Stock market today: Tech stocks lead S&P 500, Nasdaq higher to end volatile week

Paramount (PARA) reached a new multi-year distribution deal with Charter Communications (CHTR) on Thursday, a significant win for the company as it weighs its strategic options and a possible buyout from Skydance Media or Apollo Global and Sony. (Disclosure: Yahoo Finance is owned by Apollo.)

Charter, the parent company of Spectrum TV, will continue to carry all of Paramount’s networks, including Showtime, CBS, and Paramount+. Additionally, subscribers to Charter’s largest tier will receive the ad-supported versions of Paramount+ and BET+ at no additional costs.

Financial terms of the deal were not disclosed.

“With its TV Media segment largely driven by linear networks accounting for two-thirds of Paramount’s revenue last year and all of the company’s EBITDA, [Charter] had the potential to cause serious damage if it had decided to turn the screws on Paramount,” MoffettNathanson analyst Robert Fishman said in a new note to clients on Friday.

“This means that Paramount has successfully averted one of the biggest risks it faced (droppage of its longer-tail networks) while confirming a costly, though widely expected, development (provisioning of Paramount+ for free),” the analyst continued. “[This forgoes] the dramatic blackout that occurred last September during Charter’s negotiations with Disney.”

Last year, Disney (DIS) pulled its owned and operated channels, including ESPN and ABC, from Charter Spectrum cable systems after the two sides failed to reach a distribution agreement. At the time, the media blackout impacted a slew of high-profile sporting events, including the US Open, and arrived on the heels of the NFL’s debut — upping the pressure for both sides to make a deal.

The stalemate was eventually resolved as Charter agreed to offer some Disney streaming services — the ad-supported version of Disney+, ESPN+, and ESPN’s yet-to-be-launched direct-to-consumer offering — as part of select cable packages at no additional cost to the consumer.

But for Paramount, the stakes appeared even higher amid its uncertain future.

“We have repeatedly discussed this Charter negotiation as a potential stumbling block for any bigger strategic action or deal for Paramount as buyers need confidence in the trajectory of the company’s linear cash flows,” Fishman said. “With this deal now locked in, we would not be surprised to see some renewed progress on the Skydance Media bid or Sony/Apollo offer.”

“Depending on the Charter distribution deal terms, the newly instated Office of the CEO led by a trio of senior executives might even have more conviction to move forward with its own long-term plan.”