Shocking Truth Behind Shari Redstone’s Failed Paramount Hollywood Comeback!

Shari Redstone, who had long struggled to make her mark, was poised to make an impressive resurgence in Hollywood as she sought to revitalize her family’s underperforming entertainment business, Paramount Global. This was meant to be a high-profile comeback.

Expressing her optimism to investors during a virtual event in February 2022, Redstone, Paramount’s controlling stakeholder and non-executive chairperson, declared, “We are on the climb… reaching for new peaks.”

However, instead of leading Paramount back to its glory days among industry giants, Redstone’s tenure as the company’s leader has been marked by missteps and obstacles. She is now attempting to sell the company, known for its legendary film studio, the respected CBS broadcast network, TV stations and cable channels.

Redstone’s decision to hand Paramount over to tech heir David Ellison through a complex two-phase deal has sparked outrage among investors, led to months of boardroom discord, and contributed to the dismissal of CEO Bob Bakish, according to informed sources who requested anonymity.

This sale could now be in jeopardy.

John W. Rogers Jr., founder and chairman of Ariel Investments, one of Paramount’s largest shareholders, remarked in an interview, “In my 41 years of business, I’ve never seen a situation quite like this.”

So, how did Redstone and Paramount end up in such a mess?

“It’s simply been a series of terrible decisions,” stated corporate governance expert Nell Minow.

Years of under-investment, poor management, a significant shift in audience behavior, a forced merger of Viacom and CBS five years ago, the COVID-19 pandemic, and an expensive venture into streaming have all contributed to the decline of this once-powerful Hollywood player, according to interviews with media industry executives, company insiders, and financial experts.

Since Redstone’s positive outlook in early 2022, Paramount’s stock has plummeted 60%. (Shares closed at $13.05 on Friday, unchanged.) Investors have fled, including legendary investor Warren Buffett, who recently admitted that buying Paramount stock (63 million shares) was a mistake, saying: “We lost a significant amount of money.”

Four board members of Paramount are set to depart next month. With Bakish’s departure, three top creative executives are temporarily managing Paramount under an awkward “Office of the CEO” power-sharing arrangement, likely a temporary solution until the company is sold.

Adding to the uncertainty, the 30-day exclusive negotiation period with Ellison’s Skydance Media and its partners, RedBird Capital Partners and KKR, ended this month without an agreement, despite a last-minute sweetener.

Now, Paramount’s independent board members are considering a $26-billion offer — almost half of it in cash — from rival bidders Apollo Global Management and Sony Pictures Entertainment, who would acquire the majority stake in the proposed venture.

The bid from Sony-Apollo is also contentious. It would face regulatory obstacles, including foreign ownership rules that likely prevent Sony from owning CBS and its stations, which could prolong the process for several months. Analysts anticipate the company would be split up if the bid is successful.

The film studio would likely be incorporated into Sony’s Culver City operations, ending the era of the Melrose Avenue stronghold known for iconic films such as “The Godfather,” “Terms of Endearment,” and “Top Gun.” Substantial layoffs would inevitably ensue, and cable TV channels like Nickelodeon and MTV could be discarded.

This deal may also collapse; Sony and Apollo want to examine Paramount’s financial situation before moving forward.

Redstone, who declined to comment for this story, is reportedly open to other combinations that would enhance shareholder value.

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However, she has long wanted Paramount to remain an independent entity and is battling to safeguard the legacy of her family and her late father, Sumner Redstone.

But it might be too late. Despite her family’s ownership of 77% of Paramount’s voting shares, events largely beyond Redstone’s control have weakened her influence.

The path to the sale was paved by years of Redstone family discord and an increasingly difficult environment for traditional media companies.

Paramount, like Viacom before it, has long relied on its highly profitable cable channels stuffed with low-cost programming. Consider “The Osbournes,” “Jersey Shore,” and “Tosh.0.” A decade ago, its cable channels operated with profit margins around 40%, but the transition to streaming has devastated that business, according to an informed executive who requested anonymity.

Most young adults no longer watch MTV or Comedy Central. They prefer Netflix, which has revolutionized the business, aided in part by Viacom. A decade ago, Viacom executives eagerly licensed their shows, including Nickelodeon cartoons, which helped the streaming service gain traction with consumers — and eventually cannibalize their own business.

As the industry shifted, Viacom’s former CEO prioritized stock buybacks over content investment, according to longtime executives.

Adding to the complications, Sumner Redstone’s health was deteriorating rapidly, and he was in conflict with his daughter.

Shari Redstone believed that Viacom was being poorly managed. However, her attempts to play a bigger role in her father’s life or at Viacom were consistently thwarted by the unpredictable mogul, his live-in girlfriends, and even Viacom’s top management.

In 2014, Sumner Redstone proposed to pay his daughter $1 billion for her then-20% stake in the family’s Massachusetts-based holding company, National Amusements Inc., which holds the voting stock in the public entertainment company. But the offer was contingent on her giving up her right to succeed him as chairman of Viacom and CBS Corp., which were then separate entities. She declined.

“Your grandfather said that I’ll be chair over his dead body,” Shari Redstone vented in a July 2015 email to her youngest son.

In a 2007 incident, the elder Redstone faxed a letter to Forbes magazine to publicly air his grievances with his daughter and her ambitions: “While my daughter talks of good governance, she apparently ignores the cardinal rule of good governance that the boards of the two public companies, Viacom and CBS, should select my successor.”

He concluded the letter with a derogatory jab, stating that while he had given stock to his daughter and son, “It is I, with little or no contribution on their part, who built these great media companies with the help of the boards.”

Despite the insults, Shari Redstone worked closely with her father during the 2008 financial crisis, when his investments failed, almost jeopardizing National Amusements. And she came to his aid in late 2015 after he expelled his girlfriends from his Beverly Park mansion.

Sumner Redstone’s life was in shambles; at 93, he was losing his mental faculties. In court documents in 2016, he admitted that he had bestowed homes and gifts worth $150 million on two female companions.

The situation was so severe that the billionaire had to borrow $100 million from National Amusements to meet tax obligations for the gifts.

He passed away in August 2020. In recent court filings, Shari Redstone and another co-executor of the tycoon’s trust stated they were ready to settle his personal estate, which included $2.9 million in cash, his coin collection, cemetery plots near Boston and 305 shares of Hanover Insurance Group common stock.

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The family’s wealth has always been linked to its Paramount shares. And significant federal tax obligations are looming.

Upon her father’s death, ownership of the Paramount shares was transferred to Shari Redstone, creating tax liabilities that exceed $200 million, according to knowledgeable sources. Small payments must be made each year until the bill is reportedly due in 2034, according to someone familiar with the matter who requested anonymity.

Another reason to sell Paramount: The family’s debt-ridden National Amusements has been strapped for cash. National Amusements operates a regional chain of movie multiplexes in the Northeast, an expansion of the business started by Sumner Redstone’s father, Mickey, in the 1930s. Like other theater owners, it has been hit hard by COVID-19 pandemic closures and a slow-to-recover studio release schedule.

Hollywood writers and actors’ strikes last year further delayed movie releases.

Paramount, the smallest of the major media companies, reported a $417-million loss in the first quarter and has $14 billion in debt. It also faces an impending deadline to renegotiate a crucial TV channels distribution deal with Charter Communications.

Last May, Paramount drastically cut dividend payments to shareholders in a bid to increase cash flow and attract new investors, but the move backfired, causing the stock to plummet.

The dividend cut had a devastating impact on National Amusements. Struggling to meet its debt obligations, NAI accepted a $125-million equity investment from Chicago banker Byron Trott of BDT Capital Partners, an affiliate of his merchant bank, BDT & MSD Partners, which works with high-net-worth families, last May. Trott has been advising Redstone on the sale.

Some shareholders privately grumble that Redstone is selling Paramount at a low due to NAI’s financial troubles. However, others argue that it’s time to exit because the business is under such pressure.

Leadership problems, particularly scrutiny of Bakish, have deepened Paramount’s troubles beyond industrywide challenges, insiders say.

Redstone chose Bakish to run Viacom in 2016, after a tumultuous period marked by lawsuits and a purge of top managers and board members aligned with her father.

Bakish, a 20-year Viacom veteran, had been managing its international TV business, selling its programming, including “SpongeBob SquarePants,” overseas. Redstone praised Bakish’s interpersonal skills and his business knowledge.

At the time, Redstone’s objective was to quickly merge Viacom with CBS, but she encountered resistance from CBS’ then-chief Leslie Moonves, who believed the merger would be a disaster that burdened the stronger CBS with Viacom’s weaker assets. It wasn’t until a year after Moonves left amid resurfaced allegations of sexual misconduct that Redstone achieved her goal of unifying the two halves of her father’s empire.

Three months later, the pandemic struck.

Viewers’ shift to streaming sped up, prompting Paramount and other media companies to invest heavily in building their own streaming platforms. Former Paramount executives questioned the strategy, noting that Viacom’s TV arsenal was mostly made up of low-cost reality shows, children’s shows, and topical programming such as Comedy Central’s “The Daily Show” — not the type of high-end dramas that cost $15 million per episode.

Paramount had a surprise hit with Taylor Sheridan’s western drama “Yellowstone” on cable’s Paramount Network, and so it spent lavishly to produce expensive prequels in the Sheridan universe. And “Yellowstone” streams on NBCUniversal’s Peacock.

Paramount has lost more than $3 billion on its foray into streaming since early 2022, according to filings.

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Last year, Comcast Corp. executives had discussions with Bakish about collaborating in streaming, three people close to the situation said. They discussed merging their two streaming services, Peacock and Paramount+, to better compete against Disney+ and Netflix. But Comcast wanted controlling interest and the talks stalled.

Shari Redstone was focused on Ellison, excited by his vision and the prospect of a younger mogul taking over.

Redstone, 70, has also told friends and colleagues that she wants to dedicate more time to personal causes, including combatting antisemitism in the wake of the Oct. 7 attacks by Hamas militants on Israel.

But Paramount’s shareholders were outraged.

“The Ellison deal feels like this clumsy merger,” said shareholder Tim Johnston of Pasadena. “Ellison would take control of National Amusements from Shari, and she gets paid this enormous premium and gets to walk off into the sunset.”

The sticking point for many shareholders, including Johnston, was the deal’s second phase. The plan was for Paramount to issue new shares to absorb Ellison’s Skydance, a small company valued at $5 billion, into Paramount. That would have diluted the stakes of other investors.

“It felt like they were in such a hurry to do the deal with Skydance that it was like a panic situation,” said Rogers, the Ariel Investments chairman. “And it came at a time when the business was finally starting to recover.”

Investors, including Rogers, have been disappointed with Paramount’s management over the past year. Standard & Poor’s downgraded Paramount’s credit to “junk” status in March. Opportunities to sell key assets, including the BET cable channel and the premium Showtime cable network came and went without a deal, weakening Bakish’s position.

His willingness to entertain offers other than Skydance’s was the final straw, knowledgeable people said.

“But the independent committee of trustees is doing what’s right for all shareholders and living up to their fiduciary responsibility in a conscientious way,” Rogers said. “I’m optimistic. I think logic and common sense will prevail.”

The Sony-Apollo deal could gain traction before the company’s annual shareholders meeting in early June. Redstone also could wind down her family’s holdings by selling a large stake, or all of National Amusements.

“What Shari should do is take her money and go start something new herself. She should not keep trying to re-create the deal she thought she should have gotten from her father,” Minow, the governance expert, said. “She’s still trying to prove herself to her dad.”

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