Perhaps the biggest sign that traditional media is on the front lines heading to the intensive care unit isn’t that Shari Redstone made the bizarre move and refused to sell her dwindling empire to a company called Skydance, after months of tough negotiations.
No, many astute media people, including those involved in the negotiations, believe that when Shari is faced with the cold hard facts about the business she inherited from the late media mogul Sumner Redstone, she will come back to the negotiating table.
She has nowhere else to go.
I see what you’re saying – aren’t there other bidders for her “controlling stake” in Paramount?
Sorry, but for those of you familiar with the industry, this is not a very awe-inspiring group.
What’s less awe-inspiring is that Paramount was run by three executives, all of whom essentially reported to Redstone, who squandered billions of dollars in stock market value during his time at the family business.
Additionally, Paramount’s main business drivers — CBS, NFL television rights, local networks, MTV, BET and Nickelodeon — are all being crushed by cord-cutting.
Movie studios are struggling with declining interest in movie-going.
Streaming services are still losing money.
That’s why Paramount’s stock price dropped nearly $1 billion in market cap last Tuesday after Shari did a 180-degree turn and literally walked away from a deal that was putting her family’s fortune on the line.
Is Redstone simply incompetent?
Maybe so, but consider this: all traditional media is in trouble and in need of a savior.
Analyst Rich Greenfield recently posted on social media that Netflix’s market capitalization is larger than the top four media content providers combined.
Sure, Paramount is the weakest of the weak, but that doesn’t mean Shari likes being treated like a lowlife.
She was forced to walk away from a deal that was literally about to be approved by the Paramount board of directors because she felt Skydance was squeezing her out of pocket.
Shari believes Skydance has the funds to pay her what she wants, and that’s no exaggeration.
The company is run by film producer David Ellison, who shares his name with Oracle Chairman Larry Ellison, as they are father and son.
Last I checked (as did Shalley), Larry is one of the richest people in the world with a net worth of over $150 billion, meaning he has plenty of money to support his son’s ambitions of owning a media company and taking charge of running Shalley’s business.
But because of the Redstone family’s strange control over Paramount, they didn’t.
Through a little financial ploy concocted by her father, Shari “owns” the company through what are called voting and controlling shares.
Her sale of shares is a bit odd, since she also has common shareholders in Paramount.
They have always threatened to sue, and in this case, they did so after initially getting very little.
So Skydance began thinking of ways to please the common man at Shari’s expense, lowering its payment to Shari to nearly $2 billion and refusing to compensate him in the event of a lawsuit.
I’ve interviewed people on all sides of the show, and they all tell different versions of the same story: the deal fell through because Paramount executives didn’t want the Ellisons to whisper in Shari’s ear; the deal ultimately fell through because Shari was too emotional about giving up her baby.
But one thing is for sure: nobody likes being stingy.
My guess is that David and his deal partners at RedBird Capital had no qualms about cutting Shari’s dividend because she saw the melting iceberg of a media company slowly disappearing and other buyers lacking capital or facing regulatory hurdles left her with no choice but to sell.
It makes sense on paper.
What’s unfortunate is that David Ellison and Shari hadn’t spoken in the weeks leading up to her exit, which is always a bad sign for any acquisition.
Remember: David probably started wooing Shari because he really wanted the Paramount fortune and his status as a media mogul.
Then, when conditions began to change, they stopped talking.
When it comes to business, silence is never golden. You have to approach it like you’re asking the homecoming queen to prom.
And it shows its charm.
David Ellison didn’t do that.
His aides say it wasn’t his fault and his lawyers have urged him to stay away.
Either way, that’s why he got dumped.
He learned the basics of trading but failed.
This is David’s first big dance, so I blame it on inexperience.
But his counterparty, Redbird, is run by one of the industry’s most veteran media bankers, Jerry Cardinale, who has more emotional intelligence than anyone on Wall Street, so you’d think he would have stepped in. But according to my reporting, he didn’t.
Again, Cardinale and Skydance insiders believe Shari doesn’t have many good options, and that she will return with a weaker hand, my sources say.
But they were wrong before, they’re dealing with Redstone, there’s been a lot of family drama with Shari running this place, but I can’t go into detail about that here.
Shari has self-esteem, and let’s assume she learned a few things from her father.
She knows that David really wants to build a media empire and has the money to do so from his father.
Which brings us to another family drama at Skydance involving the Ellison family.
Negotiations dragged on, but I heard Larry was unhappy with Shari’s last-minute change of policy.
Even if she were to come back to the negotiating table, he may not want to support the deal for the sake of his children.
Or, if Shari were to come back and show him the money to turn her son into the next Sumner Redstone, Larry might do a 180-degree turn.
