Viacom's Salvation: The Sale of Paramount Pictures

Paramount Pictures hasn't been doing that good of late, but as a major studio it still has a lot of value.  Viacom, Paramount's owner, however is in deep trouble.  Plagued by the ill-health of its founder, Sumner Redstone, and the on-going legal battles over management succession, poor financial results, and a general malaise in its programming for children and teens through its MTV and Nickelodeon operations, Viacom is floundering and its only way out may be the sale of its crown jewel - Paramount Pictures.

Last week, Viacom's management announced that it would be amiable to offers for a stake in Paramount or its out-right sale. Paramount, the once proud studio with a history of iconic films which range from 'The Godfather' trilogy to 'The Transformers' films, experienced a 46% drop in operating income in 2015 to a level of only $111 million - reiterating a downward trend in Paramount's performance over the last five years.



Possible bidders for Paramount include Amazon, which wants to enhance its original content offerings on its streaming operation - Amazon Prime.  Also in play are two Chinese conglomerates: e-commerce giant Alibaba and entertainment biggie Dailan Wanda (which recently purchased mini-studio Legendary Entertainment, as well as, the AMC movie theatre chain).




Viacom's management team, led by CEO Philippe Dauman says, and analysts agree, that Paramount is worth about $4 billion.  But, that might not be enough to get Viacom back to a sound financial footing - with a current debt load of $6 billion.


The best bet for Viacom would be the out-right sale of Paramount, as well as, its BET and international TV networks for a combined $8 billion and then forming a new company comprised of its remaining assets: MTV, Nickelodeon, and Comedy Central.




Viacom's share price fell 45% last year and the blood-letting continues.  I think we will see a change in ownership of Paramount in the very near future - and it will be for the betterment of the movie industry to have a strong and vibrant Paramount.