Skydance Media CEO David Ellison sketched out a vision on Monday for Paramount Global as a technology media hybrid company at a time Hollywood has been competing for attention with tech giants moving into the entertainment business.

David Ellison’s vision for Paramount’s future

Speaking to analysts one day after the on-again-off-again Skydance and Paramount merger that was finally confirmed on Sunday evening. David Ellison. CEO of Skydance outlined a vision to build a leading feature, television, animation, sports and games company, and rebuild the Paramount streaming platform.

David Ellison. CEO of Skydance talked about relationship between art and technology.

“The art challenges the technology and the technology challenges the art,” said Ellison, recalling a favorite Jobs quote. “We believe that understanding of the symbiotic relationship between art and technology is essential to be able to meet this moment.”

Skydance and Paramount merger

A “key thesis” behind the merger of Skydance, a media company launched in 2010 to capitalize on the rise of streaming media, with the century-old Paramount whose roots extend into the silent film era, is to position the company to better meet the demands of a changed market. Ellison discussed making changes to the Paramount+ streaming service and hinted at using artificial intelligence.

“There are a lot of technology companies that are rapidly expanding into media,” said Ellison. “We believe it is essential for Paramount to be able to expand its technology prowess, to be both a media and technology enterprise.”

Entertainment and technology

Ellison told investors he would work to improve the algorithmic recommendation engines that Paramount uses, hoping subscribers will spend more time on the streaming service and that fewer will cancel.

He also proposed upgrading the advertising technology to give marketers more information about which audiences they reach.

A slide deck accompanying the investor call described how artificial intelligence would “turbocharge content creation” and help drive “efficiencies” and streamline operations.

 Endeavor CEO Ari Emanuel said “One of the things that people are underestimating” about Ellison “is his sense of tech, compared to some of the other guys … maybe with his father’s help or just his upbringing.” Ellison’s father is Oracle co-founder Larry Ellison.

Importance of tech in Paramount and Skydance merger

Ellison’s tech pedigree factored into the decision by Paramount controlling shareholder Shari Redstone to strike a deal with Skydance, a longtime production partner of Paramount.

“Skydance is well aware of what we have accomplished over the years and it is for that reason that they have pursued a combination with Paramount,” as per Redstone’s note.

“They have a clear strategic vision for the future and the resources to build on Paramount Global’s competitive advantages to drive the company’s success.”

Ellison is using AI in a way that he described as “really pushing the boundaries of what’s possible in game-play.”

Investors bullish on Paramount Global

As per Jeff Shell, the former NBCUniversal chief executive who will join the newly merged company as president Ellison is well equipped to help navigate the entertainment industry’s technological change, “as somebody who writes scripts and is in table reads and was an actor at one point and also, by the way, can code.”

“David is one of one,” said Shell. “And he’s going to define … the identity of new Paramount.”

The $8bn merger deal sees Skydance and the Skydance Consortium  pay $2.4bn for National Amusements, which holds the Redstone family’s controlling stake in Paramount Global.

Skydance will use $1.5bn to pay down Paramount Global debt. The merger values Skydance at $4.75bn, and the new company at $28bn.

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The Skydance deal is a turning point for the Redstone family, whose fortunes have been intertwined with the rise and fall of the traditional entertainment industry during the decades of its tumultuous ownership of Paramount and its predecessors. Ms. Redstone, Paramount’s board chair, is cashing in much of her ownership in the company she fought to preserve and control.

Paramount and Skydance merger

As per report, Paramount Global’s full board and Redstone have approved the complicated three-way merger transaction. The deal will take Paramount, CBS and the former Viacom assets out of the hands of the Redstone family for the first time in decades.

The revised merger terms still faces a complicated process of regulatory approvals in part because the deal involves Paramount Global’s television stations, which trigger the involvement of the FCC.

Paramount Global’s revised merger terms

The special committee of Paramount Global’s board of directors tasked with reviewing M&A options has agreed to revised terms for a merger with Skydance. The pact will now be reviewed by the full board of the parent company of Paramount Pictures, CBS, Nickelodeon, Paramount+, Showtime, MTV and more. Skydance and Paramount are expected to announce the agreement early Monday before the markets open, if not late tonight.

Paramount and Skydance deal

As part of the deal, Paramount Global will have the right to shop around for matching or superior offers for a 45-day period before completing the deal with Skydance. Although Paramount has been seen as on the block for years, that ticking clock is likely to bring out opportunistic contenders. Already, media adjacent-moguls including Barry Diller and Edgar Bronfman Jr. have indicated interest in a deal to buy out National Amusements.

Earlier deal broken by National Amusements

Paramount and Skydance were close to tying the knot this time last month when National Amusements abruptly broke off talks, citing concerns the company would not be able to close the deal. Skydance’s effort is backed by Gerry Cardinale’s RedBird Capital, among other equity players.

Representatives for Paramount Global, the board’s special committee and Redstone’s National Amusements Inc. holding company did not respond to requests for comment Sunday. A representative for Skydance Media declined to comment.

Paramount’s market capitalization

Paramount’s market capitalization that is the value the stock market places on the company is around $8.2 billion. Skydance’s last disclosed its valuation was around $4 billion.

A tender offer from Skydance will allow many holders of Paramount’s nonvoting stock to cash out at roughly $15 per share. Investors who own voting stock will be able to sell at $23 per share. This will allow investors who feel shortchanged by the Skydance deal to get rid of the company’s stock at a premium to its current price of $11.81.

Skydance cost cutting

Another pillar of Skydance’s plans for Paramount is cost cutting. The company plans to consolidate some international operations, boosting profits partly by laying off employees. That won’t earn Mr. Ellison many fans among the company’s rank-and-file, though it could help him please shareholders.

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Paramount and Skydance deal

Under the tentative agreement, Skydance would pay $1.75 billion for National Amusements, which owns 77% of the voting shares of Paramount. The Paramount and Skydance deal includes a 45-day “go-shop” period, in which other bidders could submit offers as per report.

National Amusements acquisition

Others who have expressed interest in National Amusements acquisition include film producer Steven Paul, Seagram heir Edgar Bronfman Jr. and IAC’s Barry Diller.

One source with ties to a potential bidder said it was unlikely the others would abandon their efforts, in part because they may put forth bids that are more lucrative for Paramount shareholders or Redstone personally.

National Amusements has referred the Skydance deal to a special committee of Paramount’s board for review, according to two people familiar with the matter. Under the new arrangement,

National Amusements is not mandating that the Paramount merger be approved by a majority of non-Redstone shareholders, a previous sticking point, as per report.

Skydance and Paramount agreement envision

The sale is envisioned as the first part of a two-phase transaction, in which the smaller independent studio Skydance would merge with Paramount, home of the namesake film studio, CBS and cable networks such as MTV and Nickelodeon.

The century-old Paramount Pictures is known for films such as “Titanic,” “The Godfather” and the “Transformers” franchise. Skydance has co-produced Paramount movies such as “Top Gun: Maverick” and “Star Trek Into Darkness.”

Paramount declined to comment on a possible deal with Skydance, and a spokesperson for the special committee could not immediately be reached for comment.

Paramount and Skydance deal a strategic move

National Amusements re-engaged with Skydance over the past week, even as it continued conversations with other interested parties, according to one source familiar with the talks.

Redstone always saw a strategic value in the combination of Paramount and Skydance, the source said.

National Amusements owns movie theaters in the U.S., Britain and Latin America, and holds the Redstone family’s 77% of Paramount’s class A voting stock.

Rise in Paramount shares rise

The news of deal with Skydance sent Paramount shares rise up to 9% in after-hours trading. The paramount stock at closing was at $11.57.

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