To help Paramount Global to grow, its new owner needs to make cuts.
Skydance executives who are set to take over the owner of CBS, Nickelodeon and MTV have identified at least $2 billion in cost cuts that can be made at the company, much of it from its linear media operations, according to Jeff Shell, who is slated to be named president of the new entity. Skydance and Shari Redstone, Paramount’s current controlling shareholder, struck a deal Sunday that will have the former take over National Amusements, Redstone’s investment vehicle, and inject capital into Paramount.
Executives believe in the potential for linear media, said Shell, but need to make changes to wring cash flow. The cost cuts,, targeted with the help of consultants at Bain & Co., can be made “quickly,” Shell said. “Linear is going to keep declining,” he added during a call Monday with investors. Managed properly, he said, “I personally think the linear business” will be strong for years to come. “We don’t think it’s going to worsen, but we don’t think it’s going to get better either.”
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Paramount has grappled with the problem for several quarters, seeing declines in ad sales and ratings. The company’s current management team, a troika that consists of CBS chief George Cheeks, cable-programming chief Chris McCarthy and Paramount and kids-content chief Brian Robbins, had already articulated a need to cut costs at a time when the company’s business has seemed more fraught.
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David Ellison, the Skydance chief who will become the CEO of a “new” Paramount, put a spotlight on his plan to boost the media conglomerate with content from his entity, which controls certain rights to top Paramount franchises like “Top Gun” and “Mission: Impossible.” He envisioned a new company that combined Skydance’s animation business with that of Nickelodeon, and CBS Sports with Skydance’s sports documentary division.
The new company will face challenges similar to those currently vexing the old one. Paramount is saddled with an array of cable networks that underperform or lack a hook with modern audiences. Many of them boast only a small number of original shows and have not received the new investment required to keep them relevant.
Skydance suggested new business moves were on the horizon. Shell indicated a willingness to sell certain non-strategic assets — which he did not immediately identify — and suggested the company hoped to add to the CBS Sports portfolio, which boasts the Masters golf tournament, Big Ten football, part of the NCAA March Madness tournament and NFL rights. “Sports if the foundation of our business,: he said, and with Gerry Cardinale’s RedBird investment vehicle involved in the Skydance deal, the new Paramount “will likely be a buyer, rather than a seller” when it comes to sports rights.
And executives appear poised to investigate opportunities for Paramount+, the company’s primary subscription-based streaming vehicle. Shell articulated a plan to seek out potential partnerships with other streamers, while Ellison vowed to overhaul the company’s technology offering, citing a crucial need to blend content with a top digital platform.
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In time, Shell suggested, many of the streaming services were likely to be bundled together. The current streaming experience “‘is not great,” he said, with consumers forced to pay high fees to continue to receive most services. The current consumer experience “is not sustainable,” he added. “I think you already see the bundling process starting to happen,” he said, because consumers may have favorite media brands, but still crave a unified experience. “If you’re in that bundle you’re going to win, and if you’re not, you’re going to be in trouble.”