What now?

The Skydance Media deal for National Amusements appears to be dead, with the company declining to extend its exclusive negotiating window, and sources tell The Hollywood Reporter that controlling shareholder Shari Redstone is cool onthe $26 billion offer from Sony Pictures and Apollo Global Management a deal that would lead to the breakup of the empire her father built.While it is possible that Paramounts independent board committee believes that regulatory concerns presented by the Apollo-Sony offer can be overlooked and recommends that deal, it looks like an increasingly challenged proposition. For the foreseeable future, it appears, the company is in the hands of the three-man committee made up of CBS chief George Cheeks, Paramount Pictures Brian Robbins and Chris McCarthy, head of Showtime/MTV Entertainment Studios and Paramount Media Networks. Paramount stock dropped by 7 percent to $12.89at the close in the wake of the news.

For now, Paramounts board named McCarthy interim principal executive officer, though it added that it was doing so for purposes of the rules and regulations of the Securities Exchange Commission, per a securities filing.A Paramount source stresses that the trio are co-CEOs.

A high-level exec at a rival media company was incredulous at the latest turn of events. [Shari] cannot not do one of those deals, this person says. If things continue to spiral for them, youre going to sell this thing for pennies on the dollar, more than they are now. How can you not take an exit ramp now?

As to next moves, speculation is that Paramount might attempt some kind combination of its streaming service with Peacock. It makes sense, says a source with knowledge of the situation. These are the two services that are going to fall outside the bundle because on their own they dont have enough EBITA. But when it gets into details, this executive added, I dont understand how thats going to work. Is it Paramount+ with Showtime, Peacock plus Paramount+?. . I dont know what that structure would look like.

Paramount+ and Peacock are both subscale streaming services with about 100 million subscribers combined (71 million of which are Paramount+, 34 million for Peacock).Compare that with Netflix, which has about 270 million subscribers, and Disney+ which has over 111 million (not to mention the nearly 50 million Hulu subscribers or nearly 40 million Disney+ Hotstar subscribers that Disney also has).

Paramounts new Office of the CEO: George Cheeks, Chris McCarthy, Brian Robbins Paul Morigi/Getty Images; Noam Galai/Getty Images; Pascal Le Segretain/Getty Images Another source says the deal could work because the two services are complementary, with Paramount+ skewing more male and Peacock appealing more to the female audience. But this person says Comcast would only consider this if it were to oversee the service.Control has arisen as an issue in previous negotiations between Comcast and Paramount.

Paramount+ is premised on its Mountain of Entertainment, to use the advertising slogan, while Peacock has leaned more heavily on live sports, with the company streaming live WWE events like Wrestlemania. The platform is set to be the only place to watch every Olympic event live from Paris this summer.

On the library front, the combination of Paramount and Universals films would make a combined service formidable when it comes to features, while a deal would also unite the Yellowstone and Dick Wolf cinematic universes.While the Yellowstone spinoffs and other Taylor Sheridan shows stream on Paramount+, the original hit is on Peacock, thanks to a deal cut by Bob Bakish before the company went all-in on streaming.Meanwhile, NBC and Peacock are the home to Dick Wolfs Law Order and Chicago franchises, while his FBI franchise lives on CBS and Paramount+.

For Comcast chief Brian Roberts, says one source, Its a timing game. If all these options go away and Comcast doesnt get an NBA package [which the company is trying to wrest from Warner Bros. Discovery], Brian doesnt want to end up with nothing. Does he see the NBA deal going south and then he does a Hail Mary bid for Paramount? He doesnt want to be left in a situation with all these irons in the fire and then the fire went elsewhere.

Another speculated-upon move is that Byron Allen or another bidder might takeaswing at acquiring BET, though one observer was skeptical that such a sale would have much impact on Paramount.

Meanwhile Paramount executives, as well as high-level observers of the studios wild ride of the past several weeks, express skepticism about leaving the company in the hands of three top executives. Its such a bad idea, says a top executive at another studio. When has that ever worked? I can see partnering Brian and George together butai yi yi yi yi.

At the May 2 CBS upfront briefing, Cheeks told reporters that he, Robbins and McCarthy will each remain in their respective lanes as co-CEOs. Divisional clarity will continue, Cheeks told reporters. In other words, I have no involvement in Paramount Pictures greenlights and Brian has no involvement in CBS show greenlights. Cheeks also reiterated that the trio are in the process of finalizing our strategic plan which we are going to roll out as soon as possible, but declined to provide details.

But a longtime Paramount insider offers a harsh appraisal of the hydra-headed approach, which certainly took a toll when then-Time Warner CEO Jeff Bewkes ran a bake-off for the top job at the studio. They dont complement each other, this person says. Robbins has never programmed an entire slate, ever. McCarthy lucked into Yellowstone. And Cheeks is kind of a [former CEO Bob] Bakish good bureaucrat but no inspiration. (Inspiration or not, CBS just claimed its 16th straight season as the most watched broadcast network in primetime.)Sources inside Paramount insists the three men have always gotten along very well.

Co-CEOs are a rare occurrence among large corporations, and many that tried the idea have since abandoned it.The software provider Salesforce briefly had founder Marc Benioff joined by Bret Taylor atop the company, a co-CEO relationship that lasted only 18 months.

But there are success stories, and one of Paramounts biggest competitors is one of them.

In July 2020, amid the COVID-19 pandemic, Netflix elevated Ted Sarandos to be co-CEO alongside founder Reed Hastings.This change makes formal what was already informal that Ted and I share the leadership of Netflix, Hastings said at the time. As co-CEO, its two of us full time. Its not like a part-time deal.

That arrangement, however, was part of Hastings succession planning. Two and a half years later he formally stepped aside, shifting to a role as executive chairman, and elevating Greg Peters to co-CEO alongside Sarandos.Paramounts current leadership setup did not have that extended runway.And there is another critical difference between Netflixs C-suite and Paramounts: Netflix gave Sarandos and Peters clear lines of oversight, with Sarandos overseeing content and marketing, and Peters running product, gaming, and ads.

One Paramount source says that it is not clear yet how the three executives will divide oversight of some of the companys non-content business lines like operations, streaming, advertising, and licensing, a concern that appears to be top of mind for Wall Street.

The elevation of the trio raises several questions which remain unanswered in our view, wrote Bank of Americas Jessica Reif Ehrlich April 30. These include: 1) who is making the strategic decisions at the company, 2) what is the timing/terms of a potential sale (as has been subject of several media reports) and 3) what would the strategic direction of the company be if no transaction is executed, and current ownership remains in control?

The analyst cautioned that Paramount shares will remain volatile until there are more definitive answers.

In fact, multiple analysts said in the wake of Bakishs ouster that they viewed the office of the CEO as a temporary structure, meant to be sustained only so that a deal can be made.

Those views will likely need to be reevaluated now. To quoteP Globals Naveen Sarma:We believe such a shared management structure is not sustainable forParamountGlobal, or for any publicly traded company, outside of a short transitional period.

Lesley Goldberg contributed reporting.