Why Is Shari Redstone, Ruler of a Vast Media Kingdom, Weighing a Sale?

Paramount Pictures, the storied studio behind hits like “The Godfather” and “Raiders of the Lost Ark,” has had several owners over the last century: Its co-founder, Adolph Zukor. The industrial conglomerate Gulf+Western. At one point, it was a stand-alone public company.

But for nearly three decades, Paramount’s fate has been controlled by the Redstone family, after its pugnacious patriarch, Sumner Redstone, won a bidding war for the studio in 1994.

That may be about to change. Shari Redstone, Mr. Redstone’s daughter, is weighing a sale of her family’s controlling interest in Paramount’s parent company just five years after she won a fight to retain control of her family’s media empire.

Suitors for both Ms. Redstone’s stake and the company she controls are already lining up, including Warner Bros. Discovery, the owner of HBO and the Warner Bros. movie studio, and Skydance, the movie studio that helps produce hit Paramount franchises like “Top Gun” and “Mission: Impossible.”

So far, the pursuit of Paramount has the makings of a drama fit for the silver screen. Here’s the story so far:

Who is Shari Redstone, and how did she get control of the company?

Ms. Redstone, 69, presides over a vast media empire that includes Paramount Pictures, MTV, Nickelodeon and CBS. But her rise to the top was not simple.

For years, Ms. Redstone toiled away at National Amusements, the theater chain that doubles as a holding company for Paramount. A lawyer by training, she demonstrated an early aptitude for the media business but was overshadowed by her aging father, who refused to relinquish control even as his mental capacity waned.

As the family business began to falter, Ms. Redstone began to assert herself more. She thwarted an attempt by Philippe Dauman, one of her father’s lieutenants, to sell a stake in Paramount Pictures in 2016. One of her allies, Bob Bakish, became his permanent replacement as chief executive.

Two years later, she won another battle. Leslie Moonves, whose programming prowess earned him the nickname “the man with the golden gut,” led a revolt against Ms. Redstone, urging a Delaware court to strip her family of its company control. Ms. Redstone prevailed after Mr. Moonves was accused of sexual harassment and forced out of the company. (Mr. Moonves has denied allegations of nonconsensual sex.)

What Is Paramount, and what does it own?

In 2019, months after Mr. Moonves was forced out, the boards of CBS and Viacom — companies controlled by National Amusements — began exploring a merger. The deal, which Ms. Redstone championed, put the Paramount movie studio and Viacom’s bundle of cable channels, including MTV and Nickelodeon, under the same corporate umbrella as CBS and the book publisher Simon & Schuster.

After the merger, Ms. Redstone encouraged the combined company — eventually renamed Paramount — to use its heft to make an ambitious foray into the streaming wars, stocking its Paramount+ service with shows and movies from both Viacom and CBS. The company has bet big on building a healthy and profitable streaming business before its traditional TV networks, which are lucrative but in terminal decline, fade out.

Why is she under financial pressure?

Paramount was once so mighty that people in Hollywood referred to it by the nickname “the Mountain,” a reference to its logo of a snow-capped peak encircled by stars.

But these days, the company is more of a melting iceberg.

Paramount’s portfolio of cable networks has been battered by the same cord-cutting and advertiser weakness that have afflicted its industry peers and is facing analyst-estimated subscriber losses of nearly 25 percent over the next two years. Wall Street is unconvinced that Paramount’s money-losing streaming business will ever be able to compete with the likes of Netflix. Paramount+ has a 6 percent share of the revenue market, while Netflix has 47 percent and Disney’s streaming services have a combined 23 percent.

Paramount’s movie studio has done its best to revive aging franchises like “Teenage Mutant Ninja Turtles” and keep “Mission: Impossible” running, but it ranks last among Hollywood’s five legacy film companies in domestic market share and posted an operating loss of $143 million for the first nine months of this year.

Despite those headwinds, Paramount has made some progress. The streaming service has 63 million subscribers globally, and the company’s Pluto TV free steaming service generates more than $1 billion in annual revenue, up from $70 million when it was acquired in 2019.

There are also financial pressures at National Amusements. Historically, the bulk of the holding company’s profits have come from dividends on the Paramount stock it owns, roughly 10 percent of that company. But financial pressures forced Paramount to sharply reduce its dividend, cutting into profits at National Amusements.

Now, National Amusements is incapable of generating cash, according to a May estimate from S&P Global Market Intelligence, and owes about $25 million in annual interest cash payments.

Why is Ms. Redstone willing to sell her controlling stake in the company? It may come down to the pressures facing both National Amusements and Paramount. As Rich Greenfield, an analyst at LightShed Partners, put it in a recent client note, “Paramount has a bleak future ahead.”

What are her options?

National Amusements’ 10 percent stake in Paramount — a piece worth more than $1 billion at today’s prices — is still a prize for any deep-pocketed investor who wants control of some of the most prestigious media assets in the United States. Ms. Redstone could sell National Amusements’ stake in Paramount, or promote a deal to sell the entire company. Or she could elect not to sell, essentially betting that the company’s prospects will improve over time.

Ms. Redstone is being advised on her options by BDT & MSD Partners, a merchant bank founded by Byron Trott, a former Goldman Sachs partner who consults with some of America’s wealthiest and best-connected family business owners. So far, National Amusements has held talks with media companies including Skydance, Warner Bros. Discovery and Netflix and technology firms such as Amazon and Apple, according to four people with knowledge of the discussions.

Warner Bros. Discovery has also raised the topic of a merger with Paramount directly. David Zaslav, the chief executive of Warner Bros. Discovery, broached the topic over lunch on Tuesday with Mr. Bakish. Those discussions, which are in their early stages, are separate from Ms. Redstone’s discussions about a sale of her stake in National Amusements.

What could stand in her way?

Paramount’s suitors and Ms. Redstone will have to solve a messy equation to reach a deal.

Any buyer of Ms. Redstone’s stake in National Amusements will most likely need to pay a bonus on the market value of her shares — commonly known as a “control premium” — for the rights to steer Paramount. For the owners of a privately held company like Skydance, that requires raising capital. For a publicly traded firm like Warner Bros. Discovery, that means convincing shareholders that the increased price is worth the additional investment.

Some of the suitors are also subject to the same financial pressures facing Paramount. Though it has paid down some of its debt, Warner Bros. Discovery is burdened with more than $40 billion in leverage, the price of its merger with AT&T’s WarnerMedia division. Warner Bros. Discovery also runs the risk of a tax penalty if it strikes a deal before the two-year anniversary of that merger in April, which could complicate deal making.

There are nonfinancial considerations, too. To make drastic changes, any buyer of National Amusements would have to work through the board of Paramount.

If Skydance’s bid to acquire National Amusements is successful, for example, the company will probably need to nominate its own slate of directors at Paramount, which could then contemplate moves like merging Skydance with Paramount Pictures, according to two people familiar the negotiations.

Brooks Barnes contributed reporting.