(Bloomberg) — When investors look at Paramount Global, they see a distressed company in decline. David Ellison sees a rare opportunity to own one of Hollywood’s original studios.
The 41-year-old son of technology billionaire Larry Ellison has spent months pursuing a takeover of the TV and film giant, overcoming a shareholder revolt and opposition from Paramount leadership, as well as the occasional reluctance of controlling shareholder Shari Redstone to part with the business. Ellison persisted, drawn by Paramount’s century-old film library, the most-watched US broadcast network, CBS, and one of the leading producers of kids programming in the world with Nickelodeon.
“The assets at Paramount are not replicable,” he said in an interview on Monday.
Backed by his father and the investment firm RedBird Capital Partners, Ellison is spending billions of dollars to gain control of and recapitalize Paramount, merging it with his independent studio, Skydance Media. Now that he’s struck a deal, Ellison must embark on the daunting task of figuring out how to fix the business, which has seen sales stagnate and profitability slide as audiences shift from traditional TV to streaming. Below, a look at Ellison’s plans for the company.
Animation and Sports
Ellison has hired a number of experienced hands to create animated films at Skydance, including former Pixar executives John Lasseter and Brad Bird. By 2026, the company will be making two animated pictures a year for Netflix Inc. Skydance co-owns the films and shares the merchandise rights.
“The addition of Skydance Animation to Nickelodeon creates an animation powerhouse that will immediately make us one of the best and most powerful within the industry,” Ellison said on a call with analysts on Monday.
Jeff Shell, the former NBCUniversal executive who will serve as president of Paramount when the Skydance merger closes, said he’s looking forward to leveraging the CBS Sports business to win more sports rights. Shell said he jokingly texted NBA Commissioner Adam Silver on Monday, saying he was interested in a new package of TV rights to games. Silver immediately responded, not jokingly, with some other ideas for content.
Cost Cuts
Ellison and Shell have already been working with the management consultants at Bain & Co. to figure out how they might restructure Paramount. They’ve identified $2 billion in cost savings, which will entail firing hundreds of people, reducing programming costs and likely consolidating TV production. Shell has a strong point of view on how to manage the decline of traditional TV networks. He’s suggested the company may reduce the hours of programming its networks air.
All of this will have to be balanced with Ellison’s stated desire to increase the company’s film and TV output.
Asset Sales
Paramount is in talks to sell the BET cable channel – a deal Skydance supports at the right price — and the company will explore the divestiture of other non-strategic assets both in the US and abroad. The new team won’t be selling the Paramount film studio or CBS, which they view as cornerstones of the company, Ellison said in the interview.
Harness Technology
Ellison has leaned on his Silicon Valley bona fides. Though raised by his mom, he grew up around technology luminaries thanks to his father. Ellison cited his dad’s company, Oracle Corp., as a business that has managed to shift its focus successfully. Skydance is using Oracle’s cloud computing technology to help reduce the cost of making films like the upcoming Spellbound for Netflix.
He’s also been inspired by Steve Jobs’ ability to fuse art and technology at Apple Inc. Ellison wants Paramount to do the same, improving the technology behind advertising sales at its streaming TV service and the algorithm that recommends what to watch.
“It will be a combination of art and technology working hand in hand,” he said.
Partnerships
While Ellison said Paramount+ can thrive on its own, he and Shell made no secret of their desire to pursue a joint venture.
They believe combining Paramount+ with NBC’s Peacock or Warner Bros.’s Max will help them manage costs, reduce cancellations and create a more competitive service.
The investors confirmed on Monday that Paramount has been looking for a partner internationally. Bloomberg News reported earlier that the company has been in talks with Amazon.com Inc. about some kind of tie-up.
The investors think they can also combine the ad sales power of Paramount+ and the company’s free Pluto streaming service. The Ellison-led group believes it can take the money-losing streaming business to break-even within 18 months of the merger.
They won’t be able to do anything about it right away, however. Redstone still has a 45-day window in which she can shop for a better deal, and regulators will spend months at least reviewing the transaction.
By the time Ellison gets his hands on Paramount, which they believe will be in the third quarter of 2025, Netflix, Amazon and Walt Disney Co. will have had another year or more to extend their lead.
Ellison, a trained pilot, has already pulled off one difficult maneuver by convincing Redstone to sell him her family company. Now he has to land the plane.
©2024 Bloomberg L.P.