In 1994, when Sumner M. Redstone bought Paramount Pictures for about $10 billion, the equivalent of about $22 billion today, he did more than buy a company. He ascended to a cultural throne.
Studios like Paramount, founded in the 1910s, which operated complexes of recording studios and controlled vast film libraries, were valuable companies on the verge of striking a goldmine: the DVD. But perhaps more importantly, they gave their owners a valuable identity as certified members of the cultural elite.
Movies still dominated. The top-selling films of 1994 included such landmarks as “The Lion King,” “Schindler's List,” “Interview with the Vampire,” “Mrs. Doubtfire,” “Philadelphia,” “Speed,” and “Pulp Fiction.” In 1995, when Paramount's “Forrest Gump” won the Academy Award for Best Picture, more than 48 million Americans tuned in to watch it.
Those days are over.
The Redstone family reluctantly gave up Paramount on Sunday, handing the studio to David Ellison, the tech scion behind a 14-year-old entertainment company called Skydance. If the complex deal closes, 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 movie studio alone was worth $22 billion in 1994, it wasn’t exactly a moment of celebration in Hollywood. Rather, it was another example of harsh reality intruding on a world that still loves to fantasize about recapturing its golden age. (Universal recently renovated its lot, adding a sign to one of its entrance gates that reads, “Welcome to all who change the world.”)
Sure, Mr. Ellison, 41, is now considered a bona fide Hollywood mogul. But what does that mean in 2024? His rise is nothing like that of the thieving moguls like Mr. Redstone who preceded him, partly because there is so little to rob.
With a few exceptions, most notably animated films, the box office has been a relative desert; Memorial Day weekend was the worst in nearly 40 years, after adjusting for inflation. Most streaming services have been financial disasters; Paramount+ alone has lost nearly $4 billion since the start of 2022. Metro-Goldwyn-Mayer and 20th Century are little more than logos. Warner Bros. is on its fourth superhero reboot strategy in eight years.
“We cannot in good conscience encourage you to continue in our profession,” says the Art Directors Guild, which represents production designers. and other film professionals, he said in May, when he suspended his training program. A recent column in Deadline, an entertainment industry publication, described Hollywood, battered by the coronavirus pandemic, two lengthy labor strikes and the still-rising popularity of TikTok, as “something post-apocalyptic, with zombies and a lot of smoking ruins.”
Artificial intelligence is threatening jobs, especially in visual effects and animation. Streaming has made it easier to piracy content.
The Oscars were kept alive. This year's Academy Awards ceremony drew 19.5 million viewers, down 60 percent from 1995.
In contrast to the heyday of Redstone, the era now beginning at Paramount will be defined by Mr. Ellison’s skills as a fixer. He acknowledged as much on Monday, telling analysts on a conference call that he intended to remake the collection of assets into a “tech hybrid.” He would do so, he said, by drawing on his experience as a Skydance producer of films such as “Top Gun: Maverick” and “The Tomorrow War” and leveraging his Silicon Valley connections; Mr. Ellison is the son of Oracle founder Larry Ellison.
“If I went into a lab and designed the perfect executive for the next-generation Hollywood company, I would literally spit out David Ellison, because he not only knows how to go to a table read, he knows how to go into the next room and write code,” Jeff Shell, Mr. Ellison’s top lieutenant at the new company, said on the call. Mr. Shell was previously a chief executive at NBCUniversal, where he was known for shaking up long-standing Hollywood business practices, including movie distribution models. (Mr. Shell left NBCUniversal last year after admitting “an inappropriate relationship with a woman at the company.”)
Gerry Cardinale, founder of RedBird Capital, said Mr. Ellison would transform Paramount “into the guiding machine for how these traditional media companies need to be run in the future.”
They have been vague on specifics, with two exceptions: Mr. Ellison plans to revamp Paramount+, cutting and burning old businesses to find more than $2 billion in “cost efficiencies and synergies.” (To put that number in context, the company’s previous management team said last month that $500 million in cuts was aggressive enough.)
Mr. Ellison has run Skydance as an ultra-lean operation. Larry Ellison has also demonstrated a lack of tolerance for Hollywood largesse, forcing an overhaul of his daughter’s money-losing Annapurna Pictures in 2018. Annapurna has largely transitioned out of the film business and found success with 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 in the process of selling a struggling Paramount for its real estate value. Discussions began with a cemetery that adjoins the studio. Additional burial plots were planned.
It was then that Paramount’s young production chief, Robert Evans, transformed a macabre drama, “Rosemary’s Baby,” into a box-office juggernaut. Mr. Evans continued to make the studio a showcase for culture-defining cinema, serving up “The Godfather,” “Chinatown” and “Urban Cowboy,” among others. Barry Diller took over, making hits like “Raiders of the Lost Ark,” “Grease” and “Beverly Hills Cop.” Sherry Lansing kept Paramount healthy in the late 1980s and 1990s with films like “Fatal Attraction,” “Braveheart” and “Titanic,” a co-production with Fox.
Mr. Ellison has a reverence for Paramount’s history. In Monday’s call with analysts, he repeatedly said he wanted to rekindle the studio’s status as a haven for storytellers. But he also made clear that nostalgia would no longer be enough.
“This is a transformative and pivotal moment for our industry,” said Mr. Ellison. “We are committed to energizing the business and strengthening Paramount with contemporary technology, fresh leadership and a creative discipline that aims to enrich future generations.”