Shari Redstone has won the battle for her family’s Paramount media empire. Now comes the streaming war

Two years after finally taking the reins of her family’s media empire, Shari Redstone appeared before investors on Tuesday and said, “I’ve never been more excited about the future of the business. “

When markets opened the next day, shares of ViacomCBS, this week renamed Paramount, fell 20%.

The ruthless reception highlighted a central problem for the fabled Redstone Empire, a dysfunctional family dynasty whose dysfunction helped inspire some of HBO’s characters. Succession.

Redstone prevailed in the two-decade saga over who runs the company, fending off two of Hollywood’s most powerful men – disgraced CBS chef Les Moonves and his father, Sumner.

But the future of the $20 billion company remains as uncertain as ever. Investors fear Paramount is too small to compete in an entertainment industry that has consolidated into a few huge conglomerates, each pledging tens of billions of dollars in a streaming battle.

Shari Redstone prevailed in the two-decade long saga over who would lead the family media empire ©Getty Images

Redstone has spoken informally with potential Paramount buyers over the past year. But talks have not advanced due to the complexity of the asset and the high price she would seek, according to three people familiar with the matter.

Paramount has made notable progress as a streaming challenger for Netflix. Its portfolio of TV stations, which includes CBS, Nickelodeon and Comedy Central, continues to spend money and it sits on valuable assets such as the Paramount movie studio. Redstone herself has campaigned for an even bolder streaming strategy through Paramount Plus, the company’s flagship streaming service, according to company insiders.

But investors aren’t convinced that in an entertainment landscape filled with much bigger competitors – such as Netflix, Amazon and Disney – Paramount can compete on its own. For some investors and analysts, the best thing to do is to sell to a larger rival.

This has created a peculiar situation where Redstone’s ambitions for his business and perceived desire to protect his independence seem almost inversely correlated to his stock market performance. A sympathetic former CBS executive described it as “a tragedy”.

After Tuesday’s presentation, analysts at Bank of America downgraded their outlook for Paramount, concluding that a sale was not “imminent.”

“Swinging towards fences increases risk,” they said.

Some people close to Redstone wonder if she would be willing to part ways with the company. “She spent years of her life on it. She fought with her own father, she fought with Les Moonves, who at the time was the most revered guy in all of Hollywood, whom she took down, ”said a person who has known the Redstone since years.

“There’s a tremendous amount of emotion attached to his control of this business now.”

Another person close to the company pushed back on the idea, saying Redstone will do what’s best for shareholders. “She is a businesswoman and takes it very seriously,” the person said.

Paramount Plus has been unable to capitalize on some of the studio’s biggest hits, such as Yellowstone, as it is constrained by licensing agreements with other companies © AP

Paramount’s troubles illustrate the harrowing transition facing traditional media companies.

Like its peers in Hollywood, Paramount is trying to turn its prized film and TV businesses into a future-ready online streaming service.

But it is a costly business that involves heavy losses for years. With less financial flexibility than Amazon or Netflix, Paramount had until recently opted to be an “arms dealer”, selling the licensing rights to its shows to deep-pocketed tech companies.

This has limited Paramount Plus, which launched about a year ago, as many of these licensing deals last for years. It has therefore been unable to deliver some of the company’s biggest recent hits, such as Yellowstone, the popular drama set on a cattle ranch in Montana, or Oprah Winfrey’s hit interview with Prince Harry and Meghan Markle. They were licensed to NBCUniversal’s Peacock and Amazon, respectively.

“They could never adopt a broad and assertive strategy because they needed short-term money [from licensing]said a former executive. “They couldn’t afford to be what they wanted to be.”

Last year, Paramount changed its strategy with the advent of Paramount Plus, but has to wait until licensing agreements expire to act on it. For example, executives said on Tuesday that they would take over the rights to new South Park episodes from 2024, after its licensing deal with HBO Max ends.

They also touted the progress made by Paramount Plus, aided by its live sports offering, particularly National Football League games, as well as popular children’s programming.

Paramount added 9.4 million subscribers to its streaming services in the fourth quarter, overtaking HBO Max. By the end of 2021, he had reached 56 million subscribers on his streaming services, including 33 million for Paramount Plus.

The lack of enthusiasm around Paramount’s foray into streaming may partly be a matter of timing. A few years ago, saying the word “streaming” sent a media company‘s stock price soaring. But as growth has stalled at Netflix, investors have become more skeptical of streaming’s long-term prospects and high cost structure. Paramount is expected to lose $1.5 billion on its streaming business this year and plans to increase its spending on streaming content to $6 billion per year by 2024.

To fund this, Paramount sold assets, such as the CBS Studio Center where Seinfeld was shot, leaving it with more than $6 billion in cash at the end of 2021. Netflix has already approached Paramount to buy its sprawling studio, but those talks are no longer active, according to people familiar with the matter.

As for the company as a whole, media bankers say Comcast, Amazon or Warner would be the most likely buyers. However, Amazon is unlikely to want to take on traditional TV channels, including CBS News, which accompanies it, they said, while Comcast already has distribution deals that give it access to the library. from Paramount on Xfinity devices in the cable group.

In her presentation this week, Redstone tried to persuade investors to stick with her for the ride. “[Paramount is] greater than the sum of its parts,” she said. “We can deliver the [return on investment] what you expect and deserve.

Additional reporting by Christopher Grimes in Los Angeles

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