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.

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