As a buyer group led David Ellison’s Skydance Media aims to iron out a potential deal to take over Paramount Global, many eyes on Wall Street are also watching carriage talks between the entertainment conglomerate and cable giant Charter Communications. On April 30, that deal expires.
Last year, Charter played hardball with Disney in a negotiating showdown that led to a brief blackout last fall before the companies struck a broad carriage deal covering traditional pay TV networks and streaming services, which finance experts called a blueprint for future sector agreements and a potential “tipping point” in the relationship between content and distribution giants.
Depending on if, when, how, and what Charter and Paramount agree on in a new pact could affect the value of Paramount, therefore its take over price target, and its strategic positioning for the future. No surprise then that industry observers have their eyes and ears peeled for signs of how it will play it.
“Charter took a hard stance against Disney in September despite adverse timing (during the beginning of NFL/CFB seasons) despite that ESPN had yet to double-dip,” Wolfe Research analyst Peter Supino highlighted in a recent report. “Neither of these factors will benefit Paramount, whose streaming service can be purchased at a cheaper rate (with all its marquee sports) than Charter currently pays for its portfolio of network.”
LightShed Partners analysts Richard Greenfield, Brandon Ross and Mark Kelley had already warned in March of potentially rough seas in the Paramount-Charter and other carriage talks.
“While we doubt Paramount ends up being dropped, we expect very challenging renewals as it has become far less important to distributors to carry Paramount, given how little content is exclusive to the legacy multichannel bundle,” the LightShed team argued. “And while Paramount+ may be included in any distributor renewal, it will likely lead to a significant reduction in what distributors pay for existing Paramount networks to prevent double paying for content.”
And given that Paramount has a vast array of cable channels tethered to the linear pay TV ecosystem that’s declining, negotiations could get tough. “Operators may balk at the price tag for MTV2 during the next round of carriage negotiations given the network is not seen as a must-have for subscribers in today’s world where consumers have a vast array of digital video options,” S&P Global Market Intelligence analyst Scott Robson wrote about Paramount in a report after the Disney-Charter deal was unveiled last year.
Paramount Global CEO Bob Bakish, whose exit from the company was made official on Monday, “made plans to focus its attention on six ‘core brands’ in 2017, before the CBS and Viacom merger,” the analyst added. “Since then, the company has kept its niche networks on air, but that might be changing.”
