We are watching Democrats all over the place try to place blame for the end of Stephen Colberts show on Trump, saying its being done for political reasons.
Believing this is basically a public declaration that one does not understand basic business concepts.
The Colbert show is owned by Paramount, which was previously Viacom. It has been trying to sell off assets for years now, well before Trump took office. It’s been difficult to find a buyer; I know this well, I traded the stock in the past and read the quarterly reports.
They now have a buyer in Skydance, and we need to understand what Skydance wants to acquire to understand why Colbert was ended.
A sale of a company is basically a sale of a collection of assets. With Paramount, those assets can be things like the Yellowstone franchise, Transformers, the CSI and NCIS series, along with channels like CBS, Comedy Central, and MTV. These assets are valued individually, and usually purchased at a multiplier, from 4 to 10 times the earnings/profitability.
The Colbert show loses money each year. So to start off, that’s a tough sell. It turns out the demographic advertisers care about, those largely under the age of 49, are not watching Colbert, or for that matter, most late night talk shows.
Advertisers care less about older viewers, especially on a national level, as older consumers are less likely to change buying habits. Trying to get a 60 year old to come to Chili’s or switch from Hellmanns to Miracle Whip is a waste of time. While this is different on a local level, nationally, ad ratings for an older demographic are much lower and few companies are spending ad dollars there.
Even losing money annually is not always a bad thing though. Shows like Friends, where they were paying the stars 10 million an episode, likely were not profitable annually when they were produced and aired. However, it was known the show would rake in millions in syndication, and likely for decades. It was worth it to take a loss as it was going to be a cash cow in the later years, and it helped launch other shows around it. Even as an losing asset in the year it was produced, a company would pay a fortune to acquire it.
With Colbert, we have an aging viewership that advertisers don’t want, and unlike Friends or Yellowstone, it would have no revenue from syndication. No one is paying to watch 3 years old late night talk show episodes.
So why would Skydance want it? They don’t.
As assets are sold at a multiple, if Colbert had any value, Paramount would be holding on to it. Even a return of 10 million would add between 40 and 100 million to the purchase price.
Instead, Colbert being sold actually lowers the purchase price. It makes no sense for Paramount to keep it to sell, and it makes no sense for Skydance to want any part of a losing asset.
It has nothing to do with Trump. Its math. No one would be shutting down an asset that was profitable, especially at a sales multiple. It would simply never happen.
There is very little value is an asset that times out with advertisers, and largely reaches a demographic advertisers are not willing to pay top dollar for.
Now, if Skydance thought they could acquire it and somehow make it profitable, they would. But how? Late night TV was profitable when there were 3 major networks and only a few cable channels. But that’s not the reality now, and will likely never be again. A whole generation isn’t even watching network tv, they are watching YouTube and TikTok. All the trends are going in the opposite direction of the Colbert show showing profitably anytime soon, and that 40 million a year with the sales multiplier would mean Paramount would be taking a huge cut, potentially a few hundred million, from its sale price.
Business is business. Politicians can try to spin this as they like, but money, well, trumps everything. Colberts cancellation is dollars and cents, not politics.