Paramount is 'quite impaired' at this point: Kevin Mayer

The 2024 Cannes Lions International Festival of Creativity is bringing together the world's best and brightest executives from the realm of creative marketing and advertising.

Candle Media Co-Founder and Co-CEO Kevin Mayer sits down with Yahoo Finance Executive Editor Brian Sozzi by the Cannes waterfront to talk about where linear TV and sports streaming fits into the broadening streaming landscape, as more platforms like Amazon Prime (AMZN) adopt ad-supported subscription tiers.

"One of the reasons paid TV is in such [a] secular and substantial decline is the cost of those sports rights. And everyone had to bear the cost of those sports rights. So you had every consumer, almost every household had paid TV 10 years ago, and everyone was paying not only for the entertainment that they loved, but also for sports," Mayer explains. "And not everyone watched the sports. And I think that helped drive the decline down. People were paying for something in a very expensive thing that they didn't really want to watch.

"So I think Netflix (NFLX) will put their toe in the water, but they've become a very successful entertainment company without sports. They have sports-related programming, but not the actual sports rights."

Mayer finds that these major streaming companies need to incorporate these new sports partnerships in order to "feed their ecosystem in some way."

Mayer's resume also includes his tenure as the CEO of TikTok, COO of the popular app's parent company ByteDance, and the chairman of Disney's Direct-to-Consumer & International segment. Mayer comments on the potential ban of TikTok within the United States and the acquisition sage surrounding Paramount Global (PARA, PARAA).

Catch up on Yahoo Finance's full coverage of this year's Cannes Lions International Festival of Creativity.

This post was written by Luke Carberry Mogan.

Video transcript

All right.

One of the most in demand executives here at can Lions is no doubt.

Kevin Mayer, Uh, candle media co-founder.

Good to see you looking good in that jacket, sir.

I'm feeling a little hot, you know, I was gonna You're looking good in the shirt.

Well, the last time I saw you was at the, uh, the Yahoo Finance 2023.

Best conference news making there.

That was a great conference.

Great news making.

Thanks for having me.

I appreciate that.

Uh, that shout out.

So what brings you to to Cannes?

How is your week?

Looking so far.

And what is Candle Media up to?

Well, we're up.

We're up to many, many things.

Part of our the biggest part of our business is actually, um, a YouTube, uh, presence that we have with some of the biggest I kids IP in the world.

Coco Melo.

For parents out there that have small Children, I don't know who coon is.

They'll love me or hate me, but I think love me more than anything else.

Uh, blippy and a whole bunch of different properties.

Those are all ad supported as well as streaming, uh, licencing to streaming services.

So I'm here meeting with a bunch of advertisers, seeing the creativity that's out here come here every year.

It's a really great, great event.

What's your, uh, vibe on the The advertising outlook?

Of course, political year could be a nice little boost for, uh, many linear networks.

But what's your what's your feel of it?

Well, I feel it's definitely political year.

It's gonna be a big political year, for sure.

Um, I do think the advertising is on the upswing.

You know, it's very cyclical, and it follows the economy.

The economy was a bit in the doldrums for for a couple of years now, but it's coming out.

Uh, I guess we didn't have an official recession, but we had close to it.

So, waiting for one that will happen next year.

It will happen at some point.

There always is one at some point.

But the I think the ad business is doing pretty well, and I do think it's shifting.

Though there's a big mix shift afoot in advertising.

I think advertisers are seeking high quality video environments, um, which I've always had in in linear television, but also coupled with the ability to at least lightly, if not if not if not really in a deep way, target their advertisements.

So I think these interactive platforms, I think, um, fast channels, I think all the over the top ad supported services.

Most streaming services now do have ads in their in their mix.

I think that's where the advertising dollars are flowing.

Linear TV is still important, has a lot of reach, has deep some of the highest quality programmes in the world, so still important.

But I think you're seeing this target media coupled with great environments.

That's what that's the thing Do big brands want to see their name in an ad after the first debate on CNN?

Isn't there a risk to putting your name out there?

You'll have to ask the brand.

I don't know.

Those debates can be pretty interesting.

I think it's going to be interesting.

I'm looking forward to watching them.

I think the one thing I will say people are pretty engaged in those debates is not a lean back experience, so I think advertisers that do end up there and have the the fortitude to to to stick with it will probably be paid off with a decent amount of, uh, recognition and engagement.

You have, uh, really an extensive, uh, streaming background.

Help launch what?

Disney.

Disney.

Plus, what is the outlook for linear TV?

If we're having this conversation 10 years from now, what does the local TV station look like?

Linear TV is in is in secular decline.

I think there's no question that at least the pay TV elements of linear television are being supplanted by streaming.

And I think that, you know, the last bashing of pay TV has always been sports and news news.

You can get in a lot of different streaming, uh, and and you can get them just on the Web and you can get news in a lot of different places.

So I'm not sure that's gonna continue to be a major driver of pay TV.

So it's really down to sports, and I think you know, ESPN has announced that they're going over the top with their sports streaming.

There's they're in a joint venture with Warner Brothers and Fox to do the same thing.

I. I think that you'll see sports migrating from pay TV in a very, very substantial way also to streaming.

So I think the the outlook for pay television isn't great.

Um, and when when sports viewers find other opportunities to watch sports, I think you'll see a a continuation of that of that decline and and a collapse, frankly, of that environment.

But, uh, broadcast is a bit different that doesn't depend on pay TV to get delivered to households.

They in every single household.

And I do think you'll just see a different type of programming coming in there.

You'll still see sports on broadcast.

You'll see a see a news, of course, and you'll see a much more reality programming, less expensive programming.

I think this the day is a very expensive high production value.

Scripted programming and linear T television are coming to an end.

I hear what, uh, Disney and Warner Brothers teaming up to launch that that streaming sports, um, that out that package or, uh, platform.

But do we need another streaming service in our life and is that is what they're doing, something that a Netflix and Amazon should have just got into and just totally own the own the ecosystem.

I don't think that, um, Amazon and Netflix should have gotten into that.

I think sports are very, very interesting and differentiated type of programming.

They're very expensive.

They appeal to a subset of the population, but not everyone.

I think, you know, big time sports fans are probably less than 50% of households would be my guess.

Um, and for years, I mean one of the reasons pay TV is in such, you know, secular and and substantial decline is the cost of those sports rights.

And everyone had to bear the cost of those sports rights.

So you had, uh, every consumer almost every household had pay TV 10 years ago, and everyone was paying not only for the entertainment that they loved, but also for sports.

And not everyone watched the sports, and I think that helped drive the decline down.

People were paying for something in a very expensive thing that they didn't really want to watch.

So I think Netflix will put their toe in the water, but they've been they've become a very successful entertainment company without sports.

They have sports related programming, but not the actual sports rights.

I don't think they're gonna get into it in a big way.

The major sports rights.

I might be wrong.

Can linear hold these sports rights?

They continue to go up.

I mean linear the the cost is going up.

The balance sheets for the likes of the sports broadcasters are are getting They're not where they need to be.

And the biggest companies with the biggest cash coffers are in fact, Amazon and Netflix.

They are Netflix, Amazon, Google and Google.

You know, the big the big tech companies and Amazon has proven, has proven once in the end, that they are interested in sports rights.

They're bidding on them.

Uh, you know, rumour has it They're in the NBA this time around.

I don't know if that's true or not.

Um, they obviously have, um, football.

They have a lot of sports and they have sports internationally, too.

I don't know how much more they're gonna do in sports.

It has to feed their ecosystem in some way the direct revenue of sports through their advertising business.

And it's a big advertising business.

I doubt it covers the big major sports, but I do think that there is ancillary benefits to, uh, companies like Amazon and Google.

It brings people to the ecosystem, has a lot of engagement.

It causes.

It's a brand deposit in a very big way, so I think they'll still be in it.

I just don't know if there'd be a wholesale shift away from traditional media to digital or not.

It's yet to be seen.

Last time we talked to you at our investment conference, you were advising Disney CEO Bob Ecker Are you still advising him?

And then when he is no longer the CEO of Disney, what does Disney look like?

Does he have that one more Eger moment where he makes some form of big strategic change?

I'm still about things.

I have to be I. I can't I can't speak too directly about it.

Um nor should I, Um, But I'd say, you know, Bob's here for 2.5 more years.

He has plenty of time.

He has a good deep bench there.

They have a very, very solid management team across the board.

So I think that he has succession well in hand.

I would guess again, I'm not involved in the process.

Um and do I think he wants to do one more big thing before he leaves.

Possibly, um, I don't know what that would be exactly, but he's made some, you know, made some investments recently, and I think that there's probably a little more to do.

Um, but he might just leave in 2.5 years and leave it to his successor and make a big change.

I'm not sure it's in good shape.

Disney is in, actually in very good shape.

The stock price hasn't quite reflected that yet, but I think it will.

And I think this weekend with, uh inside Out two is a huge win and a much needed win for Disney two parter.

One.

Do we know who the Disney successor is this year?

And then what characteristics are they looking for?

And how is the process, I guess Different than the last time Disney went through the process.

Well, I'm not sure I'm not privy to their to their succession process.

So I I But I do think the board is gonna be quite involved, as as good governance would call for.

And I think they were last time, too.

Um, I think we may know this year, but he's He has a 2.5 more year, so it wouldn't surprise me if it if it extended a little bit beyond this calendar year into next calendar year.

But in the not too distant future, he's gonna want to make make, uh, make it known who was successor.

So he had some time to spend with him or her, uh, at the helm.

Um, I don't know much more than that, and I don't have a huge amount of insight.

I think the succession process will be very clean and very good this time around.

You're also the former former CEO of Tiktok, and we've talked to a lot of creators here on the ground.

And, gosh, they're just a passionate group.

They love the Tiktok platform.

But if gosh, Kevin, if this gets banned in the US, what happens to this community and where do they go?

This has been such a strange process.

I was when I was there in 2020 we had to run through the same thing.

That was a little easier to navigate, though, in hindsight, because they were presidential decrees, Trump had some decrees and said, you know, we're banning Tiktok, and he didn't have the weight of the Legislature Legislature behind him.

And now, of course, it's a validly passed law, both houses and it's signed by President Biden, so it looks a little more difficult, their path at this point.

Now they can always sell or something can happen, and the law could be overturned in the court.

In the courts.

That's also possible.

Again.

I don't know what the what the outcome will be.

I think it's all a bit, and I'm going to use the word silly.

It's hard.

It's hard for me to contemplate tiktok being that big of a good thing.

No, it's not.

No, I don't think it's a good thing I don't And I think Tiktok is a great service.

I think, um, Tiktok has been separated from China in a large way.

I think they're based in Singapore now, and they're and they're largely separated at this point, if not fully.

I'm not again.

I'm not at tiktok now.

I don't know all the facts, but it's a good platform.

It's a it's more than a good platform.

It's a spectacular platform.

It it does things that others can't the A I that it uses both to create all the lip syncing and all the things it does with the A I and the creation side, but also on the curation side.

The for you page is nothing but a vastly efficient, incredibly insightful A I engine that knows exactly what every single user wants in what order and what, what to show them next and does a lot of a B testing throughout the process.

So they have an incredible platform if they do get banned, or if they get if they get banned, I think two, there are two companies that are that are gonna really benefit from that.

Everyone talks about meta and reels, and that's for sure.

They're gonna benefit.

But I think YouTube is probably the biggest beneficiary.

You know, I think I believe it's true that YouTube shorts has even more monthly active users than tiktok around the world in that vertical video format.

And I think they've done a great job.

I. I love instagram reels, too, but those two will share the spoils, should take tiktok get banned, which I hope they don't.

Um, I think probably YouTube benefits a bit more.

Lastly, real quick.

Before I let you go.

Um, Paramount, Uh, this has just been a true disaster story.

II.

I I'm It's it's it's I've never seen anything like this, Kevin.

But is there another buyer potentially coming in here or is this brand now been harmed beyond repair?

Just given the process they've gone through, it's been a very strange process.

People I know and respect a lot have been in it.

You know, Redbird or the Jerry Cardinal was almost got the deal done.

And David Ellison, great guys, really smart guys.

Very surprised that Sherry at the end didn't decide to take that option.

You have Apollo and Sony that are knocking on the door.

I think there's I've heard I've seen in the press a couple of other potential suitors that are out there.

But I will say Paramount, as a company is quite impaired at this point.

They have, you know, three CEO S running it, uh, broken.

It looks to be Maybe it will resurrect, but a but a broken deal process and a business that is not doing all that well, So I like Sherry a lot.

I think she'll, uh, hopefully figure out what to do.

here, but as of right now, it's a It's a big, strange problem.

Put it, uh, put him hotly.

Kevin Mayer.

Well, let's get back to the, uh, party and meeting sitting here at Ken Lyons.

And thank you for always making time for y'all Finance.

We'll talk to you soon.

I appreciate it.

Thank you.