellison, management in Jeff Shell and potentially Jeff Zucker, both experienced. And you’re not controlled by the daughter of a legacy media owner who, frankly, managed the company so poorly that it got itself into this situation in the first place.
Bill: But with Apollo, you know you’re gonna get whatever it is, $15, $16, $17, $18 a share. You’re out, you’re gone, and they take it private, assuming it can get approved by the regulators and blah, blah, blah…
Matt: Well, that’s not a blah, blah, blah. We saw what happened when Disney bought most of Fox. That eliminated a buyer for Hollywood content. The 20th Century Fox studio essentially became a small label at Disney, and we are now down to five legacy Hollywood studios. If this deal happens with Apollo/Sony and Paramount, we would be down to four. Bankers must love this because there are incredible synergies. You just combine the film and television studios. You either spin off or include the TV networks in some new company, you sell off the Paramount lot, and then you fire everybody. Not great for Hollywood. And increasingly, the F.T.C. and the Department of Justice have been looking closely at the impact on the market for creative work. That was a problem in the Simon & Schuster sale, the book consolidation deal. They didn’t look at the impact on consumers; they looked at the impact for authors like Stephen King that would have one fewer buyer for their work. From this perspective, a Sony/Paramount deal is a disaster.
Bill: Is the D.O.J. or Lina Khan at the F.T.C. gonna look at this? In the past five years, nothing’s been as easy as some of these guys think it is.
Matt: But who knows what a Trump administration would do?
Bill: Right. So, an Apollo/Sony deal could be very problematic. But if you look at it from the shareholder perspective, there’s no question that a bird in the hand is worth two in the bush.
Matt: Unless your bird grows into a beautiful swan.
Bill: The special committee of the Paramount board, they have a dilemma. Do you take the $30 to $40 a share potential that’s in a PowerPoint presentation versus the $17 or $18 a share that is on the table now, which can be rejected by Shari with one fell swoop without an explanation. It’s a really, really difficult situation. And a third option is also possible here, Matt, and that is rejecting both of them and doing nothing and returning to the status quo.
Matt: Doing nothing is really not an option, I don’t think.
Bill: It’ll tank the stock. |
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| Matt: You could make the argument that the combination of Sony and Paramount, while bad for creative people, is kind of necessary. We need consolidation, as Bob Iger likes to say. Paramount is not equipped for the next generation of the media business. It just isn’t. It’s got a subscale streaming service, a movie studio that doesn’t have the capital and the I.P. to make the $200 million, $300 million movies that you need to compete. Its TV networks business is cratering. So, it needs to go away. At least, that’s the argument.Bill: And it’s going to go away if Shari doesn’t do a deal. The debt load of $14 billion has already been downgraded into junk territory by one credit agency. We’re talking about a potential wipeout.
Matt: This would be like Apollo owning newspapers and TV stations, which they do. Carve it up, milk it, fire as many people as you can, don’t look for the future, look for the squeeze right now.
Bill: But Skydance has already talked about eliminating $3 billion in expenses, you know…
Matt: True, but Ellison actually likes the business. He would keep the lot as it is and run it as a Hollywood movie studio. Apollo would not. Apollo would look for the highest bidder for each of the assets.
Bill: I’m old enough to remember these so-called recapitalizations that were all the rage 20 plus years ago, where they all promised $30 to $40 stocks, and the stocks went to zero and the company went bankrupt because it had too much debt, because the recap didn’t work. Now, to Skydance’s credit, they’re talking about a serious deleveraging, not a re-leveraging. So they’re gonna pay off maybe $5 billion worth of Paramount debt, which is a good first step. They're gonna cut costs. They’re gonna bring in a whole new management team, which is desperately needed.
Matt: Oh, the Bob Bakish slander! You don’t think Shari’s C.E.O. is worth $31 million a year?
Bill: For $31 million, he deserves to be slandered. What has he done to earn that money?
Matt: He makes the same as Bob Iger. It’s amazing.
Bill: It’s absurd. The fact that Nicole Seligman and Robert Klieger left [the Paramount Global] board at this moment is stunning to me. Both of them are very close to Shari.
Matt: But we don’t know why.
Bill: I think they see what’s coming, and there’s gonna be lawsuits, and they’re trying to insulate themselves. I mean, obviously it’s too late.
Matt: So what happens here? Give me your odds on who gets this deal. Ellison or Apollo?
Bill: I think it’s going to have to be Apollo.
Matt: Interesting. I think Ellison gets it. I think the 10th-richest man in the world wins.
Bill: The 10th-richest man isn’t involved here.
Matt: He’s a backstop here. I think that whatever money they need to make this happen will end up happening.
Bill: And if the stock of the publicly traded stub starts trading down, you think he’s gonna start buying stock? If instead of going to $30 or $40, it goes to $2, then what? Is Larry coming in to buy the company?
Matt: Then they start giving private tours of the island of Lanai to raise money. My point is, it doesn’t matter to him. His son wants to do this. He is in his late 70s. He will enable his son to do this. And then we’ll see what happens. |
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| See you Monday,
MattGot a question, comment, complaint, or want to hit Mad Men creator Matt Weiner’s moving sale this weekend with me? Email me at Matt@puck.news or call/text me at 310-804-3198. |
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| FOUR STORIES WE’RE TALKING ABOUT |
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| RACHEL STRUGATZ |
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