Billionaire scion David Ellison wants to transform Paramount, a storied Hollywood company with roots in the silent film era, into a modern media and tech giant capable of rivalling Netflix.
A day after agreeing to buy Paramount from Shari Redstone, Ellison told the Financial Times that the century-old company needed to move faster to adapt to the technological changes that are disrupting Hollywood, from streaming to artificial intelligence.
“We recognize that we’re in a period of transition across our industry,” said Ellison, 41, the son of Oracle founder Larry Ellison, one of the world’s richest men. “To navigate that transition successfully, we need to take Paramount from being a pure media company and make the transition to being a hybrid media and technology company.”
Ellison reached a deal on Sunday to merge his production studio, Skydance, with Paramount after eight months of tough negotiations, taking control of the group away from Redstone, whose father was a key backer of the deal.
The deal, expected to close next year, values the new Paramount Pictures company at $28 billion. Shares fell 5% on Monday after the deal was announced. They have fallen 30% in the past year and nearly 80% since 2019.
Paramount’s struggles began in 2021, when Redstone decided to increase investment in its Paramount+ streaming service. Since then, the streaming business has absorbed billions of dollars in investment but has not been profitable, with small viewership, widespread complaints about glitches in technology and ads inserted into content despite a monthly fee.
But Ellison said he plans to restructure the technology behind Paramount+ to make it more consumer-friendly, including by improving the algorithm-driven recommendation engine that helps users discover new shows.
“There are things that can be done in platform design to reduce churn and maximise time spent on the platform,” he said.
Ellison and his team have a tough task ahead: Even the biggest traditional media companies like Disney are struggling to keep up with Netflix in the costly and competitive streaming wars.
“Even for a company with unlimited funds like Apple, investment returns eventually become complicated in a chaotic market,” said a veteran media executive.
Ellison plans to work with his father’s company, a leader in cloud computing, to boost efficiencies and cut costs. Skydance is already using cloud technology in its animation business, led by former Pixar Chief Executive John Lasseter.
“We’re building a studio in the cloud for our animation business,” he said, allowing production and rendering processes to be run virtually at a lower cost. “Content has always been cutting edge for Paramount, but it takes technical capability to effectively navigate and transition our business during this particular time.”
Jeff Shell, the former NBC CEO who will become president of the combined company, told the Financial Times that Paramount+ will explore potential partnerships or bundling deals with other streaming services to help cut costs and reduce customer churn.
“We want to get into the streaming business and win in the streaming business,” Shell said. “We’ve gotten a lot of calls from a lot of potential partners. If we can get the right partnership with somebody that can help us scale and get to cash flow breakeven faster, we’re open to considering it.”
He said Netflix is the only streaming service “that’s really leveraging technology at the moment.”
“The experience is pretty bad on other platforms,” Shell said, “so whether we partner with them or do it ourselves, we’re ultimately going to be the technology leaders.”
Paramount has struggled as cable networks such as MTV, Comedy Central and Nickelodeon have seen their revenues decline sharply due to the popularity of streaming services, and Shell has said it may consider selling some of its cable assets.
“There has been speculation about assets we might sell, but we’re not going to hang on to some of our non-strategic assets,” he said, but any asset sales would be “strategic mini-sales.”
But Skydance sees the CBS networks as an asset and an opportunity for growth, particularly in sports, where it holds rights to NFL games and the UEFA Champions League, he said.
Jerry Cardinale, founder of RedBird Capital Partners, which is backing the Skydance deal, denied that his private equity firm has plans to break up Paramount.
Skydance’s investment in Paramount and plans to keep the company intact were crucial in winning Redstone’s approval, he said.
“We’re not looking to break up the company or destroy it,” Cardinale said, “but to protect, revitalize and recapitalize a company that’s over 100 years old. And frankly, I think that’s probably what attracted Shari to it, that philosophical aspect, because she cares so much about her family’s legacy.”
