Buying Paramount Could Take Sony’s Content Arms-Dealing Strategy to a New Level
Getting ahold of Paramount-owned franchises could be a dream for Sony, but big regulatory issues stand in its way.
Sony has spent the last decade doing things a little differently than Hollywood-based entertainment companies. That makes plenty of sense, considering that so much of Sony’s revenue comes from other sources than its TV and movie productions; video game sales and hardware manufacturing are the company’s true bread and butter. But the company could be about to undergo a big shift, as it has joined private equity company Apollo Global Management to make a $26 billion offer to acquire Paramount Global. There are plenty of obstacles to clear before a deal can be made, but if the transaction does eventually go through, Sony will be able to evolve to a new level of content arms dealing that has made the company so successful in recent years.
Key Details:
- Paramount owns some highly popular franchises, including Star Trek, Top Gun, and The Godfather.
- Nickelodeon properties like “SpongeBob SquarePants” and “Monster High” could provide valuable opportunities for future video games.
- Sony and Apollo face significant regulatory issues in trying to buy Paramount.
Paramount Global has been up for sale for many months, but it appeared to be closing in on a deal in early April when it entered into exclusive negotiations with David Ellison and his production house Skydance Media regarding a merger. Paramount’s controlling shareholder Shari Redstone initially favored that deal, but as more and more Paramount investors expressed negative opinions on the negotiations, the two sides exited the exclusive window without an agreement in place.
Now, Paramount’s special committee for evaluating M&A opportunities is officially considering Sony and Apollo's $26 billion bid. If their efforts are ultimately successful, distribution rights to top franchises like Star Trek, the “Mission: Impossible” and “Top Gun” movies, “Teenage Mutant Ninja Turtles,” and much more will fall to Sony.
The question for Sony would immediately become what it would do with all of its newfound content. There are certain titles that it would be wise for Sony to try to keep; “SpongeBob SquarePants” would be the perfect intellectual property (IP) to mine for new PlayStation games, as would the “Ninja Turtles” franchise. But it would make sense for Sony to consider selling some of its newfound IP to other interested outlets. How much would Disney pay to acquire rights to old “Indiana Jones” movies to keep alongside “The Dial of Destiny” on Disney+ permanently? Disney and Sony already have a deal that sees Sony-produced films go to a Disney-owned streaming service after an 18-month run on Netflix, so the two sides have plenty of history negotiating equitable deals. Could CBS’s NFL rights hit the auction block if Sony acquires them, and who would pay most to get them?
The biggest question is what would become of Paramount’s streaming operations. Paramount+ and its attendant rights would likely fetch a high price on the open market, depending on what IP would come along in the sale. A ready-made streaming service with 71.2 million subscribers doesn’t hit the open market every day, and NBCUniversal has already held discussions with Paramount about combining their two streaming products in some way. That would make it a logical buyer for Paramount+ if it ever came up for sale, and Warner Bros. Discovery — which showed initial interest in acquiring all of Paramount in late 2023 — could also take a look at snagging Paramount’s flagship streamer.
Alternatively, Sony could try to keep Paramount+ and offer it in a bundle with its PlayStation Plus subscription service. PlayStation Network has 130 million+ users, and the opportunity to convert some or all of those users to Paramount+ customers as well could be too good to pass up. The company could also look into more cross-media opportunities, creating new games and TV shows from the same IP brought over in a potential Paramount deal.
How Regulatory Concerns Could Kill Sony/Apollo Offer in its Crib
There are myriad opportunities awaiting Sony if it were able to somehow follow through on its joint bid with Apollo to buy Paramount. Federal regulations, however, will seemingly make that an incredibly difficult task for the two companies.
To start with, as a company based in Japan Sony is not legally allowed to own an American broadcast channel like CBS. Sony could simply hand over control of CBS to Apollo, were it not for the fact that Apollo owns a majority stake in the television ownership group Cox Media. Ownership of CBS and all of its affiliates by Apollo would run afoul of FCC rules that say companies can’t own more than one of the top four stations in any given market, and could also violate the regulation which prevents one entity from owning stations reaching more than 39% of the total American audience.
The Department of Justice could also quash the merger, as it may run up against complex merger guidelines first laid out in 2023. If the DOJ thinks that the deal would dampen competition heavily by reducing the number of major studios, it may decide to put the kibosh on the deal.
All of those are worries for Sony and Apollo’s legal teams, but they could be existential threats to a deal with Paramount. Sony has to be rubbing its hands together gleefully when it glances at the list of Paramount IP it could score if the deal does become a reality, but first it must successfully lobby Paramount to accept the deal, and the U.S. government to approve it.
Paramount Plus
Paramount+ is a subscription video streaming service that includes on-demand access to 40,000+ TV show episodes from BET, CBS, Comedy Central, MTV, Nickelodeon, Nick Jr. and more. The lineup includes “1883,” “Tulsa King,” “Star Trek: Discovery,” Nickelodeon’s “SpongeBob SquarePants,” and “PAW Patrol.” Subscribers can watch the NFL, college football, The Masters, college basketball, UEFA Champions League, UEFA Europa, Serie A, and NWSL. The service also offers the option to watch your live CBS affiliate. The upgraded ad-free package includes premium movies and shows from Showtime.