Skydance-Paramount Deal Drags Hollywood Further Into a Tech Future

Bonus Content: Enjoy This Premium Article on Us Skydance-Paramount Deal Drags Hollywood Further Into a Tech Future With an $8 billion agreement to buy the legacy studio, CEO David Ellison is promising to leverage technology to turn Paramount from a struggling legacy studio into a tech-content powerhouse By Alexei Barrionuevo and Lucas Manfredi The lines between traditional Hollywood and the tech industry became fuzzier than ever when Skydance Media announced on Sunday that it had [an $8 billion deal in place]( to acquire Paramount Global, the entertainment conglomerate with a century-old movie studio along with a TV network, cable channels and streaming services. “The tech companies have obviously been pushing very significantly into the media space,” CEO David Ellison told TheWrap in a media call on Monday, referring to Apple, Amazon and of course the Netflix streaming colossus. “We believe what is required to meet this moment is to obviously have a traditional media company like Paramount expand into both a media and technology company.” Ellison has the substance to back that up, as the son of Oracle co-founder Larry Ellison, whose first job, he told reporters, was writing code at Oracle for his Dad, the [fifth-richest person]( in the world, according to Forbes. Larry Ellison and his family [are investing $6 billion]( of the $8 billion to fund his son’s Paramount takeover, with RedBird Capital putting in the rest. David Ellison said on the call that he talks to his billionaire father “all the time,” calling him an “incredible adviser across the board.” But Ellison offered few specifics on the formula Skydance would use to unlock Paramount’s future potential, or at least turn around its sagging stock price. On an investor call on Monday, the Skydance team outlined a vision to take a tech-focused approach to transforming a legacy entertainment giant weighed down by heavy debt and unprofitable businesses. Ellison said the new Paramount would double down on struggling streamer Paramount+ and broadcast giant CBS while using artificial intelligence to wring out more efficiencies. [Enjoying this WrapPRO article? Become a subscriber today.]( An all access subscription, just $14.99 $9.99 a month [SUBSCRIBE NOW]( The official announcement of the on-again-off-again deal, which major shareholders have threatened to sue over for prioritizing Redstone over minority shareholders, sent Paramount’s stock down 5.3% on Monday. And some analysts on Monday were skeptical that Skydance’s approach would be enough to turn around the company. “New Paramount will face the same secular headwinds as old Paramount of deteriorating linear trends and a highly competitive streaming market, and the deal does not bring any new major franchises to an IP library that lacks the depth and breadth of Disney’s or Warner’s,” TD Cowen’s Doug Creutz said in a research note on Monday. “Paramount’s future remains tied to the timing of a rebundling of entertainment content with an offer that gives consumers the enhanced technology and ease of access of streaming.” Skydance’s acquisition — a complicated two-step deal in which the company is buying Shari Redstone’s National Amusements Inc. before merging with Paramount — comes as traditional Hollywood studios broadly are struggling with legacy broadcast and cable TV assets, and streaming platforms that have yet to prove they can be profitable. Skydance CEO David Ellison will be Paramount’s CEO if the deal closes (Credit: Kevin Winter/Getty Images) At the same time, tech companies like Apple and Amazon have invested billions to create content and platforms that are competing with — and also partnering with — Hollywood studios, but they face much less pressure for those businesses to deliver consistent returns. And the studios are leaning more and more on the generative AI that major tech companies are in a race to develop, which has the potential to transform almost every aspect of the content-creation process. Ellison, as he is eager to share, has been steeped in tech all his life. In addition to the early stint as a computer programmer for his father’s company, he analogized the current moment in entertainment history to transitions that “traditional tech companies” like Microsoft and Oracle went through where they “disrupted their own businesses to kind of all-time highs.” But when asked directly by a Wrap reporter what was the tech strategy that had eluded other studios thus far, Ellison had no specifics to share. Skydance, Ellison said, has already been on the path to becoming a tech-Hollywood hybrid. He noted the company’s Studio in the Cloud initiative with Oracle, which “took an industry that was always on premise” and migrated a significant amount of the business to the cloud, made it “less expensive, faster and creatively superior.” Skydance has built a deep library of content, including Hollywood tentpole movies like “Mission: Impossible” and formidable animation and gaming studios, and has done a lot of content and licensing deals with Paramount. Under terms of the acquisition, Skydance will retain 25-50% of the rights to several “crown jewel franchises,” including “Top Gun,” “Mission: Impossible,” Star Trek, “Transformers” and the Tom Clancy universe, Ellison said. “This transaction unifies those rights all under the Paramount roof, which I do believe is where they belong,” he said. So far, Wall Street is taking a wait-and-see approach to Skydance’s plans, which also include unnamed asset sales and an injection of $1.5 billion in cash to help bring down Paramount’s $14.6 billion in long-term debt. “The new company has major opportunities for content production and distribution, but the challenges of competing in today’s disruptive movies and entertainment industry remain,” said CFRA Research. While financial targets the company outlined for 2026 and 2027 “may be achievable,” the firm said, “we want to monitor developments in 2024-2025 to gauge progress.” Looking ahead, the Skydance executives said they expect Paramount to reach $3.4 billion in adjusted operating income and produce an estimated $32.6 billion of revenue in 2025. Then in 2026, they said, the company will produce $4.1 billion in adjusted OIBDA, $32.9 billion of revenue and return to investment-grade status with all credit rating agencies. They’re also looking to de-leverage from approximately 4.3 times to 2.4 times by 2027 and produce $4.5 billion in adjusted operating income and $33.5 billion in revenue that year. Skydance not looking to “turn around” Paramount+ Skydance executives said Monday that they would ramp up efforts to make Paramount’s direct-to-consumer business profitable — a milestone the studio is currently on track to reach domestically in fiscal 2025. While the previous management team had made progress, Paramount+ remains a laggard among its major competitors, including Max, Disney+ and market-leading Netflix. “I don’t think it has to be turned around necessarily, we just want to take a bit of a fresh approach to it,” Shell said of Paramount+ on Monday. “The combination of having a business that hopefully will be cash positive at scale with good content, and then layering in what [Ellison’s] vision is for making this the technological leader in the industry will make us part of a winning streaming strategy.” The Skydance executives noted their support on Monday for talks with potential partners in international markets to scale and improve the economics of Paramount’s streaming business, which have been initiated by current Co-CEOs Brian Robbins, George Cheeks and Chris McCarthy. Under the co-CEOs’ current long-term strategic plan, Paramount has targeted $500 million in cost cuts in areas like legal and corporate marketing. They have also hired bankers to help with potential asset sales, which sources have told TheWrap could include the Paramount studio lot, Pluto and BET Media Group. On Monday, Shell didn’t dispute that the Skydance management team remains open to buyers for some “non-strategic” assets. “If we were to get a buyer to pay a price that we thought was compelling, we would absolutely do that,” Shell said. “I know current management is also talking about a couple of transactions that, if they get the right price, we’ll be supportive of.” Though Ellison acknowledged that incoming leadership would have “a seat at the table” in deciding potential sales, he expressed a “tremendous amount of confidence” in the work of the Office of the CEO. “Given how dynamic the landscape is changing, we think it’s really important that the company not be paralyzed in any way, shape or form, and obviously for those conversations to continue and to explore.” Jeff Shell will be Paramount’s president (Getty Images) At the same time, Ellison and RedBird Capital’s Gerry Cardinale said that ensuring the Redstone family’s legacy is protected was a “very important” factor in getting a deal across the finish line. “The way to do that is you capitalize this over 100-year-old business, and you keep it as Paramount. You don’t take it private, break it up and kill it,” Cardinale said. “That’s what it was from day one that is in the fundamental crux of this entire deal, a real philosophical coming together with David and his family and Shari and her family.” Ellison agreed. “Our goal here is to transition the business as Paramount, and that was something that me and Shari discussed early on,” he said, “and I believe that by keeping the assets together and transitioning them through this moment in time, we’ll obviously be able to create significant shareholder value.” An all access subscription, just $14.99 $9.99 a month [SUBSCRIBE NOW]( It’s not over til it’s over The Skydance-Paramount transaction is expected to close in the third quarter of 2025, subject to regulatory approval and other customary closing conditions. But a number of hurdles could still impact the deal between now and then. One is a go-shop provision, which allows the Paramount board of directors’ independent special committee 45 days to solicit other acquisition offers. In the event of a superior proposal, Paramount would have to pay Skydance a $400 million breakup fee. Other parties that have expressed interest in National Amusements and Paramount include IAC chairman Barry Diller, [“Baby Geniuses” producer Steven Paul](, former Warner Music Group CEO and chairman[Edgar Bronfman Jr](, and Sony Pictures Entertainment and Apollo Global Management, who [submitted a joint $26 billion all cash offer in May](. Allen Media Group founder Byron Allen also [placed a $30 billion bid including debt](. In December, Warner Bros. Discovery CEO David Zaslav met with former Paramount CEO Bob Bakish about a potential merger, and then the parties [broke off talks](. There’s also a looming threat of potential shareholder lawsuits. Under the terms of the $8 billion cash and stock agreement, NAI will receive $2.4 billion, non-NAI shareholders will receive $4.5 billion and $1.5 billion in new capital will go towards helping to pay down debt and recapitalize the company’s balance sheet. Paramount shareholders will receive a 48% premium to the price of the Class B stock as of July 1, 2024. Class A shares receive a 28% premium. Mario Gabelli, a major Paramount investor whose GAMCO Investors Inc. represents clients that own five million Class A shares and one million Class B shares, told TheWrap that all of these moving parts make one thing certain: “It ain’t over till it’s over.” While acknowledging that Skydance laid out a vision for the future, Gabelli argued there are a number of questions remain unanswered. He wants the company to provide more transparency for his 800 clients that own voting stock. Gabelli declined to explicitly say whether he’d pursue a lawsuit of his own, but questioned why Skydance and National Amusements were trying to “opt out of Delaware law” and Paramount’s fiduciary responsibilities. “I want my clients to have the option of continuing to own the voting shares. Why should they get squeezed out? That is not clear,” he said. “And secondly, are they worried I would discover a whole bunch of numbers that would indicate that they should get more money because the other guy got more money? I don’t know.” This week’s Sun Valley Allen & Co. conference could create an environment to discuss more proposals, Gabelli added. “They’re all going to be schmoozing,” he said. “The deal is on the table. Everybody’s going to look at it … Let’s see.” Discover why entertainment executives and professionals rely on the WrapPRO platform daily for exclusive coverage, analysis and deeper reporting. 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