Industry Insider: The Bidding War Over BET
From Top Left to Right: BET, Bryon Allen, Tyler Perry, Richelieu Dennis, Travis Montaque, Bonin Bough and Sean “Diddy” Combs - Paramount / Michael Tullberg / Axelle/Bauer-Griffin / Arnold Turner / Stringer / Arturo Holmes / Robin L Marshall / Amy Sussman
There is yet a new rumor in the rapidly evolving and ever-changing media industry: the potential sale of Black Entertainment Networks (BET), which is still in very early talks. On one end of the negotiation table is Paramount Global (previously known as ViacomCBS), which currently owns BET via its unit CBS Entertainment Group. On the other side of the table are four Black media giants: Tyler Perry, Byron Allen, Sean “Diddy” Combs, and the three founders of Group Black: Travis Montaque, Richelieu Dennis, and Bonin Bough. The potential sale would comprise the streaming service BET+ and the company BET Networks, which operates many premium cable TV channels, including the basic cable TV network VH1. But why is Paramount selling its subsidiary in the first place?
Before changing its name to Paramount Global in February 2022, ViacomCBS was the result of the 2019 merger of Viacom and CBS Corporation after a long fight between the two companies and their shared owner National Amusements, Inc., the giant media conglomerate founded in 1936 by Michael Redstone and from then on captained by the Redstone dynasty. The companies’ strong resistance against the merger culminated in CBS suing National Amusements with the accusation that Shari Redstone, the company’s president, was abusing her voting powers to force the agreement. Finally, in December 2019 the merger was successfully completed: ViacomCBS was born and trading on Nasdaq as VIAC and VIACA.
A divestment strategy was immediately put in motion. First, ViacomCBS sold its New York skyscraper Black Rock, which had been the CBS headquarters since 1965, for $760 million. In the words of CEO Bob Bakish, “we believe that money would be put to better use elsewhere”. Then, ViacomCBS announced the sale of its publishing house Simon & Schuster to Penguin Random House for more than $2 billion; however, the sale was blocked by the U.S. Department of Justice on account of antitrust concerns, thus impeding a transaction that would have brought a substantial amount of cash to the company’s balance sheet. In February 2022, ViacomCBS changed its name to Paramount Global (NASDAQ: PARAA, PARA), and only a few days ago, on March 20th, 2023, Paramount filed for a mixed shelf offering, further indicating a short-term plan to raise money. Paramount’s strategy is clear: divest in the assets that do not bring additional value to the company and invest that capital in the expansion of one of its most profitable and fast-growing segments: Paramount+.
In fact, in the November 2022 Form 10-Q, it is stated that “for the nine months ended September 30, 2022, revenues increased 7% to $22.02 billion, driven by significant growth in revenues from our DTC services, led by Paramount+” (page 36). The relatively new streaming platform is bringing in revenues from two sources: subscription fees, and ads. Paramount+ had 46 million subscribers in September 2022, a 42% increase from the previous year. Regarding advertising, the two available subscriptions both contain ads, although in different formats. With the essential subscription, Paramount+ offers its content library with ad interruptions and no live TV channels. The premium subscription – although it offers ad-free movies and TV series – includes live TV channels with advertisement.
The only way for Paramount+ to affirm itself as one of the major players in the so-called “streaming war” is by offering content that will attract new subscribers while effectively retaining existing customers. The streaming industry is characterized by particularly low switching costs, and with popular content being progressively spread over multiple platforms, consumers have started to subscribe to different services for a limited amount of time with the intention of watching all the content they are interested in at once and then switch to another platform. Therefore, investing in content is key, and it is for this very reason that “Content Cost” contributed 80% to Paramount Global’s total operating expenses for the last fiscal year.
Hence, Paramount is evaluating all its segments and subsidiaries to determine what the next smartest move to raise cash is – and it seems like selling BET could be it. In the September 2022 10-Q, Paramount states that its operating income decreased by 41% from 2021 because of both the decline in revenues from linear networks (such as BET) and a substantial investment in the Direct-To-Consumer segment.
BET, founded in 1980, was acquired by Viacom in 2001 for $2.3 billion. As of 2015, it was received by 75% of all US households with television, a huge reach for a channel targeting the African American audience, and if the sale were to happen, Paramount would maintain both a minority stake and a commercial relationship with the business. However, it is important to highlight that the potential buyers are not only attracted to BET for its business potential, but also to take back Black ownership over it. They already serve its target African American audience and know exactly what to offer their customer base.
Tyler Perry, filmmaker and entrepreneur, is one of the strongest contenders thanks to his already heavy involvement with BET. In July 2017, he signed a 5-year deal producing several shows that would air on the network, plus co-owning and operating BET+ through his film production studio, Tyler Perry Studios. The deal came into effect in 2019 after his previous one with Discovery expired, producing shows like Sistas and The Oval for the network. This established relationship puts Perry at the forefront of the bidding war.
Byron Allen has also expressed his explicit interest in buying BET. The media mogul is founder, Chairman, and CEO of Allen Media Group, which owns ten cable networks (including The Weather Channel and ES:TV) and acquired twenty-one regional sports networks from Disney for $10.6 billion, among numerous other stations, while also producing and selling ads. Adding BET to this impressive portfolio would amplify the potential synergies between the different divisions, as well as adding a new one: a streaming platform thanks to BET+. As Allen Media Group owns Freestyle Releasing, an independent film distributor, adding a new distribution platform only increases the chances for it to become a bigger player altogether.
Group Black is yet another potential buyer by teaming up with CVC Capital Partners, a Luxembourg-based investment firm with more than $100 billion in assets. Co-founded in 2021 by Travis Montaque (its current CEO), Richelieu Dennis (Chairman), and Bonin Bough (Chief Strategy Officer), it already comprises more than 150 Black-owned media brands. The aim of the company is to both invest in Black-owned businesses and create helpful connections between creators and agencies. Group Black’s mission is to “Dramatically transform the face of media ownership and investment.” Group Black is also already involved in BET, as it struck deals with agencies to spend $500 million in advertising on its channels.
Sean “Diddy” Combs is the latest entry to the bidding war for BET. Rapper, actor, record producer, and executive, Combs is a huge name in the music industry and is already present in the film and TV industry via Revolt Network, a music-oriented TV channel with a production arm that he founded in 2015. The purchase of BET would thus be part of a “strategy to build a Black-owned global media powerhouse.”
Even though the evidence points in the direction of a probable sale in the short term, Paramount has declined to provide any comments on it. As there are no official statements yet, the sale might not happen at all, and if it were to happen, it could be to another buyer altogether. In this case, it still would be an amazing opportunity to bring BET back to being Black-owned. As Byron Allen said in an interview with Where is the Buzz:
“It's important that we control as much media as we can so we can control our image, our likeness, how we are produced, depicted and seen around the world so we can control the narrative.”
