Paramount Closes in on Deal to Merge with Skydance, but Charter Carriage Negotiations Could Present Problems
Charter’s carriage deal for Paramount’s channels expires at the end of April, and the value of a new contract will be an important part of merger talks.
Paramount Global appears to be heading toward the closure of a merger that will see it combined with Skydance Media. A new report from CNBC indicates that Paramount and Skydance are moving closer and closer to a deal, checking off boxes and figuring out a timetable to proceed. The next big hurdle for the two companies is negotiating a new carriage deal for Paramount’s broadcast and cable channels, which could have major implications for the Paramount merger. But that deal may not be as easy a problem to solve as it sounds, considering the outlet Paramount has to make a new agreement with is Charter Communications.
Key Details:
- Paramount and Skydance would like to close the merger in May.
- The value of Paramount’s next carriage deal with Charter could have big implications on Paramount’s valuation.
- Charter could ask for free access to Paramount+ for its customers as part of its deal with Paramount.
The merger of Paramount and Skydance could be completed by mid-May, according to CNBC. The two companies entered into an exclusive negotiating window at the start of April, and Skydance representatives have asked for a two-week extension of that period to hopefully allow the two sides to close the deal once and for all.
At present, both sides are drawing closer to agreeing to a valuation for Skydance as a company, which will be crucial to determining how much new equity will be injected into the merged entity when it comes into existence. Skydance could bring billions of new dollars into Paramount to help pay down the company’s outstanding debt as part of the agreement.
How Big a Problem Could New Carriage Deal with Charter Be for Paramount?
The valuation of Paramount still needs to be agreed upon by the two sides as well. In order to come to a consensus on financial terms, Skydance officials will have to await the outcome of carriage negotiations between Paramount and Charter Communications, one of the largest cable distributors in the United States with more than 14 million customers.
The deadline for a new deal with Charter is set for April 30. If Paramount is forced to take less in carriage fees for its channels, the value of the company could take a hit, which would have an impact on its talks with Skydance. Negotiations with Charter will be led by current Paramount CEO Bob Bakish, who is reportedly to be let go if the Paramount/Skydance merger goes forward. Bakish has reportedly spoken against the deal to the company’s board.
The trouble for Paramount is that Charter has been known to be a tough negotiator in the past. For example, its last carriage deal with Disney was not agreed to until a blackout of Disney-owned cable channels forced the two sides back to the negotiating table. Charter insisted that Disney give its cable customers no-cost access to Disney+, so that they would not essentially be charged double to watch the same content. Disney eventually assented to that demand, and now Spectrum TV Select customers get free access to Disney+ Basic. Charter’s Spectrum cable service was also allowed to drop eight Disney-owned channels from its bundle, further decreasing Disney’s carriage fee payments.
Bakish has made it known that he thinks bundling on-demands streamers with cable plans is a sound idea, and that he was on the lookout for such opportunities last fall. Now, it appears that he’ll be able to put that desire into practice. It seems very likely that Charter will ask for terms similar to its Disney deal when negotiating with Paramount, and also likely that Paramount will accept. CBS is a popular network, but Paramount’s other channels like MTV and Paramount Network don’t approach the popularity of Disney-owned channels like ESPN and FX, so Paramount will have decidedly less leverage in negotiations than Disney did.
While Paramount Network is the home to television’s most popular series, “Yellowstone” hasn’t aired an episode in nearly a year and a half, and when Season 5 eventually returns, it will reportedly be the final installment of the show. Therefore, Bakish can’t use the show’s juggernaut status as a long-term incentive for Spectrum to continue carrying the channel if it is not so inclined.
If the Skydance talks manage to implode, Paramount will still have other potential buyers waiting in the wings. Sony has had preliminary talks with the private equity firm Apollo Global Management about making a bid, though CNBC reports Paramount’s special committee for considering M&A possibilities has not gotten any concrete details so far.
For the moment, it looks like Paramount Global is Skydance’s to lose. That could still happen, but if Paramount comes out of its negotiations with Charter in a strong position, a deal could follow rapidly in the proceeding weeks.
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.