When Sumner M. Redstone bought Paramount Pictures for approximately $10 billion in 1994 (the equivalent of about $22 billion today), he didn't just buy a company—he ascended to a cultural throne.
Founded in the 1910s, studios like Paramount, which operated soundstage complexes and curated vast film libraries, were a valuable business on the verge of the DVD bonanza, but perhaps more importantly, these studios gave their owners a valuable identity as certified members of the cultural elite.
Movies still won everything: The top ticket sellers in 1994 included benchmarks like “The Lion King,” “Schindler's List,” “Interview with the Vampire,” “Mrs. Doubtfire,” “Philadelphia,” “Speed” and “Pulp Fiction.” In 1995, more than 48 million Americans tuned in to watch Paramount's “Forrest Gump” when it won the Academy Award for best picture.
Those days are over.
The Redstone family reluctantly parted ways with Paramount on Sunday, handing the studio to David Ellison, the technology mogul of Skydance, the 14-year-old entertainment company.If the complicated deal goes through, Mr. Ellison and his backers, including Redbird Capital Partners, will spend about $8 billion on a collection of assets that includes Paramount, CBS, two streaming services and a portfolio of cable networks including MTV, Nickelodeon, BET and Comedy Central.
Considering that the film studio alone was worth $22 billion in 1994, this was hardly a joyous moment for Hollywood. Rather, it was another example of harsh reality confronting a world dreaming of recapturing a golden age. (Universal recently renovated its campus, putting up a sign over one of its entrance gates that read, “We Welcome All Who Change the World.”)
To be sure, at 41, Mr. Ellison is now a bona fide Hollywood mogul. But what does that mean in 2024? Mr. Ellison's rise bears little resemblance to that of his robber baron predecessors, such as Mr. Redstone, in part because there is so little left to steal.
With a few exceptions, especially animated movies, the box office has been relatively weak, with the Memorial Day weekend being the worst in 40 years, adjusted for inflation. Most streaming services have been financial disasters, with Paramount+ alone losing nearly $4 billion since the start of 2022. Metro-Goldwyn-Mayer and 20th Century are merely logos. Warner Bros. is on a superhero reboot spree for the fourth time in eight years.
“We cannot in good conscience encourage anyone to enter our profession,” said the artistic directors' union, which represents set designers. So said Hollywood directors, producers and other film professionals when they suspended training programs in May. A recent column in entertainment trade publication Deadline described Hollywood, hit by the coronavirus pandemic, two lengthy union strikes and the still-growing popularity of TikTok, as “a post-apocalyptic place full of zombies and smoking ruins.”
Artificial intelligence is threatening jobs, especially in visual effects and animation, and streaming has made content piracy easier.
The Academy Awards are on life support: This year's ceremony was watched by 19.5 million people, down 60 percent from 1995.
In contrast to Redstone's golden era, the era that begins at Paramount will be defined by Ellison's tinkerer skills. He acknowledged that on a conference call with analysts on Monday, saying he plans to remake the assets into a “tech hybrid.” He said he'll do it by drawing on his experience making films such as “Top Gun: Maverick” and “The War Between Us” at Skydance, as well as his Silicon Valley connections. Ellison is the son of Oracle founder Larry Ellison.
“If you went into a lab and designed the perfect executive for the next generation of Hollywood companies, you would literally have David Ellison come out because not only can he read scripts, but he can also go in the next room and write code,” Jeff Shell, Mr. Ellison's top aide at the new company, said on a conference call. Mr. Shell was previously chief executive of NBCUniversal, where he was known for shaking up long-standing Hollywood business practices, such as theatrical release patterns. (Mr. Shell left NBCUniversal last year after acknowledging “inappropriate relationships with women in the company.”)
Redbird Capital founder Jerry Cardinale said Ellison would turn Paramount into “a bellwether for how these existing legacy media businesses should be run in the future.”
The specifics were vague, with two exceptions: Ellison plans to overhaul Paramount+ and slash legacy businesses, finding more than $2 billion in “cost efficiencies and synergies.” (To put that number in perspective, the company's former executives said last month that $500 million in cuts would be aggressive enough.)
Ellison has run Skydance as a lean operation, and Larry Ellison has signaled his lack of tolerance for Hollywood extravagance, overhauling his daughter's money-losing Annapurna Pictures in 2018. Annapurna has largely exited the film business and has had success making independently produced video games.
Paramount has endured boom and bust cycles before. In the 1960s, the studio's owner, the conglomerate Gulf & Western Industries, was on the verge of selling the struggling company for its real estate value. Discussions began about building a cemetery adjacent to the studio. More burial grounds were envisioned.
It was at this time that Paramount's young production executive, Robert Evans, turned the macabre drama Rosemary's Baby into a box-office smash. Mr. Evans went on to turn the studio into a showcase for culture-defining films, churning out The Godfather, Chinatown and Urban Cowboy. Barry Diller took over, churning out hits like Raiders of the Lost Ark, Grease and Beverly Hills Cop. Sherry Lansing kept Paramount healthy through the late 1980s and '90s with films like Fatal Attraction, Braveheart and the Fox co-production Titanic.
Ellison respects Paramount's history — on a conference call with analysts on Monday, he reiterated that he wants to reposition the studio as a haven for storytellers — but he made clear that nostalgia alone is no longer enough.
“This is a defining and transformative time for our industry,” Ellison said. “We are committed to revitalizing our business and strengthening Paramount with modern technology, new leadership and creative discipline that aims to enrich generations to come.”
