Why is Shari Redstone delaying the Skydance deal?

By the time you read to the end of this sentence, Shari Redstone may have made a deal with David Ellison’s Skydance. or not.

Days after reports that Skydance had finally reached an agreement with Paramount’s special committee, there was a pause as Redstone considered whether to pull the trigger on a complex deal that would end her control of the entertainment empire amassed by her late father.

While thousands of Paramount employees and the media world wait, the pot is stirred. Maybe it’s Warner Bros.’ David Zaslav. Discovery has added a new element to the mix by signaling its interest in acquiring the CBS and Paramount Global television stations — from either Redstone or Ellison, as the case may be. Sources indicated that John Lasseter, the leader of Skydance’s animation unit who has been touted as positive in a potential deal with Paramount, has been absent from work for several weeks. Skydance sources say Lasseter is only working from home while recovering from surgery and that this information could only come from enemies of Ellison’s potential deal.

Meanwhile, Redstone’s friend Steven Paul, the producer behind Child geniusesum, Universe, which also manages Jon Voight, jumped in with a bid to buy a majority stake in National Amusements, the holding company through which Redstone controls Paramount.

As the process dragged on for more than a month since the Skydance team presented its “best and final” show, sources say Redstone was at times angry with Ellison. The reason for her anger is not clear. Some sources believe that Skydance will decline to be compensated in the event of shareholder lawsuits if the deal is completed. Initially, it seemed likely that these suits were coming from non-voting Class B shareholders, who were unhappy that the Skydance deal would have paid Redstone more than it paid them. Skydance subsequently improved the offer to non-voting shareholders, which in turn reduced the purchase price of Redstone’s National Amusements from $2.5 billion to $2.25 billion. Perhaps this was another reason for Redstone’s anger. It is perhaps a coincidence that Paul’s bid for a controlling stake in National Amusements was right at the $2.5 billion mark.

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Another possible reason for Redstone’s anger: Ellison was an attractive partner in the deal because he suggested that his group of buyers would keep the empire built by Redstone’s father more or less intact. But as one media executive familiar with both sides of the negotiations noted, “Ellison’s team has been very good at not saying what they’re actually going to do. They’re not obligated to but… you don’t know if they want to stay in the broadcasting or streaming business.” It’s not known what Ellison Redstone specifically promised, but it’s possible she got something she viewed as a breach of promise — for example, WBD may have held informal talks about buying CBS from anyone in a position to sell it.

Or she may be thinking that if she’s going to start selling her assets, she might as well do it herself. Obviously there’s another way – it could sell some parts, and perhaps enter into a streaming partnership with NBCUniversal. But Zaslav hinted at his own interest in acquisitions at a recent Bernstein Strategic Decisions conference. WBD is a “healthy company” that will find some new opportunities over the next two or three years, he said. “There will be some players who want to exit that business. There will be some who will look to merge their streaming business with others. So I think we will look to be opportunistic during that period,” he added.

Zaslav reportedly wants to create a broadcast network, which would put WBD on equal footing with NBCU and Disney, which leverage their broadcast networks to help their cable portfolio, and would help with sports rights. With WBD now facing the potential loss of NBA games, the CBS deal would also allow Zaslav to merge TNT Sports with CBS Sports, giving his company expanded NFL, Masters and college sports rights, while consolidating the March Madness tournament into one location. And of course WBD could merge CBS News and CNN, allowing for widespread cost-cutting and synergies, to follow through on the deal that was discussed and later abandoned in the early 2000s. A WBD source familiar with Zaslav’s thinking indicates that the company would be one of the few potential buyers that does not have major regulatory issues because it does not currently own a broadcast network or station group.

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Meanwhile, there are questions swirling in the animation community about the absence of Lasseter, the former chief creative officer of Pixar and Walt Disney Animation Studios. While Skydance Animation was touted as an attractive element to a potential Skydance-Paramount tie-up (although Paramount had its own animation division, with IP such as SpongeBob SquarePants), in reality the picture was complex. luck, Skydance Animation’s first feature film under Lasseter’s direction, received middling reviews upon its release on AppleTV+ in 2022, though it performed flat on the streaming service. (The film was started before Lasseter was hired but was expensively reworked once he arrived.) Sources say the relationship between Skydance Animation and Apple imploded when the tech giant concluded that other planned projects were too expensive and not strong enough creatively. One sticking point was a hand-drawn movie layout, Beam Singfrom The Incredibles Directed by Brad Bird for more than $150 million.

Skydance then marketed the animation deal to other studios, which had their own animation departments, but none came forward. In October 2023, Skydance moved its animated film slate to Netflix, meaning none of Lasseter’s films have a chance of getting a meaningful theatrical release. In particular, against this backdrop, Lasseter’s health is key, with a source familiar with the matter saying a material change could upend Skydance’s deal with the streamer.

Another theory about what was derailing the deal is that Redstone was going through the Kubler-Ross stages of grief over losing control of the empire built by her sometimes harshly critical father, and losing her position as a regular at the annual Sun newspaper. Valley Moguls, whose 2024 event will begin in about a month, is back. Sources say Skydance has now offered Redstone some sort of honorary title and compensation to make the deal more enticing.

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Maybe that will help, maybe it won’t. One longtime Hollywood insider says he’s amazed at the chaos and length of the deal-making process. He suspects that the emotional side of the deal may simply be too overwhelming for Redstone. “There are two ways to look at it,” he says. The first is that it is a negotiation. The other is that it is a matter of personal importance, where you lose all your mental strength. “This is probably the craziest sale in the history of public companies,” says another prominent media expert.

Rebecca Keegan contributed to this report.

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