By Jessica Toonkel
Paramount Global's board is considering replacing Chief Executive Bob Bakish and installing a committee of top executives to run the entertainment giant on an interim basis, according to people familiar with the situation, a stunning move that would come as the company explores a sale.
Under the plan being discussed, the board of Paramount and controlling shareholder National Amusements -- helmed by Shari Redstone -- would put in place an "Office of the CEO," made up of the company's division heads, upon Bakish's departure, some of the people said.
No decision has been made about Bakish's future and it is possible the board could keep him in place.
Bakish was named CEO of Viacom in 2016 and continued in the top post after Redstone merged the company with CBS, the other wing of her family's media empire, in 2019. He was chosen partly because of his shrewd management of Viacom's international operations, which had been a growth engine.
Redstone and some board members have soured on Bakish's leadership over time, questioning whether he pursued strategic opportunities for the company aggressively enough, including a potential sale of the Showtime channel. Some senior leaders at Paramount also have raised concerns internally about Bakish's stewardship.
Over the past several years, Paramount, home to brands such as CBS, MTV, Nickelodeon and the Paramount film studio, has struggled as its legacy cable TV business has continued to erode, while its streaming service is growing quickly but not generating profits. Paramount's market value has fallen from $25.3 billion in 2019 to $8.4 billion now.
Bakish's backers say he has put the company on the map in streaming with the launch of Paramount+ and the acquisition of Pluto TV, an ad-supported service, maintained CBS in a strong industry position and managed to negotiate TV distribution deals even as consumer cord-cutting puts pressure on the entire cable business.
Removing Bakish would add more confusion to an already-thorny sale process the company has been pursuing, and would raise questions about whether Paramount is in line for major changes in operational strategy.
Paramount is currently in exclusive merger talks with Skydance Media, a production company backed by the family of Oracle co-founder Larry Ellison.
Under the proposed transaction, Skydance's backers would pay roughly $2 billion in cash for control of National Amusements, which has a 77% voting stake in Paramount and owns a chain of movie theaters.
In the second step of the deal, Paramount would merge with Skydance in a $5 billion, all-stock transaction. Many shareholders have complained that the deal would favor Redstone's National Amusements, giving it a cash premium while leaving other, nonvoting shareholders with diluted stock in Paramount.
The exclusivity window for the negotiations between Paramount and Skydance expires on May 3. It is unclear if exclusive negotiations will be extended. Paramount reports earnings on Monday.
Bakish has told investors that executing the Skydance deal would be challenging. An independent committee of the board has been tasked with weighing the best course for all shareholders, and has another potential option that some shareholders say they would prefer: a $26 billion, all-cash offer for Paramount from Apollo Global Management.
The board had concerns about Apollo's bid, including whether it could arrange financing for a deal, people familiar with the situation said. Since then, Apollo has discussed teaming up with Sony Pictures on a potential bid.
Redstone succeeded her father, media mogul Sumner Redstone, after a yearslong battle with his top lieutenants and associates, taking pole position in the empire in 2016.
Tensions between Redstone and Bakish have been growing. She told associates that as Skydance talks were proceeding, Bakish was pursuing other deal conversations, including over a potential streaming partnership with Comcast, without keeping her or the board in the loop, say people familiar with the situation. Bakish and the cable giant had discussed a potential joint venture between Paramount+ and Comcast's Peacock, The Wall Street Journal reported in February.
Redstone also has placed blame on Bakish for the company's overall predicament and what she views as missed chances to strike sound deals. She was open to selling the Showtime premium channel, people close to her camp say. Bakish turned down Showtime bids in recent years, and ultimately integrated its programming into a souped-up version of the Paramount+ streaming service.
Bakish is credited in the industry for pushing Paramount into the ad-supported streaming world with the 2019 acquisition of Pluto TV, one of the leading players in the sector. While less glamorous than subscription services like Netflix or Disney+, services like Pluto cater to the tens of millions of consumers looking for free access to shows and movies, and have been popular with advertisers.
Paramount's fundamental business challenge is that TV isn't growing, but continues to be the biggest source of its profits. Last year, revenue in its TV and media segment fell 8% to about $20 billion, while profits in the segment fell 12% to about $4.8 billion.
Streaming posted healthy revenue growth of 37% last year, with a lot of customers joining Paramount+, but the streaming operations posted a $1.7 billion adjusted operating loss.
The company has said that Paramount+ will hit domestic profitability in 2025 . Other big media companies like Disney and Comcast are also struggling to turn a profit on streaming. Overall, revenue at Paramount grew 2% in 2023 to about $30 billion.
As the drama over its leadership and potential deals plays out, Paramount is in high-stakes negotiations with cable provider Charter over carriage of its channels, including MTV, Comedy Central, Nickelodeon and others, with the current distribution agreement set to expire at the end of this month.
Write to Jessica Toonkel at jessica.toonkel@wsj.com
(END) Dow Jones Newswires
April 26, 2024 14:24 ET (18:24 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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