Business
How a negotiation over cable fees could weigh on Paramount's sale
Paramount Global’s sale talks with David Ellison’s Skydance Media face a milestone later this week, but the battered Redstone family-controlled media company has been scrambling to meet another deadline — one that also carries huge implications.
On Tuesday, Paramount and Charter Communications agreed to a deadline extension as the two sides worked to hammer out a new distribution agreement for Paramount’s channels, which would replace a three-year pact that was due to expire this week, according to knowledgeable people who are not authorized to comment publicly on the high-stakes talks.
Charter pays Paramount significant fees to carry its channels, including CBS, BET, Comedy Central and Nickelodeon, on Charter’s Spectrum television service. As Paramount‘s cable networks lose viewers and advertising revenue declines, the company must protect the affiliate fees it receives from distributors, including Charter. Paramount cannot afford to lose such a key source of revenue from one of its primary partners.
The outcome of the negotiations could weigh on Paramount’s valuation in the event of a sale.
While the length of the contract extension is not clear, it does give Paramount some breathing room in what has become a chaotic and difficult period.
Paramount’s Chief Executive Bob Bakish was bounced on Monday, amid increasing tensions with controlling shareholder Shari Redstone, who is pushing to sell her stake in her family’s media empire.
He was replaced by three senior entertainment executives who now make up an “office of the CEO.” The company also reported earnings that beat estimates, but executives refused to take questions during their customary conference call with Wall Street analysts.
The company’s stock is down 50% in the past year. Paramount fell 7.2% Tuesday to $11.37 a share.
Nonvoting B-class shareholders have fumed over the terms of the Skydance deal, concluding that it would bestow Redstone with a rich premium at the expense of other shareholders. Meanwhile, independent directors are weighing the Ellison group’s sweetened offer, which has been described as its “best and final.”
Paramount’s board will soon lose five directors, including Bakish.
Even before the boardroom and management turmoil, Paramount was seen as having a weak hand in its negotiations with Charter, which currently offers 25 Paramount-owned television channels to its 13.7 million Spectrum TV subscribers.
“The majority of Paramount’s current U.S. cable networks are at risk,” Bank of America media analyst Jessica Reif Ehrlich wrote in a research note for investors this week, adding that a bad result in the Charter talks could threaten Paramount’s financial foundation and potentially “impact the company’s ability to execute a sale under favorable terms.”
The reason: Paramount’s “TV media segment still generates an overwhelming percentage of the company’s earnings and cash flows,” Reif Ehrlich wrote. Investors and potential buyers have been watching the Charter talks closely as they consider how much Paramount is really worth.
Apollo Global Management has offered $26 billion, including the absorption of Paramount’s nearly $14 billion in debt, which some shareholders favor over the two-phase deal orchestrated by Ellison’s Skydance along with investment firms RedBird Capital Partners and KKR. Paramount had granted the Ellison group 30 days of exclusive negotiations. That period ends Friday, however, sources close to the sales process say they expect the talks to continue past this week.
Paramount and Charter representatives declined to comment.
Paramount Global, long known as Viacom, has struggled to adapt in the streaming era.
Broadcast network CBS has largely maintained its popularity — its February broadcast of the Super Bowl drew a record 123.4 million viewers — but the viewership shift has pummeled Paramount’s cable channels, including MTV, VH1 and Nickelodeon, putting the company in a tough spot.
At the same time, cable companies are losing pay TV customers at a rapid clip and don’t want to give subscribers another reason to flee by asking them to pay more for programming that they don’t necessarily watch.
Stamford, Conn.-based Charter has increasingly balked at paying high fees for cable channels that have been hemorrhaging viewers in recent years as consumers shift to streaming and other video-on-demand options.
Charter also has demanded concessions on carriage terms for streaming services, such as Disney+ or Paramount+, which compete with its Spectrum channel bundles.
Paramount Pictures studio, on Melrose Avenue in Hollywood, has long been a jewel in the Redstone family-controlled media empire.
(Al Seib/Los Angeles Times)
Last summer, Charter drew a hard line during its negotiations with Walt Disney Co., which led to a 10-day blackout of Disney-owned channels, including its ABC and ESPN networks. Charter threatened to permanently pull all the Disney channels from its Spectrum TV service unless Disney caved to some of its demands — a scenario that would have been unthinkable a decade ago.
In the end, Disney sacrificed carriage on Spectrum for several smaller channels, including Freeform.
Losing networks could be particularly painful for Paramount.
More than a decade ago, Paramount programmed nearly three dozen cable channels and collected handsome fees for the distribution rights. However, over the years, distributors including Dish Network and Charter have refused to continue to carry what they view as nonessential ones — and that wrangling was expected to be a key hurdle in the Charter talks.
For example, Charter offers its customers five MTV channels: the main network MTV and spinoffs MTV2, MTV Classic, MTV Live and MTVU. MTV‘s programming lineup relies heavily on “Awesomeness,” a twist on talent competitions. There are four Nickelodeon channels, the flagship kids network as well as Nick Jr., Nick Music and Nick Toons.
Charter is expected to push for the ability to drop channels with meager ratings.
“In our view, the critical carriage would be for Nickelodeon, MTV, BET, Comedy Central and Paramount Network,” Reif Ehrlich wrote.
One sticking point for distributors, including Charter, is that Paramount makes much of its content available to subscribers of Paramount+, the streaming service the company offers for $5.99 to $11.99 a month. That, in some cases, is less than what cable distributors pay for the same content.
The television programmers’ move to offer their own streaming services has rankled distributors, who feel that their longtime partners have turned into rivals. Charter Chief Executive Christopher Winfrey has said his company would take a tougher stance in its carriage negotiations.
“Our goals here are really to re-create a video ecosystem that works for everybody. Today, it doesn’t,” Winfrey said last week on the company’s earnings call. “It’s been broken, and it’s been broken for a while.”
Business
U.S. Space Force awards $1.6 billion in contracts to South Bay satellite builders
The U.S. Space Force announced Friday it has awarded satellite contracts with a combined value of about $1.6 billion to Rocket Lab in Long Beach and to the Redondo Beach Space Park campus of Northrop Grumman.
The contracts by the Space Development Agency will fund the construction by each company of 18 satellites for a network in development that will provide warning of advanced threats such as hypersonic missiles.
Northrop Grumman has been awarded contracts for prior phases of the Proliferated Warfighter Space Architecture, a planned network of missile defense and communications satellites in low Earth orbit.
The contract announced Friday is valued at $764 million, and the company is now set to deliver a total of 150 satellites for the network.
The $805-million contract awarded to Rocket Lab is its largest to date. It had previously been awarded a $515 million contract to deliver 18 communications satellites for the network.
Founded in 2006 in New Zealand, the company builds satellites and provides small-satellite launch services for commercial and government customers with its Electron rocket. It moved to Long Beach in 2020 from Huntington Beach and is developing a larger rocket.
“This is more than just a contract. It’s a resounding affirmation of our evolution from simply a trusted launch provider to a leading vertically integrated space prime contractor,” said Rocket Labs founder and chief executive Peter Beck in online remarks.
The company said it could eventually earn up to $1 billion due to the contract by supplying components to other builders of the satellite network.
Also awarded contracts announced Friday were a Lockheed Martin group in Sunnyvalle, Calif., and L3Harris Technologies of Fort Wayne, Ind. Those contracts for 36 satellites were valued at nearly $2 billion.
Gurpartap “GP” Sandhoo, acting director of the Space Development Agency, said the contracts awarded “will achieve near-continuous global coverage for missile warning and tracking” in addition to other capabilities.
Northrop Grumman said the missiles are being built to respond to the rise of hypersonic missiles, which maneuver in flight and require infrared tracking and speedy data transmission to protect U.S. troops.
Beck said that the contracts reflects Rocket Labs growth into an “industry disruptor” and growing space prime contractor.
Business
California-based company recalls thousands of cases of salad dressing over ‘foreign objects’
A California food manufacturer is recalling thousands of cases of salad dressing distributed to major retailers over potential contamination from “foreign objects.”
The company, Irvine-based Ventura Foods, recalled 3,556 cases of the dressing that could be contaminated by “black plastic planting material” in the granulated onion used, according to an alert issued by the U.S. Food and Drug Administration.
Ventura Foods voluntarily initiated the recall of the product, which was sold at Costco, Publix and several other retailers across 27 states, according to the FDA.
None of the 42 locations where the product was sold were in California.
Ventura Foods said it issued the recall after one of its ingredient suppliers recalled a batch of onion granules that the company had used n some of its dressings.
“Upon receiving notice of the supplier’s recall, we acted with urgency to remove all potentially impacted product from the marketplace. This includes urging our customers, their distributors and retailers to review their inventory, segregate and stop the further sale and distribution of any products subject to the recall,” said company spokesperson Eniko Bolivar-Murphy in an emailed statement. “The safety of our products is and will always be our top priority.”
The FDA issued its initial recall alert in early November. Costco also alerted customers at that time, noting that customers could return the products to stores for a full refund. The affected products had sell-by dates between Oct. 17 and Nov. 9.
The company recalled the following types of salad dressing:
- Creamy Poblano Avocado Ranch Dressing and Dip
- Ventura Caesar Dressing
- Pepper Mill Regal Caesar Dressing
- Pepper Mill Creamy Caesar Dressing
- Caesar Dressing served at Costco Service Deli
- Caesar Dressing served at Costco Food Court
- Hidden Valley, Buttermilk Ranch
Business
They graduated from Stanford. Due to AI, they can’t find a job
A Stanford software engineering degree used to be a golden ticket. Artificial intelligence has devalued it to bronze, recent graduates say.
The elite students are shocked by the lack of job offers as they finish studies at what is often ranked as the top university in America.
When they were freshmen, ChatGPT hadn’t yet been released upon the world. Today, AI can code better than most humans.
Top tech companies just don’t need as many fresh graduates.
“Stanford computer science graduates are struggling to find entry-level jobs” with the most prominent tech brands, said Jan Liphardt, associate professor of bioengineering at Stanford University. “I think that’s crazy.”
While the rapidly advancing coding capabilities of generative AI have made experienced engineers more productive, they have also hobbled the job prospects of early-career software engineers.
Stanford students describe a suddenly skewed job market, where just a small slice of graduates — those considered “cracked engineers” who already have thick resumes building products and doing research — are getting the few good jobs, leaving everyone else to fight for scraps.
“There’s definitely a very dreary mood on campus,” said a recent computer science graduate who asked not to be named so they could speak freely. “People [who are] job hunting are very stressed out, and it’s very hard for them to actually secure jobs.”
The shake-up is being felt across California colleges, including UC Berkeley, USC and others. The job search has been even tougher for those with less prestigious degrees.
Eylul Akgul graduated last year with a degree in computer science from Loyola Marymount University. She wasn’t getting offers, so she went home to Turkey and got some experience at a startup. In May, she returned to the U.S., and still, she was “ghosted” by hundreds of employers.
“The industry for programmers is getting very oversaturated,” Akgul said.
The engineers’ most significant competitor is getting stronger by the day. When ChatGPT launched in 2022, it could only code for 30 seconds at a time. Today’s AI agents can code for hours, and do basic programming faster with fewer mistakes.
Data suggests that even though AI startups like OpenAI and Anthropic are hiring many people, it is not offsetting the decline in hiring elsewhere. Employment for specific groups, such as early-career software developers between the ages of 22 and 25 has declined by nearly 20% from its peak in late 2022, according to a Stanford study.
It wasn’t just software engineers, but also customer service and accounting jobs that were highly exposed to competition from AI. The Stanford study estimated that entry-level hiring for AI-exposed jobs declined 13% relative to less-exposed jobs such as nursing.
In the Los Angeles region, another study estimated that close to 200,000 jobs are exposed. Around 40% of tasks done by call center workers, editors and personal finance experts could be automated and done by AI, according to an AI Exposure Index curated by resume builder MyPerfectResume.
Many tech startups and titans have not been shy about broadcasting that they are cutting back on hiring plans as AI allows them to do more programming with fewer people.
Anthropic Chief Executive Dario Amodei said that 70% to 90% of the code for some products at his company is written by his company’s AI, called Claude. In May, he predicted that AI’s capabilities will increase until close to 50% of all entry-level white-collar jobs might be wiped out in five years.
A common sentiment from hiring managers is that where they previously needed ten engineers, they now only need “two skilled engineers and one of these LLM-based agents,” which can be just as productive, said Nenad Medvidović, a computer science professor at the University of Southern California.
“We don’t need the junior developers anymore,” said Amr Awadallah, CEO of Vectara, a Palo Alto-based AI startup. “The AI now can code better than the average junior developer that comes out of the best schools out there.”
To be sure, AI is still a long way from causing the extinction of software engineers. As AI handles structured, repetitive tasks, human engineers’ jobs are shifting toward oversight.
Today’s AIs are powerful but “jagged,” meaning they can excel at certain math problems yet still fail basic logic tests and aren’t consistent. One study found that AI tools made experienced developers 19% slower at work, as they spent more time reviewing code and fixing errors.
Students should focus on learning how to manage and check the work of AI as well as getting experience working with it, said John David N. Dionisio, a computer science professor at LMU.
Stanford students say they are arriving at the job market and finding a split in the road; capable AI engineers can find jobs, but basic, old-school computer science jobs are disappearing.
As they hit this surprise speed bump, some students are lowering their standards and joining companies they wouldn’t have considered before. Some are creating their own startups. A large group of frustrated grads are deciding to continue their studies to beef up their resumes and add more skills needed to compete with AI.
“If you look at the enrollment numbers in the past two years, they’ve skyrocketed for people wanting to do a fifth-year master’s,” the Stanford graduate said. “It’s a whole other year, a whole other cycle to do recruiting. I would say, half of my friends are still on campus doing their fifth-year master’s.”
After four months of searching, LMU graduate Akgul finally landed a technical lead job at a software consultancy in Los Angeles. At her new job, she uses AI coding tools, but she feels like she has to do the work of three developers.
Universities and students will have to rethink their curricula and majors to ensure that their four years of study prepare them for a world with AI.
“That’s been a dramatic reversal from three years ago, when all of my undergraduate mentees found great jobs at the companies around us,” Stanford’s Liphardt said. “That has changed.”
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