Is Paramount’s potential deal to sell Showtime really dead? Not if you talk to a wistful corner of the media investor community, which readily perked up when the Journal reported last week that Paramount Global owner Shari Redstone had rebuffed several offers for Showtime—including a recent $3 billion-plus bid from former top executive David Nevins and the private equity group General Atlantic. To many, that’s a no-brainer deal for a struggling unit of a company that’s worth only $15 billion in total and is facing a cratering cable television business. I’m told that a couple decent-sized Paramount shareholders have let management know that they think offloading Showtime at that price makes perfect sense. Paramount declined to comment.
To be clear, there have been no new talks or outreach between Paramount and the Nevins group this week, despite rumors around town to the contrary. (Nevins declined to comment, as well.) And that ship potentially sailed last month when Paramount announced its dismantling—sorry, integration—of Showtime into Paramount+, with 120 layoffs and the new “Paramount+ with Showtime” branding, all managed under franchise-focused TV executive Chris McCarthy. The company did its diligence on the offer and concluded that while $3 billion in P.E. cash would more than pay for Shari’s Patriots season tickets, the new combination will save $300 million to $400 million a year, according to C.E.O. Bob Bakish, while allowing Par+ to add all those Showtime shows to its premium tier and raise its price $2 to $12 a month. “If we were to divest the asset, it would have to create more value than our own operating plan,” Bakish said when asked about the offers on an earnings call by analyst Rich Greenfield. A stronger all-audience service, cost cuts, and higher recurring revenue is more beneficial to the company than a one-time cash infusion, albeit a large one, the thinking goes.
But is it really? I’d love to see the actual math supporting that conclusion, as would a number of analysts I spoke to this week. “Given the headwinds facing linear TV and the multichannel bundle, selling Showtime for $3 billion-plus would be a big win for Paramount,” Greenfield told me today. “If there is still interest, we suspect Paramount investors would applaud a transaction.” I’ll bet. Paramount’s stock dropped after the Journal report, though it recovered later in the week.
Shari runs this family business and can do what she wants, of course. But Paramount just agreed to pay $122.5 million to settle shareholder suits over her 2019 combination of CBS and Viacom, which was pushed through via the Redstone family’s ownership of 80 percent of the voting stock in both companies, despite diminishing the value of Viacom and especially CBS. I imagine similar anger if Paramount ends up mishandling Showtime. It was worth double the current bid only two years ago, when Mark Greenberg and Blackstone were willing to pay $6 billion, and it will almost certainly be worth less than $3 billion two years from now, if the brand exists at all. What does that tell you?
Shari’s Choice
Paramount has shown us what it thinks of Showtime—and it’s not much. Even if Bakish and McCarthy are right that the prudent strategy is reducing its output, doubling down on franchises like Billions and Dexter, and cross-pollinating Par+ shows on linear to ride out the last years of the cable bundle, it’s hard to see how that isn’t just a temporary stepping stool to fully consolidating around Paramount+. If so, that would mean Showtime is a dead man walking, and if it weren’t for the lingering cash flow from linear carriage fees, the brand likely would have been killed outright. So why, again, does Shari want to keep it so badly?
I get the concern that if Paramount offloads Showtime, it potentially sends a signal to every P.E. vulture that the rest of the Redstone empire, like the movie studio and streaming assets, will be sold for parts, eventually leaving a once-mighty media power with only its sad cable channels, like MTV and Comedy Central, until Shari is forced to embrace some vampire hedge fund like Alden Global Capital to suck the assets dry, newspaper-style. Plus, while Paramount is projecting negative cash flow this year, thanks to the depressed ad market and all those checks to Taylor Sheridan, maybe, as Bakish predicts, 2024 and beyond will see a return to growth and the company won’t actually need the $3 billion it could get now for Showtime.
Still, at a time of consolidation and downsizing at nearly all the distributors, the creative community likely would have celebrated a deep-pocketed buyer in a resuscitated Showtime. A couple agents I reached out to on the subject were enthusiastic in supporting the Nevins deal—more projects, more leverage for sellers—though it wasn’t unanimous. Showtime had a low hit rate in recent years, canceling a bunch of shows after one low-rated season. “I guess having more buyers is good,” one agent said, but, “it’s not a viable business.”
Maybe not as currently configured under Paramount Global. That’s certainly been the sentiment expressed by McCarthy, who’s been meeting lately with agents and others to pitch the “new” Showtime: Fewer shows, more hits, better in the long run for everyone, he says. But perhaps Showtime could be much more vital and ultimately more valuable under another owner.
Lionsgate wanted to combine it with Starz, which I guess makes sense. But what if Showtime, under the Nevins group or another well-funded independent owner, could become both a standalone linear and streaming service, and a service that could be sold as an add-on to other services around the world, and a so-called “arms dealer” of specific content to other buyers? There’s a growing sentiment in the financial world that the consolidation in the media space may soon be accompanied by a de-consolidation in certain areas. There may be only a few truly global streaming powers, but there may be opportunities for smaller outlets to compete on multiple fronts: Buyer, seller, partner, standalone. If so, Paramount offloading Showtime could become a harbinger of other similar deals. Bakish and his team could establish themselves as pioneers, instead of looking like Shari just can’t let go of her family’s linear roots.
For that reason, some have speculated that the Nevins leak to the Journal actually came from inside the building—meaning a Paramount executive or a representative, who thinks Shari and Bob are nuts to turn down that kind of money for a superfluous asset they’re already minimizing. Paramount’s streaming business is actually going pretty well, with Paramount+ adding more subs than any other service last quarter and its overall D.T.C. business, which includes the free, ad-supported streamer PlutoTV, growing 4 percent despite the ad slowdown. All the more reason it doesn’t really need Showtime—or at least it doesn’t need it as much as it could use $3 billion. There’s still time, Shari.
