In a surprise move, Sony Pictures is in talks to join Apollo in a joint bid to purchase Paramount Global.
It sometimes seems as if the film production company landscape is one big merger, and the recent news that Sony is in talks with Apollo to purchase Paramount could have a huge impact on the industry.
Paramount is currently in acquisition talks with Skydance Pictures, the producers of films such as Top Gun and the Mission: Impossible series, although according to reports, Paramount has been urged by some shareholders to be open to other offers. Paramount is the producer of series such as Star Trek: Strange New Worlds, and is the owner of the Star Trek franchise, along with other highly famous bits and pieces of content.
Sony, meanwhile, is one of the only major studios that doesn't currently own a streaming service, so such a merger would at first appear to present a lot of benefit to the company.
Apollo Global Management did offer a $26bn all-cash offer for Paramount only days before negotiations began with Skydance, but no formal offer has currently been made in conjunction with Sony.
Interestingly, and frighteningly, any merger would include taking on Paramount's debt, which at the time of writing amounts to a cool $14.6bn. Those of you who opened your eyes wide in response to reading that are not the only ones. So bad is the situation that Paramount's debt rating was very recently reduced to "junk" status by the credit-rating agency, S&P Global. The change of debt rating was, according to S&P, as a result of ongoing deterioration of the linear television ecosystem, and elevated investments in its streaming services.
All of that might give the appearance of a company that any rational person would want to keep at arms length rather than taking on the debt. However, according to Wells Fargo analyst, Steven Cahall, the change of Paramount's debt rating to junk status "negates change-of-control provisions”, meaning that any acquiring party would not need to immediately repay or refinance the debt. As a result it could mean that more potential buyers of Paramount's assets come forward rather than less. And that's the key word, "assets". Such a provision doesn't exist should the company be sold off as one entity rather than having its assets split up and sold individually.
However, Paramount's controlling shareholder, Redstone, is said to prefer a sale in whole to Skydance, which is also struggling to service its own debts. How this all goes remains to be seen, but with the debt hole in streaming services currently standing in the tens of billions across the board, we're not likely to see the end of potential mergers for a while. Netflix is currently in over its head to the tune of $14.54bn, and other major streaming services are in shaky territory. The dilution of the market and and ever increasing cost of living across the world has meant customers can't afford to subscribe to them all, and are often dipping in and out depending on content they deem worth watching.
The end result is that even if Sony and Apollo did manage to tempt Paramount's shareholders with a bid, thereby giving Sony ownership of some of the most famous film franchises ever made alongside TV assets such as Nickelodeon, it still wouldn't solve the issue of how to make a consistently profitable streaming service in 2024 and beyond.