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More money, more problems! In July 2024, David Ellison’s Skydance merged with Shari Redstone’s Paramount, and this now $28 billion merger has to deal with government compliance and regulation before its first day of operation.[1] A merger so powerful and public requires assurance for adequate legal deference, especially in antitrust and public interest law.[2] It gets even more complicated with broadcasting license takeovers.[3] The required applications have been submitted to the FTC, the DOJ, and the FCC, and the entrepreneurial Ellison and Redstone families have to wait as the government assesses clearance.[4]
As separate entities, Paramount and Skydance are both media giants. Paramount Global (“Paramount”) is a publicly traded, multinational conglomerate with assets including MTV, Nickelodeon, Paramount Pictures, Comedy Central, and, most influentially, the CBS broadcast network.[5] Skydance, on the other hand, is a privately owned, independent media company with growth in live-action features, television, animation, and interactive and new media.[6] Skydance was also founded by David Ellison, the son of Oracle founder Larry Ellison. [7]
Interestingly, Redstone’s decision to sell Paramount shares, owned through her National Amusement portfolio, is claimed to have been a response to the now overwhelmingly saturated media industry.[8] Paramount’s financial loss, given the linear growth of the media industry and its competition, was “withering” the publicly traded company.[9] Therefore, with personal reasons also at hand, the sale should not be a shock.[10]
Although competition was high – Paramount’s board is said to have reached out to more than 50 third parties seeking interest in an offer – David Ellison successfully negotiated the merger.[11] Another billionaire family heir, Edgar Bronfman Jr., was runner up for the merger and posed disruption late in the negotiation talks between Ellison and Redstone.[12] However, because Ellison was the louder of the two, he won the battle.
Skydance and its investor group will own 100% of Paramount’s Class A voting shares and 69% of its outstanding B shares.[13] Larry Ellison, David’s father, will be controlling shareholder, while David will stand as CEO.[14] Additionally, Ellison Senior will own 77.5% of Redstone’s National Amusement through Ellison’s Pinnacle Media that was formed to control the Ellison family interests and their newly-acquired Paramount investment.[15] The other 22.5% will be owned by Gerry Cardinale-lead RedBird Capital Partners private-equity firm.[16]
However, this profoundly influential and exciting merger should not be celebrated just yet. The merger triggered approval applications from the FTC and the DOJ, and the transfer of broadcasting licenses from Paramount to Skydance triggered an FCC filing as well. The FTC and the DOJ are Sherman Antitrust warriors, regulating and defending against monopolies. Any deals worth over $101 million have to be reported to these regulatory agencies for review.[17] At the FTC, the Bureau of Competition receives notice of mergers under the Hart-Scott-Rodino Amendments of the Clayton Act, which is yet another antitrust act to counteract monopolies.[18] The American economic system, which is motivated by ideals of fairness and democracy, ensures the protection of competition to avoid a one-player, one-price-setter industry.[19] Working handedly, the Sherman Antitrust Act criminalizes the conspiracy of unreasonably restraining trade where, thereafter, an illegal monopoly may be controlling the market power for a product or service.[20] Additionally, the Clayton Act promotes a fair marketplace with healthy competition between multiple companies to provide options for consumers and workers.[21] Basic economics suggests competition amongst companies for customers leads to lower prices, higher quality goods and services, greater variety, and more innovation, all the while, a fair market for workers in their labor.[22] In more recent news, Google was found to be a monopoly in some of its services, and Apple, Amazon, and Ticketmaster are next in line for assessment by the FTC and the DOJ.[23]
Furthermore, the FCC complements the FTC and the DOJ’s review of competition, and protects the public interest when broadcasting licenses are transferred from one company to another. The FCC’s clearance process promotes “public interest, convenience, and necessity” by regulating competition for the merger and broadcasting license takeover, while exercising the Communications Act by ensuring all people of the United States have available wire and radio.[24] The FCC’s review also allows for the public to voice their opinion on the proposed merger.[25] Serving the public interest, the FCC’s review validates diversity of information sources and services to the public, while operating a gamut that would include new experiences to the public.[26] Additionally, the FCC looks at congressional functions in its review.[27] Here, there will either be approval of the transaction or an approval with conditions that will better serve the public interest other than that proposed by the transaction.[28] The merger parties do not want to hear that the public interest would not be served or that there is a substantial and material question of fact because an administrative hearing will be required.[29]
While the Ellison-RedBird/Redstone application approval is still pending, the merging parties are ardent that competition will not be diluted and that the public interest will be served. Their applications claim that a current absence of other broadcasting licenses and no interest in acquiring more “will not result in a diminution of competition or present any other harm.”[30] In the promotion of public interest, Skydance emphasizes that the merger transaction “will deliver significant public interest benefits by bringing to New Paramount an infusion of capital and a strengthened balance sheet, as well as a highly qualified leadership team with proven expertise in the broadcasting, media, and technology industries.”[31]
While this is a persuasive argument, the Federal Government is the ultimate decision maker on whether compliance and regulation has been met in order to continue manufacturing fair competition that will best serve the interests of the public. With more FTC-DOJ crackdowns on large “monopolistic” companies like Apple and Amazon, only time will tell how this Skydance-Paramount merger will develop, especially since the FCC is now involved as well.
[1] Simpson Thacher & Bartlett LLP, Paramount to Combine with Skydance, https://www.stblaw.com/about-us/news/view/2024/07/08/paramount-to-combine-with-skydance (last visited Sept. 27, 2024).
[2] Federal Trade Commission, How Mergers Are Reviewed, News and Events, https://www.ftc.gov/news-events/topics/competition-enforcement/merger-review (last visited Sept. 27, 2024); Federal Communications Commission, Mergers, https://www.fcc.gov/general/mergers (last visited Sept. 27, 2024).
[3] Id.
[4] Winston Cho, Paramount’s Merger With Skydance to Test DOJ’s Tolerance for Big Media Consolidation, The Hollywood Reporter, July 10, 2024, https://www.hollywoodreporter.com/business/business-news/paramount-merger-with-skydance-doj-big-media-consolidation-1235944180/; Samantha Masunaga, Larry Ellison to control Paramount Global after Skydance deal closes, Los Angeles Times, Sept. 6, 2024, https://www.latimes.com/entertainment-arts/business/story/2024-09-06/when-paramount-skydance-deal-closes-larry-ellison-will-be-majority-shareholder-of-the-company#:~:text=Tech%20scion%20David%20Ellison%20intends,with%20the%20Federal%20Communications%20Commission..
[5] Paramount Pictures Corp., Investor Relations FAQ, https://ir.paramount.com/investor-faqs (last visited Sept. 28, 2024); Paramount Pictures Corp., About, https://www.paramount.com/about (last visited Sept. 28, 2024); Dawn Chimelewski, Paramount, Skydance merger deal ends Redstone era, Reuters, July 8, 2024, https://www.reuters.com/markets/deals/special-committee-paramount-global-endorses-plan-merge-with-skydance-media-2024-07-07/.
[6] Skydance Media, About, https://skydance.com/about/ (last visited Sept. 27, 2024).
[7] Paige Bruton & Sarah Jackson, Meet David Ellison, the 41-year old son of billionaire Larry Ellison set to take over at Paramount, Business Insider, Aug. 27, 2024, https://www.businessinsider.com/david-ellison-paramount-ceo-skydance-larry-ellison-son-2024-7#:~:text=41%2Dyear%2Dold%20David%20Ellison,to%20the%20Bloomberg%20Billionaires%20Index..
[8] Alex Sherman, Why Shari Redstone is trying to sell Paramount – and why she needs the right deal, CNBC Media, Feb. 3, 2024, https://www.cnbc.com/2024/02/03/paramount-sale-talks-why-shari-redstone-needs-the-right-deal.html.
[9] Id.
[10] Id.
[11] The Associated Press, Edgar Bronfman Jr. withdraws offer for Paramount, allowing Skydance merger to go ahead, The Associated Press, Aug. 27, 2024, https://apnews.com/article/paramount-skydance-bronfman-streaming-film-merger-f57cc8ac8dbbe19df5919d73df3b6671.
[12] Id.
[13] Chmielewski, supra note 5.
[14] Masunaga, supra note 4.
[15] Todd Sprangler, Tech Tycoon Larry Ellison Will Control Paramount Global After Skydance Deal Closes: FIling, Variety Magazine, Sept. 5, 2024, https://variety.com/2024/tv/news/larry-ellison-own-control-paramount-skydance-deal-filing-1236132167/.
[16] Id.
[17] Federal Trade Commission, supra note 2.
[18] Federal Trade Commission, Merger Review, Enforcement, https://www.ftc.gov/enforcement/merger-review (last visited Sept. 28, 2024).
[19] U.S. Department of Justice, Antitrust Division, The Antitrust Laws, Dec. 20, 2023, https://www.justice.gov/atr/antitrust-laws-and-you.
[20] Id.
[21] Id.
[22] Heather Boushey & Helen Knudsen, The Importance of Competition for the American Economy, The White House, July 9, 2021, https://www.whitehouse.gov/cea/written-materials/2021/07/09/the-importance-of-competition-for-the-american-economy/.
[23] David Shepardson & Mike Scarcella, Google has an illegal monopoly on search, US judge finds, Reuters, Aug. 5, 2024, https://www.reuters.com/legal/us-judge-rules-google-broke-antitrust-law-search-case-2024-08-05/.
[24] Federal Communications Commission, Media, The Public and Broadcasting, The FCC and its Regulatory Authority, Sept. 2021, https://www.fcc.gov/media/radio/public-and-broadcasting#FCC.
[25] Ted Johnson & Dade Hayes, Skydance Tells FCC Paramount Deal Will Boost CBS And Local Stations; Larry Ellison Will Control Company After Merger, Deadline, Sept. 5, 2024, https://deadline.com/2024/09/skydance-paramount-fcc-1236079534/.
[26] Jon Sallet, FCC Transaction Review: Competition and the Public Interest, Federal Communications Commission, Aug. 12, 2014, https://www.fcc.gov/news-events/blog/2014/08/12/fcc-transaction-review-competition-and-public-interest#:~:text=Congress%20has%20directed%20the%20Commission,standard%20to%20the%20review%20of.
[27] Id.
[28] Id.
[29] Id.
[30] Masunaga, supra note 4.
[31] Johnson & Hayes, supra note 25.