Paramount (PARA) on Thursday reached a new multi-year distribution agreement with Charter Communications (CHTR), with the company considering strategic options and possible acquisitions from Skydance Media or Apollo Global and Sony. It was a big victory for us. (Disclosure: Yahoo Finance is owned by Apollo.)
Spectrum TV’s parent company, Charter, will continue to operate all of Paramount’s networks, including Showtime, CBS and Paramount+. Additionally, Charter’s highest tier subscribers receive ad-supported versions of Paramount+ and BET+ at no additional cost.
Financial terms of the deal were not disclosed.
“The company’s television media division, driven primarily by linear networks, accounted for two-thirds of Paramount’s revenue and the company’s total EBITDA last year, and[Charter]has decided to turn the screws on Paramount. ” MoffettNathanson analyst Robert Fishman said in a new note to clients on Friday.
“This means that Paramount has successfully avoided one of the biggest risks it faced (the abandonment of its long-tail network), while at the same time confirming a widely anticipated but costly development (the free offering of Paramount+). “The analyst continued. “(This avoids the dramatic power outages that occurred last September during Charter’s negotiations with Disney.)”
Last year, Disney (DIS) pulled its owned and operated channels, including ESPN and ABC, from its Charter Spectrum cable system after the two sides failed to reach a distribution deal. At the time, news blackout affected a number of high-profile sporting events, including the U.S. Open, and occurred shortly after the NFL’s debut, increasing pressure on both sides to reach an agreement.
The impasse means Charter is offering some Disney streaming services (Disney+, ESPN+, an ad-supported version of ESPN’s yet-to-be-launched direct-to-consumer service) as part of some cable packages at no extra charge. The matter was finally resolved by an agreement. Cost to the consumer.
But for Paramount, with an uncertain future, the stakes seemed even higher.
Fishman reiterated that this charter negotiation could be a potential roadblock to larger strategic actions and deals for Paramount, as buyers need confidence in the company’s linear cash flow trajectory. We’ve had discussions,” Fishman said. “Now that this deal is finalized, I would not be surprised to see new developments in the Skydance Media bid and the Sony and Apollo proposals.”
“Depending on the terms of Charter’s distribution agreement, a newly created CEO office led by three senior executives may even have greater confidence to move forward with its own long-term plans.”
