Welcome back to What I’m Hearing+! At this point in the holiday cycle, many of you have checked out. But I know this industry is always working, even in Aspen and on the Big Island, so expect regularly scheduled programming from Puck. I’ll be back with a very fun 2024 predictions piece the day after Christmas.

A couple weeks ago, my Puck partner Matt Belloni sent Paramount Global’s stock shooting up more than 14 percent with his report that Skydance’s David Ellison and RedBird Capital’s Gerry Cardinale were exploring a deal for its parent, National Amusements Inc. Tonight, I examine the value of Paramount Global’s underlying assets.

But first…

• Ted loves licensing… except for Netflix content: One striking observation from Netflix’s Engagement Report is that the vast majority of audiences are watching only a sliver of the library. This data reinforced a point made some time ago by Warner Bros. Discovery C.F.O. Gunnar Wiedenfels, who noted that “a small percentage of titles really drives the vast majority of viewership and engagement.” Indeed, this dirty little secret partly explains why the streaming wars have been replaced by the great licensing rush. To paraphrase Natasha Lyonne in her Netflix series Russian Doll, “Windowing! What a concept!”

  After summer’s Suits phenomenon, Netflix has been even more aggressive, picking up titles like The Conners from ABC and Warrior from Max—moderate hits that will surely enjoy dramatic boosts on Netflix. After all, as the data dump revealed, 45 percent of all viewing hours were generated from licensed titles, according to Netflix.

  And yet, I’ve also found myself wondering why Netflix isn’t licensing its own well-worn or underloved content to collect even more recurring revenue. On a recent call with reporters, co-C.E.O. Ted Sarandos flicked at the issue, observing that Netflix’s personalized recommendation system often surfaces these less-popular titles, thereby keeping them in the content flow, and rendering them more valuable. But hoarding titles that aren’t generating strong engagement doesn’t make much long-term sense when there’s revenue to be made via windowing (like FAST) or licensing to a partner. It’s hard to imagine that a public company—particularly one that has recently experienced the vicissitudes of the stock market—would forgo such a seemingly clear-cut financial opportunity.

  Of course, Netflix doesn’t need to license content: It will end the year with more than $6.5 billion in free cash flow, with anywhere from double to quadruple the subscribers as its competitors. But here’s another argument: Netflix is keeping its vault closed because it doesn’t want to assist rivals as they grow. After all, Netflix is using licensing, in part, to reduce churn in the U.S. as it invests internationally. So why would it allow competitors with similar foreign ambitions—largely Amazon and Disney—to employ a similar strategy?

  Still, hoarding doesn’t help anyone. Netflix executives have talked about exploring a FAST service similar to Tubi or Pluto TV, and the company is also one of the most active on YouTube, with multiple channels dedicated to content verticals, including comedy and anime. A FAST channel would allow Netflix to own the end-to-end viewer journey and convert non-paying users into paid members. Sarandos mentioned in January that the company was “open to all these different models that are out there right now” and is “keeping an eye on that [FAST] segment.” If Netflix can generate additional advertising revenue on titles that aren’t properly viewed on the main SVOD platform, all while throwing the cash toward international investment, it seems like a pretty clear win.

So many relevant questions abound. Does Skydance want the studio and streaming assets, or is this a financial play? And if the goal is to control the parent company and sell the empire for parts, where might CBS fit into the streaming landscape? What about cable assets like BET, MTV, or Nickelodeon? And, frankly, should Paramount+, which has recently pared its quarterly losses to merely a quarter-billion dollars, survive as a subscale streamer in such a competitive landscape?

These are the sort of questions that M&A bankers, hedge fund managers, and investors are asking themselves. But as the director of strategy at Parrot Analytics, I’d approach the situation from a different angle: If you divided up the Paramount assets, where would they perform best? And how would you divide them up? By cable network? By franchise? By Taylor Sheridan? Furthermore, which brands or franchises are the most valuable based on their value to other streamers? Examining these questions, as it turns out, really illuminates the true value inside the company.

The argument for breaking up Paramount Global, of course, is that these parts would be worth more than the whole—especially if they were divvied up or absorbed by a larger competitor, and the tax consequences could be mitigated. For example, if WBD or Comcast were to go after Paramount (regulatory obstacles notwithstanding), the former would see a combined corporate demand share of 28.8 percent, with the latter amassing a total of 21.9 percent. Either of these outcomes would result in a new corporate entity with more audience demand than Disney.

At a more granular level, the value of CBS becomes particularly apparent. CBS content accounted for one-third of all the audience demand for Paramount properties (or 4 percent of total U.S. demand), nearly double the next leading segment. CBS content like NCIS and Criminal Minds also routinely occupies four to six slots on Nielsen’s weekly Top 10 for acquired streaming titles. Plus, eight of the top 15 acquired titles in 2022 were CBS shows or aired on CBS channels.

This isn’t really surprising. Netflix’s Engagement Report demonstrated the power of familiar fare and formats, like procedurals. If—just as a thought exercise!—Netflix were to acquire the CBS catalog, promoting the strongest-performing titles and licensing out the rest, the platform’s demand share would shoot up while its overall engagement time would likely increase as well.

Then there’s Nickelodeon, which accounted for 21 percent of Paramount’s total demand share in November, and likely represents the second-largest opportunity for a savvy buyer. Apple TV+ has shown interest in children’s programming but is struggling to find a way in. Also, Apple’s demo leans heavily male and older. Compare that to Disney+’s audience, which also skews male but is much younger. Disney, which already has a Nickelodeon destination on the improved Hulu beta app within Disney+, could make a play to dominate children’s TV.

Perhaps the most tantalizing properties in the Paramount I.P. vault are the Sheridan shows, including the smash-hit Yellowstone and its spin-offs. They are strong drivers of engagement, particularly for Prime Video and Hulu, where users often migrate after watching Yellowstone, according to consumption data. Peacock, which is home to the original Yellowstone (not the spin-offs on Paramount+), accounted for 7.2 percent of programs that audiences watched after. How does that stack up to the competition? According to Parrot, the largest segment of audiences who watched Yellowstone in November then watched a title on Hulu (18.4 percent). This was followed by Prime Video (14 percent), Max (13.3 percent), and Netflix (11.1 percent). On Hulu, for what it’s worth, series that audiences flocked to included Welcome to Wrexham, Only Murders in the Building, and Justified: City Primeval. (Some of these make more sense than others.)

Does this mean that the Yellowstone franchise is most valuable to Hulu (and now to Disney, which will soon fully own the platform)? Not necessarily. While the consumption share indicates audience preferences, and can be used to help plan slates to curb disengagement or churn, it doesn’t account for a show’s ability to acquire or retain high-value customers—which is especially relevant considering the licensing fee that Yellowstone would command.

And, of course, that’s where the opportunity and challenges arise. A carve-up of Paramount would require a careful and highly sequenced sale process. Moving out too many assets would create tax burdens and potentially diminish the value of the holding company. Success in streaming revolves around the combination of intriguing original programming, strong licensed fare that serves a broader audience, and the ability to rotate both to create the feeling of newness. The true power in Paramount isn’t just what can be made, but what can consistently be licensed out to a group of needy partners.

In a world where Ellison and Cardinale, or anyone else, gains control of Paramount, they would have the power to decide which I.P. they want to develop in-house, and what to offload. If Skydance wanted to own the future of Top Gun (theoretically), does it also need to own NCIS, or does it make more sense to sell it to someone who needs it more, like Netflix or Amazon? Whoever takes over Paramount, the result will likely look like the prom scene in Mean Girls (not the musical): a little piece for everyone in attendance that’s just big enough to make a difference to the top and bottom line.