We are watching the ongoing wackiness of the entertainment industry. Hollywood (movies) along with traditional broadcast television is a total mess. There is massive disruption taking place which makes it extremely fascinating to follow.
It is also providing a great deal of insight into how things might evolve.
This article has to start with the fact that most of the Hollywood movie studios are in trouble. To what degree is a matter of the individual company. MGM, one of the traditional names, was swallowed by Amazon, removing them from the discussion. With their money, it is basically open season for whatever they want to do.
At the other end is Paramount.
The Redstone family controlled studio is up for sale. Even though there are major financial issues, many are interested in getting involved.
We saw the latest offer come in very strong.
Sony Pictures is seriously looking to acquire the property. It is willing to team with Apollo Global to try and get the deal done.
Paramount might be a financial mess but, like many of these studios, has a tremendous library that has value on the market. In the era of streaming, content is still necessary. With franchises such as Transformers and Shrek, the company has generated revenues in the past.
A company like Sony could consolidate some of the operations, cutting costs and, perhaps, making a stronger entity.
At this point, it is difficult to forecast since details of the deal are not being released. Like many of these companies, Paramount has a lot more than just their film library to offer. What Sony has an interest in is not being made public.
The question, however, is whether they are making a mistake?
We have covered how Disney is more than $10 billion in the hole on its streaming service. This does not include the money it paid for Fox, LucasFilms, and Marvel, essentially giving them content. Like Paramount, there were other assets in the deal so the outlay was for more than just the library.
That said, it appears that Disney bought at the peak. The $70 billion paid for the different Fox properties is a total nightmare. Even after divesting some of the assets due to regulatory issues, the company has not recouped what it put in.
Could Sony be following a similar path?
One thing that Disney does have going for it is that it is not entirely dependent upon the film and broadcast divisions. In fact, many believe Disney is subsidizing these through the profits from the parks and hotels. Since I do not look at the financial statements close enough, I cannot comment either way.
It is a theory that makes sense. If there is profit in those areas, it could be offsetting the massive losses being suffered elsewhere.
Here is where Sony is more akin to Disney than Warner Bros.
This is one of the world's leading consumer electronics companies. They are big into gaming with the Playstation being one of the leading consoles. It also produces semiconductors, a great business to be in these days.
From this perspective, the deal for Paramount could make a bit more sense for Sony. With this insulation against the decline of the industry, it might have the time to create a new business model. This might require seeing how things evolve over the next year or two.
We will have to see who ends up with Paramount. This story is far from complete.
While this is taking place, it is helpful to keep watching the different segments. The NBA contract appears to be gaining some intensity, with it looking like there will be 3 companies getting the rights there.
The ongoing headwinds for films is also something to monitor. Many believe 2024 is going to be an abysmal year with 2025 not looking much better. We are entering the Summer season so the theaters might get a bump.
As stated in the past, it is rare that we get to watch an industry get disrupted before our eyes while also being aware it is happening. It is something that I think will only accelerate as we ride the technological wave even further.
