Paramount is currently in exclusive negotiations with Skydance on a potential merger, but there is another contender lurking — one coming from way out of left field.

The New York Times reported Thursday that Sony Pictures Entertainment is in talks with Apollo Global Management on teaming up for a potential joint bid to buy Paramount. There has not been an official offer on the table because of the formal exclusive negotiations, but this one threatens to be seismic. There is one degree of separation between the potential joint venture: Sony and the Apollo-backed Legendary Pictures already have a distribution deal.

When reached by IndieWire, Sony had no comment on the report. Same with Paramount, and Apollo did not immediately respond to our inquiry. We get it: we’re sort of speechless too.

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Larry David at the PaleyFest LA 2024 event for 'Curb Your Enthusiasm'

A Sony Pictures and Paramount Pictures studio combination would be an instant Hollywood juggernaut. (So much so that the DOJ and other government entities could have something to say about it.) And yes, further consolidation in Hollywood is expected — David Zaslav, who just got the M&A handcuffs off (but still carries a major debt load) had a cup of coffee with Paramount over a potential alliance — but that doesn’t make Sony-Paramount make sense.

Sony made a conscious decision in 2019 to get out of the streaming business, selling its Crackle to Chicken Soup for the Soul. Sony knew it could never scale Crackle to compete with Netflix, Hulu, and other emerging streamers (Disney+ launched later that year). Instead of chasing Netflix like everyone else, Sony essentially became an “arms dealer” for the platform, producing and licensing its content to Netflix from the relative safety of the sidelines in the streaming wars. (Sony still has a theatrical-release strategy, but their output deal makes Netflix the first stop for the streaming window.) It’s better to be there than the frontlines — just ask Paramount+, which is still losing hundreds of millions of dollars each quarter.

The Sony strategy has generally worked. In the most recently reported quarter, Sony Pictures’ profit soared 56 percent to $281 million. “Grow-or-die” was so two years ago; just make money, baby.

Many analysts believe Paramount+ should have never launched, and that it should shutter now. They see the same arms dealer strategy as the better one for Paramount Pictures. In that sense, the combination of the companies starts making a little more sense.

What to do with Paramount+ may be the least of a buyer’s concern. You know what’s an even worse business to get into in 2024 than streaming? Broadcast and cable TV, which is where Paramount Global has a huge presence. What would Sony want with CBS, let alone MTV, VH1, Comedy Central, BET, Nickelodeon, etc.? It is Paramount’s TV and streaming business that put it in the vulnerable position to be acquired in the first place. Sony does make some TV shows, but its best ones are game shows like “Jeopardy!” and “Wheel of Fortune.” Syndication is great, but synergy is better.

(Tony Vinciquerra, the chairman of Sony Pictures Entertainment whom the New York Times says has been involved in the conversations with Apollo, has experience in the TV space having previously worked at both Fox and CBS.)

HOLLYWOOD, CA - AUGUST 23:  The entrance of Paramount Studios is seen at Paramount Studios on August 23, 2013 in Hollywood, California.  (Photo by Mark Davis/Getty Images)
The entrance of Paramount Studios on August 23, 2013 in Hollywood, California.Getty Images

Finally, it would admittedly be cool to own the iconic Paramount Pictures lot in Hollywood, sure, but Sony’s own studio lot is just 10 miles down the 10 (with some Wilshire in the way).

The reality is just because you buy something doesn’t mean you have to keep it. The M.O. of private-equity firms like Apollo is to unlock value, which often means stripping the car for its parts. Paramount’s TV and streaming assets would likely be the first to go. If anybody would buy them (for a decent price), Sony (and Apollo) may have something here.

Apollo first tried (on its own) to buy Paramount’s studio assets for $11 billion. No go: Shari Redstone, who controls Paramount Global through her National Amusements Inc. voting shares, has been hesitant to sell off the crown jewel. Apollo came back with $26 billion to buy the entire company.

But Paramount’s board, according to the New York Times, had questions about whether Apollo had the financing to back up such an offer (a feeling Byron Allen is familiar with) and instead focused on Skydance’s offer, which was further down the road in conversations. David Ellison is attempting to buy National Amusements itself for a much smaller purchase price, then leverage that corporate control to merge his Skydance with Paramount.

Having Sony, a $100-billion company (by market cap, where Paramount Global is worth just $8 billion), on board certainly helps calm financial fears. Sony is also Skydance on steroids.

The NYT says the Apollo-Sony deal would be an all-cash offer for Paramount stock, and would effectively take the company private. It could mean Apollo gets a minority stake in the joint company, with Sony being the majority holder and operating the combined studios. There’s still a chance Sony and Apollo don’t make a bid at all.

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