Sometimes, It Pays To Be A Nepo Baby

I first heard the term “nepo baby” from a dismissive colleague of mine at my first significant job a looooong time ago.  The son of one of our clients, at the time a graduating college student from Wisconsin, had joined our company as an intern, and on behalf of one of my friends on a lower floor was dispatched to see when (if?) I’d be getting off work to join the gang for a night of relatively affordable carousing.  Quiet, unassuming, polite, he was cheerfully called “Richie”, as in the role Ron Howard made famous on the still-on-the-air HAPPY DAYS.  My colleague thought that nickname was “cute” but less appropriate than the one she offered up.  The “advice” I got was that in their experience “nepo babies” were to be avoided by folks like myself, people that came from far lesser means and never could count on family help to get a foot in the door.  “You’re not one of them, and you shouldn’t think you ever will be”.   Turns out “Richie” (not his real name) became a close friend and confidente, was arguably the hardest-working intern I had ever worked with (and way better than many I did after that) and earned his way into a long career, not all of which was spent at his dad’s media company.

So I do know enough to know that those that are born with a silver spoon in their mouth aren’t all bad people; indeed, many with such backgrounds I have known over the years turned out some of my biggest boosters, even if they weren’t necessarily social allies.  But I also know first-hand that plenty who inherit their assets can be dismissive, arrogant and even incompetent.  And those that fall into that subset do tend to be ones that treat folks like myself in a way that my colleague likely had experienced.  And they also tend to gravitate toward those who have had similar upbringings, perhaps out of a sense of comfort more than mere entitlement.

It’s pretty clear that Shari Redstone falls into that subset.  Ever since she inherited the control of the conglomerate her father Sumner built after he finally passed in 2020, she has demonstrated more often than not she is more apt to reward loyalty and diversity hires than competency and experience.  She has dismissed thousands of talented people in her quest to bring budgets into alignment, she has signed off on the de-emphasizing of legacy brands like CBS and the Viacom networks and she has allowed the once-Tiffany pristine CBS News to devolve into a scandal-filled, fiscally handicapped area that effectively is now a partner in their local television stations’ tool kit, a division that thinks dropping any reference to call letters is a smart move for the primarily older audience it services.  And she has spent almost this entire year in search of someone to allow her a way to get out from under all of this.

Now it appears she has found someone she is comfortable enough with to enter into an exclusive window of negotiating, and it just happens to be someone who also comes from a privilaged background.  As BLOOMBERG’s Lucas Shaw and Michelle F. Davis reminded:

David Ellison, movie producer, tennis fanatic and heir to a technology fortune, is on the verge of adding another title: media mogul.  Ellison is in negotiations to take charge of Paramount Global, the media giant that owns CBS, MTV and Nickelodeon. He and his backers have agreed to pay a little more than $2 billion for Shari Redstone’s National Amusements, the family company that controls Paramount.  But that deal won’t close unless Ellison can merge his production company, Skydance Media, with Paramount, and a number of hurdles stand in his way, including how to satisfy the company’s other investors.

And that has some non-nepo babies none too happy, as the NEW YORK POST’s Alexandra Steigrad reported yesterday:

A Paramount Global investor slammed Shari Redstone over her deal to sell the company to Skydance Media, claiming the heiress is attempting to enrich herself at the expense of regular shareholders.

In a Monday letter, Matrix Asset Advisors pleaded with Paramount’s board to reject Skydance’s bid to merge with the media giant, calling it “detrimental” to the company’s value, and demanding that it reconsider a $26 billion bid from private equity firm Apollo Global.  A deal between Paramount and Skydance… could see the media conglomerate acquire the independent studio in an all-stock transaction valued at around $5 billion. 

Under the terms being discussed, Redstone and her National Amusements, which controls Paramount -owner of Hollywood studio Paramount Pictures, CBS, MTV and Comedy Central — would receive over $2 billion in cash in the first step of the transaction, according to reports.

Matrix, which currently owns 355,445 Paramount shares and has over $1 billion in assets under management, said the “vast majority of shareholders would not receive a similar premium and would be forced to finance a speculative investment in Skydance in a transaction significantly dilutive to shareholder value.”

I suppose there is ample reason to question Redstone’s personal motivation as rationale to turn away from the siren’s song of a big name equity firm that is apparently ready to offer substantial wads of cash as opposed to making yet another investment.  And as Steingrad reported last week, allowing a firm like Apollo Global to do what it does best–carve up corporate carcasses to disparate buyers–could be far more lucrative:

Paramount could be worth $38.8 billion and its equity could be worth about $38 per share if the firm’s networks, production assets and streaming service were sold individually, Citi had estimated on Dec. 11 after news reports on sale interests.

That potential supposedly exists despite this other recent reality check:

Paramount was dealt a blow last week when ratings agency S&P downgraded its debt to junk last week, citing “accelerating declines” in its traditional TV business and continued uncertainty in its push toward streaming.

But a closer look at what and who Ellison brings to the table should illustrate that this nepo baby not only has an impressive track record, but he also has a far clearer vision for what and how Paramount and its portfolio can restore some of their tarnished legacy than the faceless fish gutters of Apollo.

For one, what success Redstone has accomplished during her tenure is largely due to their distribution of Skydance-produced content, as Steingrad reminds, blockbusters like “Mission: Impossible — Dead Reckoning,” “Transformers: Rise of the Beasts” and “Top Gun: Maverick” (were produced)  for Paramount.\

And Shaw and Davis unearthed some crucial details about the game plan Ellison is proposing:

Ellison and his supporters, which include his father, RedBird Capital Partners and KKR & Co., intend to rebuild Paramount and are willing to invest billions of dollars in the business, according to the people. They have also already assessed which assets they want to hold or sell.

They want to preserve the Paramount+ streaming service and explore merging it with a peer, such as Peacock or Max, although they haven’t yet talked with either of those operators, according to the people. They have also discussed some kind of deal with Amazon Prime Video. Merging two services, which current management has also discussed, would eliminate billions of dollars in costs.

They may try to sell some assets, including BET (Black Entertainment Television) and Paramount’s international TV networks, but don’t plan a fire sale of the legacy TV networks. They see value in the CBS broadcast network, for example, which has rights to the National Football League and Big Ten football.

Jeff Shell, the former chief executive officer of NBCUniversal, will take a senior role at the company and advise Ellison, according to people familiar with the plans.

I’ve offered on many occasions that business ability and personal conduct should be considered mutually exclusive topics.  Say what you will about the way Sumner Redstone chose his female companions, especially in his later years, but he built the Viacom empire that he left his daughter, and was shrewd enough to partner with a similarly talented and conflicted talent named Les Moonves to grow and restore CBS.  My personal experience with Shell as an architect of the highly profitable FOX Cable Networks–one of the few businesses that are working under Disney ownership–as well as his establishing and expanding the NBC News brand to a profitable digital footprint and finding a way for Peacock to shoehorn its way into conversations, and being astute enough to challenge conventional norms like does it truly make sense for a broadcast network to still offer 22 hours of content a week, is reason enough for me to have confidence that Ellison has shown better judgement in executive braintrust than Shari Redstone has demonstrated.  And yes, Shell had his own personal dalliances that he paid for with his NBCU job but, once again, that should not permanently deny this industry, or him, a chance for redemption.

So it appears at least to me that David Ellison may be more of a savior than an interloper.  Nepo baby or not.  Some are smart enough to know their limitations and who to turn to to help them be smarter.

He kinda looks a little bit like my old friend “Richie”, too.

Until next time…

 

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