Billionaire scion David Ellison wants to transform Paramount, a storied Hollywood company with roots in the silent film era, into a modern media and technology giant capable of taking on Netflix.
A day after agreeing to acquire Paramount from Shari Redstone, Ellison told the Financial Times that the century-old company needed to adapt more quickly to technological shifts disrupting Hollywood, from streaming to artificial intelligence.
“We recognize the transition the entire industry is going through,” said Ellison, the 41-year-old son of Oracle founder Larry Ellison, one of the world’s richest people. “In order to navigate this transition effectively, what Paramount requires as a pure content media company is to transition to a media and technology company.”
The younger Ellison agreed Sunday to merge his Skydance production studio with Paramount and transfer control of the group from Redstone after a grueling eight-month negotiation process. His father was a major supporter of the deal.
The deal, expected to close next year, gave the new Paramount an enterprise value of $28 billion. Shares fell 5 percent on Monday after the deal was announced. Shares have fallen 30 percent over the past year and nearly 80 percent since 2019.
Paramount’s struggles began in 2021 when Redstone decided to pump his investment into the Paramount+ streaming service. Since then, the streaming business has soaked up billions of dollars in investment but remains unprofitable, with thin audiences, widespread complaints about faulty technology and ads embedded in content despite a monthly subscription fee.
But Ellison said he plans to rebuild Paramount+’s technology to make it more user-friendly — including improvements to the algorithm-powered recommendation engine that helps users discover new shows.
“There are a few things we can do in terms of how the platform is designed to reduce ‘leaning’ and maximize time spent on the platform,” he said.
Ellison and his team have their work cut out for them. Even the biggest legacy media companies like Disney have struggled to catch up with Netflix in the costly and ultra-competitive streaming battle.
“Even for a company like Apple that has unlimited cash, at some point return on investment in a crowded market becomes a complicated question,” said a veteran media executive.
Ellison intends to work with his father’s company, a leader in cloud computing, to increase efficiency and reduce costs. Skydance already uses cloud technology in its animation business, which is headed by former Pixar boss John Lasseter.
“We’re building studios on the cloud” in animation, he said, allowing production and rendering processes to be done virtually at lower costs. “Content will always be the tip of the spear for Paramount, but it requires technological prowess to effectively navigate and transform the business at this particular juncture.”
Jeff Shell, a former NBC executive who will become president of the newly merged company, told the FT that Paramount+ will explore partnerships with other streaming services and potential package deals to help cut costs and reduce churn.
“We want to be in the streaming business and win the streaming business,” Shell said. “We had a number of incoming calls from many different potential partners. If we can find the right deal to partner with someone that gives us more scale and also gets us to the cash flow breakeven point faster, we will evaluate that.”
He said Netflix is the only streaming service that is “doing well with technology right now.”
“It’s a pretty bad experience on every other platform,” Shell said. “So however we end up, with a partner or on our own, we will be the technology leader.”
Paramount is struggling as its cable networks, which include MTV, Comedy Central and Nickelodeon, have fallen into sharp decline due to the popularity of streaming. Shell said some cable assets could be sold.
“There has been speculation about some assets that we should sell.” . . We will certainly not be committed to some non-strategic assets,” he said. However, any sell-offs would be a “strategic mini-sell”.
But he said the CBS network is an asset that Skydance sees as an opportunity for growth — especially in sports, where it has rights to NFL and UEFA Champions League games.
Gerry Cardinale, the founder of RedBird Capital Partners, which is backing the Skydance deal, dismissed any ideas his private equity firm was planning to break up Paramount.
Skydance’s plan to invest in Paramount and keep the company intact was critical to winning Redstone’s approval, he said.
“We’re not going to smash it and kill it,” Cardinale said. “We are preserving a company that is over 100 years old, rejuvenating it and recapitalizing it. I honestly think it’s probably a philosophical point that won over Shari because she’s very focused on her family’s legacy.”