Exploring Potential Buyers And Implications

Contributing Author: Corey Martin

The potential disposition of Black Entertainment Television (BET) and VH1 by Paramount Global has been a topic of much speculation in the entertainment industry. While there is yet to be any official confirmation pointing to tangible financial terms or acquiring parties involved, in the spirit of speculation, let us delve into the possibilities and implications of these networks changing hands.

Background

When Viacom acquired BET for more than $2 billion at the turn of the millennium, it not only marked a significant milestone in the media industry but also made BET’s founder, Robert L. Johnson, the first African-American billionaire in the United States. However, the cable network industry has since greatly struggled with the trend toward cord-cutting and streaming services, leading to a decline in viewership and profitability. As a result, cable network deals have become a rarity in recent years and valuations have drastically decreased.

Paramount Global, now the parent company of Viacom, has recently begun exploring the possibility of selling a major stake in BET and its sister network, VH1.

A Constellation of Potential Buyers

Who will be the buyer? Will it be a media conglomerate seeking to expand its portfolio? A competing network moving strategically to consolidate market share or secure access to a new demographic? An opportunistic private equity firm looking to “buy low and sell high”? A well-capitalized tech company angling itself as a new entrant in the television “game”?

While all conventional means of transacting a network, the current media and television landscape has been disrupted immensely – making now an excellent time to break from the norm. And how exactly does one break convention in the case of a deal of this magnitude? By attracting potential buyers whose names, expertise and track records rise to the occasion of turning around a long-struggling, but culturally meaningful, set of networks.

Within the landscape of potential named buyers, notable industry figures have emerged as contenders for the acquisition – rapper and entrepreneur Curtis “50 Cent” Jackson, basketball legend Shaquille O’Neal and media mogul Sean “Diddy” Combs have each been reported to be contemplating bids.

But among the constellation of potential acquirers, one name shines resplendently: Tyler Perry. Revered as one of BET’s most prolific creators and already on Paramount’s radar via his 25% ownership of SVOD service BET+, his intimate connection with the network has catapulted Perry as a frontrunner for ownership. Perry, a highly successful writer, producer and director known for his unique storytelling style and focus on the African-American experience and, notably, the owner of the 330 acres comprising the Tyler Perry Studios campus in Atlanta, could help breathe new life into the network – with respect to both cultural relevance and financial feasibility – with a surge of original content and business expansion, all while laser-focused on sharing the African-American community’s broad range of perspectives.

Another High-Profile Potential Buyer

Media mogul Byron Allen, and his company Entertainment Studios, is another high-profile potential buyer. Formerly a popular stand-up comedian, Byron Allen has successfully rebranded himself as a savvy media investor, entrepreneur and executive over the course of the past two decades.

Through his company Entertainment Studios, Allen has acquired a diverse array of media assets in recent years including linear cable assets such as The Weather Channel and the Black News Channel – both with carriage on Comcast, Charter, Cox, DISH, DirecTV, and Verizon – and streaming assets such as The Weather Channel streaming app and The Grio streaming app, along with a broad network of small market local television affiliates in markets including Fort Wayne, Indiana, Montgomery, Alabama and Eugene, Oregon and a minority equity stake in the former Fox Sports regional sports channels as part of the acquisition group led by Sinclair Broadcasting. Allen has publicly expressed his interest in acquiring the BET Media Group from Paramount Global, highlighting the potential to unlock synergies between BET and VH1 with his existing Entertainment Studios media assets.

Synergy Amongst Black Media Moguls

Perhaps more interesting than the potential synergy of a Byron Allen/Entertainment Studios alignment with BET is the potential impact of a Black Media Mogul combination that has not yet been publicly discussed: a joint bid for BET Media Group by Tyler Perry and Byron Allen. Combining the prolific content creation acumen of Tyler Perry with Byron Allen’s expansive linear cable, streaming and local television media infrastructure would create the first real national African-American-focused broadcast channel: the Black community’s answer to Univision.

Would two high-profile individuals like Tyler Perry and Byron Allen seek to partner with one another? Only those gentlemen can answer that particular question; however, the prospect of what two legendary African American media entrepreneurs like Tyler Perry and Byron Allen could together turn BET Media Group into would be truly exciting to witness.

Decoding Potential Deal Structures

While speculative, the structure of a potential deal for the acquisition of BET and VH1 would likely involve Paramount Global selling a majority stake in the networks to the prospective buyer. Considering the cable industry’s decline and the rise of streaming services, the valuation of BET and VH1 has likely shifted from the peak values of days past. Concurrently, Paramount Global will have to carefully consider the financial impact of removing highly attractive offerings such as BET and VH1 from its cable bundles offered to linear broadcasters, and, thus, Paramount Global will likely seek a premium from any potential buyer.

Ultimately, it will be crucial for the buyer and seller to reach a mutually agreeable price that considers factors such as cash flow, subscriber numbers and revenue projections – and negotiations will undoubtedly hinge on meticulous due diligence of such financial terms.

While the financial terms of the acquisition have not been officially disclosed, reports suggest a going rate for the networks of approximately $400 million. However, based on their annual cash flow, industry experts speculate that the true value of the networks could exceed $3 billion. The final valuation will be crucial in assessing the long-term growth prospects and potential return on investment for Perry, Allen or any other buyer.

A Landmark Acquisition in Any Scenario

If Perry, Allen or another African American-led buyer group lands the deal, it’ll be a true full-circle moment to the days of Robert Johnson – as the acquisition would see African American ownership of a prominent widely carried television network. Either Perry or Allen, or ideally the two of them working together, could undoubtedly leverage his or their collective creative vision, business acumen and deep understanding of the audience to propel BET Media Group to new heights.

If any of the other named potential bidders go through with the acquisition, it’ll equally serve as a landmark moment and signal a major – and, frankly, much-needed – shake-up in television. A big name could help shape the future trajectories of the networks and industry at-large, ushering in a new era of creative direction, programming expansion and technological adaptation.

Even a scenario involving a more conventional acquirer or consortium of institutional investors brings good news – forcing all of us involved in the television industry, whether directly or indirectly, to shake the dust off of our “How to Transact a Television Network for Dummies” book after many years of cooling transactional activity and perhaps signaling a renewed interest in what was once considered a dying segment of entertainment.

In any event, as the negotiations and due diligence unfold, the future of BET and VH1 rests in the hands of those poised to redefine the landscape of African-American-focused media.

Corey Martin is a Managing Partner and Chair of Granderson Des Rochers, LLP’s Entertainment Finance Practice. In this role, Corey oversees all corporate transactional matters involving the firm’s clients, which consist of companies and talent across the music, film, television, digital media, sports, and technology industries.