Squawk on the Street+ Skydance CEO David Ellison & RedBird Capital Managing Partner Gerry Cardinale 7/10/24

David Faber (0:00)

We're now going to turn to that merger of Skydance and Paramount, a long time in the making, the two gentlemen behind that transaction. First on CNBC, Skydance Media Founder and CEO David Ellison, and RedBird Capital Partners Founder and Managing Partner Gerry Cardinale. Gentlemen, thank you both for being with me a couple of days after, of course, you announced the transaction. David, I'd love to start with you because in the interim, since the announcement, you've been talking about technology transformation inside Paramount that I think in some ways you think and people will position it for growth.

I'm curious as to what that actually means beyond those words.

David Ellison (0:38)

Yeah, absolutely. First, just thank you for having me. Last time I was here was Top Gun Maverick. So it's a pleasure to be back talking about Paramount.

This is very much a business in transition. It has absolutely remarkable assets. You have Paramount Pictures, which is a 100-year replica studio, CBS, which has been the number one broadcast asset for years, incredible reach assets, remarkable sports package with the NFL, Nickelodeon, iconic brands and kids and family. But we believe to meet this moment that technology and content need to work seamlessly together.

The core of Paramount will always be a content company, always be a storytelling company and entertainment company. We believe that we need to make Paramount the number one destination for the most talented artists in the world. But we also believe technology will transform every single aspect of this company. From infrastructure to studio in the Cloud, to the use of artificial intelligence will completely transform this business and allow us to emerge in this period of transition stronger than ever.

David Faber (1:42)

Yeah. But does it extend well beyond that a better user experience for Paramount Plus users, recommendation engines, that wouldn't seem to be enough to move the needle towards the kind of growth that you're talking about.

So give us some sense as to where you really see the numbers adding up.

David Ellison (1:59)

No, actually. So David, we're incredibly comfortable in businesses in transition.

I think if you, there's real restructuring that needs to take place at this business. Linear television is in decline, but we can restructure and slow that curve. And then we are going to invest into significant growth areas in this business. And when we emerge from this transition, we will return to being a growth company.

In addition to that, when you think about how AI will adjust the way content is created, when you talk about what we built with Studio in the cloud with Oracle, we've been able to increase efficiency while also reducing costs. So delivering a better product that ultimately costs less. And in addition to that, when you think about how cloud infrastructure will transform every single aspect of this business, we will be able to emerge from this stronger than ever.

David Faber (2:51)

Yeah, Gerry, stand by. I got more questions, plenty of questions for you, but I want to follow up David on that again. You talk about slowing the curve in terms of the linear decline. I'm curious as to why you think you may be able to achieve that. I mean, you're, and again, to remind people, you've targeted 8% EBITDA growth from 27 over 26, 2027 over 26 That's after a lot of these cost synergies you've talked about have already taken effect. So how do you get to that number and how do you do what others haven't been able to, slow that curve that you just talked about?

David Ellison (3:23)

As I said, there's significant restructuring that we intend to do in the business. We've talked about that synergy number publicly.

But I think when you really look at what we want to do in streaming, how we want to evolve the algorithmic wreck engine, how we want to improve the ad technology in the business, what we've done with Studio and the Cloud. We believe in the future of Paramount Plus. As I've said, I do believe that what will occur over a course of time with this business is you will have the linear curve will continue to go down, the growth areas of the business, streaming, interactive film will continue to accelerate and grow, and we will ultimately emerge in this period with returning to growth and maximizing share of multiple shareholders, raw investors.

David Faber (4:08)

Yeah. Well, Gerry, that's obviously got to be something that happens for you. You're making a huge allocation of capital here at RedBird, bigger than you ever have by far. I'm curious.

You know it very well. I have covered it for years. There have been so many other media companies that have been trying to navigate this transition and not all have been successful yet. So I'm curious as to what gives you the confidence in David Ellison? What gives you the confidence that Jeff Shell, my former boss, are going to be able to do this, particularly given just how much money you've put at risk here?