00:00It's pretty solid just from, you know, whatever, whatever we've been hearing over the weekend.
00:05So we've kind of gone from, you know, is this deal ever going to close to kind of broader promises
00:10to now some concessions that seem really, really reasonable from a paramount standpoint.
00:15And I say that because one of the things that, you know, I think investors were really fearful about with
00:20this merger and the potential settlement was whether they would have to divest assets,
00:26especially whether they would have to divest the cable networks, which would have been a really, you know, problematic because
00:32it would directly have affected their synergy target.
00:35And they have a really ambitious synergy target of six billion dollars.
00:38So it looks like they don't have to do anything on that front.
00:41They do, however, have to promise to theatrically release 30 films from both studios every year, failing which there will
00:50be a penalty.
00:51They also have to make an investment in, you know, the California production and also maintain this two studio operation
00:58so they can't dispose of any of the studios.
01:00But all of that seems to be something that David Ellison will be, I think, happy to live with as
01:05long as he can get this deal closed by that September 30th date and avoid those very, very expensive ticking
01:11fees.
01:12Paramount stock is up about eight and a half percent today.
01:15Warner Brothers Discovery up about 10 percent.
01:17So the market's happy about that.
01:18All right, Geetha, I think this is a little bit of be careful what you wish for.
01:22They're going to get their deal done.
01:23Now they've got to operate this thing.
01:26What are the key challenges, do you think, for this combined company going forward?
01:30Yeah, the biggest challenge there, Paul, is definitely going to be the leverage, the debt.
01:35So we're looking at about 80 billion dollars of debt.
01:38It's going to be about six and a half times levered.
01:41So it's really, really going to come down, as you just pointed out, execution about getting those synergies and trying
01:49to drive this to three times leverage within a few years after closing.
01:53That's a tall order.
01:54Given that, you know, you have two businesses that are in secular decline, which are the TV businesses.
02:00Yes, they can extract some synergies, but you're doing that at the cost of those businesses bleeding further.
02:05And then remember, the studios is really a very, very up and down business.
02:09And you've always said this, Paul.
02:10It's like it's such a hit and hit or miss business.
02:13It's not predictable at all.
02:15So you just look at the two combined studios last year.
02:17They had about a 30 percent share of the domestic box office this year.
02:21Year to date, they're only at about 10 percent.
02:23So, you know, it's it's again, it's going to be a tough slog on that on that front.
02:28Streaming is definitely a bright spot for both companies.
02:31But again, we're seeing even streaming leaders really struggle.
02:35You look at the likes of Netflix and, you know, every day we see some engagement data that comes out
02:40that doesn't look so optimistic,
02:42really struggling against the likes of YouTube and some of the other social media platforms.
02:46So whichever way you kind of slice or dice it, this is really going to be a tough road ahead
02:51for Paramount Skydance.
02:52Yeah, the company, Paramount, has promised merger synergies of six billion.
02:56So that means a lot of cost cuts, probably job eliminations.
03:00And you mentioned all the challenges operationally.
03:04If they're going to grow their way out of this debt, what part of the business has the best prospects
03:10for growth?
03:11Yeah, definitely. Streaming, I think, has the best prospects.
03:15Remember, this is at its heart, David Ellison and, you know, the whole Oracle backing at its heart is a
03:20technology operation.
03:21So I think one of the things that the market and investors are kind of banking on is the use
03:26of technology in the media operations.
03:29You know, whether that's for content, you know, content creation, content production, eliminating a lot of those post production costs.
03:36I mean, I mean, they do have a seat at the table when it comes to AI.
03:39And so it's going to come down to how well they can kind of leverage some of the edge that
03:43they have there and implement those across their media operations.
03:47But I think definitely one of the one of the business units that everybody is going to be looking at
03:52very closely is going to be the streaming side and how much, you know, how fast they can go profitability.
03:57Even though 70% Scarlett of the combined company, 70% of EBITDA will still be from the secularly challenged
04:05TV businesses.
04:0730 seconds left here, Geetha.
04:08What's the Wall Street's view of David Ellison?
04:11He's kind of a new entity to Wall Street.
04:13Has there been enough time for the street to get a sense of, is this the management and management team
04:18that can execute this deal?
04:21I think they can, Paul.
04:23And actually, whatever we've seen so far, he's actually been pretty impressive because he's more than delivered on the synergy
04:31targets for the Skydance acquisition.
04:32Remember, this was this is Paramount Skydance.
04:34They just executed that transaction.
04:36And so far, he's actually more than delivered what he had promised.
04:40So let's see.
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