With Paramount Global’s stock price falling more than 15% since Tuesday, when Shari Redstone's National Amusements put the kibosh on a proposed sale of the studio to David Ellison's Skydance Media, research firm CreditSights is predicting that Moody’s will join S&P Global Ratings in downgrading Paramount’s credit rating to junk status by the end of 2024.
Paramount was already downgraded in March by S&P, which cited the rationale of a debt load of around $14.6 billion, combined with declining distribution of linear networks and a subscription streaming platform, Paramount Plus, which lost $1.6 billion in 2023.
In an update sent to investors Tuesday, Moody's also noted the same challenges. CreditSights analysts led by Hunter Martin and Davis Hebert interpreted the tone of this update to be “incredibly cautious,” stating their belief that the credit ratings firm will tighten up Paramount's leverage requirements and downgrade its credit rating by the end of the year.
All of this bad news makes it even more challenging for Redstone and National Amusements to leverage their key stated goal of not selling Paramount to a suitor who would break the conglomerate into pieces.
As Paramount “twists in the wind,“ startup showbiz trade The Ankler wondered aloud Thursday if the Biden administration might consider a bailout for Paramount — and more broadly, Hollywood — similar to how the federal government has stepped in to aid U.S. automakers and banks in the past.
Citing a motion picture studio that has contributed The Godfather, Chinatown, Rosemary’s Baby, Psycho, Saving Private Ryan, Beverly Hills Cop, Top Gun, Ferris Bueller’s Day Off and Grease, and a broadcast TV network that has brought America Edward R. Murrow, Walter Cronkite and Norman Lear, The Ankler declared, “No company in history did more than Paramount to provide the masses with higher-class amusement.”
How can we, as a society, just let all that twist in the wind in an endless process? As with other debt-burdened industries before, the government needs to step in with a bailout in the way it has with automobiles and banks in this millennium. Hollywood may have a reputation as frivolous, but in terms of the jobs, the economy and America’s standing in the world, its health is essential.
Editor David Lidsky asks: “How can we, as a society, just let all that twist in the wind in an endless process? As with other debt-burdened industries before, the government needs to step in with a bailout in the way it has with automobiles and banks in this millennium. Hollywood may have a reputation as frivolous, but in terms of the jobs, the economy and America’s standing in the world, its health is essential.”
Sure, the debt loads currently being carried by Paramount, Disney ($39.5 billion) and Warner Bros. Discovery ($39.1 billion) are the “self-inflicted” ills of bad decision making.
And nationalizing companies calls to mind “socialism” in today's political climate. (Editor's note: The populist and nationalist tide of today’s political climate probably would push back hard on another Detroit bailout. Do you really think Hollywood would fly well in focus group testing?)
Still, Lidsky points out, “The banks and carmakers were recklessly pursuing failing strategies, were similarly over-financialized, and in the case of the automakers quality had deteriorated significantly. For GM and Chrysler, 3 million jobs, many of them union labor, were at risk. Starting to sound familiar?“
