Paramount and Skydance Merge, Sign of New Power in Hollywood

NEW YORK (AP) — Entertainment giant Paramount will merge with Skydance, ending the Redstone family's decades-long stewardship of Hollywood and injecting desperately needed cash into a storied studio that has struggled to adapt to a changing entertainment landscape.

It also signals the emergence of a powerful new player, David Ellison, founder of Skydance and son of billionaire Larry Ellison, founder of software company Oracle.

Shari Redstones National Amusements owns more than three-quarters of Paramounts' Class A voting stock through her late father's estate, Sumner Red StoneShe fought to retain control of the company that owned CBS, the maker of hit films such as Top Gun and The Godfather.

Just a few weeks later refuse a similar agreement However, with Skydance, Redstone agreed to a deal whose terms didn't change much.

“Given the changes in the industry, we want to strengthen Paramount for the future while ensuring that content remains king,” said Redstone, chairman of Paramount Global.

The combined company is valued at approximately $28 billion. Under the proposed transaction, which is expected to close in September 2025 subject to regulatory approval, a consortium led by the Ellison family and RedBird Capital will invest $8 billion.

Skydance, based in Santa Monica, California, has helped produce some of Paramount's biggest hits in recent years, including Tom Cruise films like Top Gun: Maverick and episodes of the Mission: Impossible series.

Skydance was founded in 2010 by David Ellison and quickly formed a production partnership with Paramount that same year. If the deal is approved, Ellison will become chairman and CEO of what will be called New Paramount.

On Monday, Ellison outlined New Paramount's vision during a conference call about the deal. In addition to doubling down on its core competencies, including a creative-first approach, he stressed that the company must transition to hybrid technology to remain competitive in today's evolving media landscape.

“You’ve seen incredibly powerful technology companies move into the media industry and do it very successfully,” Ellison said. He added that it’s critical for New Paramount to chart a similar course going forward.

That includes plans to rebuild the Paramount+ streaming service, Ellison noted, pointing to broader goals for growing the direct-to-consumer business, such as increasing engagement time on the platform and reducing user churn. He also said the company aims to move to more cloud-based production and continue to use generative artificial intelligence to increase efficiency.

Executives also outlined additional restructuring plans for New Paramount during Monday's conference call, with RedBird Sports and Media Chairman Jeff Shell noting that they have identified some $2 billion in cost savings and synergies that they will seek to realize relatively quickly.

Shell and others have addressed the issue of declining growth in linear TV. It will continue to be a significant part of the company's business, he said, but learning how to manage that part of the business differently will be critical.

The merger, which has been years in the making, comes at a difficult time for Paramount, which has been struggling for years to find its footing and whose cable business is in crisis. At its annual shareholder meeting in early June, the company also presented a restructuring plan that included significant cost cuts.

Leadership at Paramount was also unstable earlier this year after its CEO Bob Bakish, following a number of conflicts with Redstone, was replaced with a CEO office, led by three executives. Four directors of the company were also replaced.

Paramount is one of the oldest studios in Hollywood, having been founded as a distributor since 1914. Throughout its storied history, Paramount has been involved in the release of films such as Sunset Boulevard and The Godfather, Raiders of the Lost Ark and Titanic.

The studio also distributed several early Marvel Cinematic Universe films, including Iron Man and Thor, before Disney's acquisition. In addition to Mission: Impossible and Top Gun, Paramount's current franchises include Transformers, Star Trek, and Jackass.

While Paramount hasn't topped the annual domestic box office charts in more than a decade, the runaway success of 2022's Top Gun: Maverick (nearly $1.5 billion worldwide) has been a major boon to theaters and the industry's post-pandemic recovery.

However, its film production has declined somewhat in recent years. Last year, the country released only eight new films and ranked fifth at the box office with about $2 billion in revenue, behind Universal (24 films), Disney (17 films), Warner Bros. and Sony.

This year's release schedule is similarly modest, not least because of the absence of Mission Impossible 8, which was pushed back to 2025 due to the strikes. They've had some successes, with Bob Marley: One Love and A Quiet Place: Day One, and there's still Ridley Scott's Gladiator sequel to come.

The National Association of Theatre Owners, a trade organization that represents more than 35,000 screens in the United States, said in a statement Monday that it plans to closely examine the details of the merger to determine whether it will produce more or fewer theatrical releases.

“We are encouraged by the commitment that David Ellison and the Skydance Media team have shown to theatrical exhibition in the past,” said Michael O’Leary, president and CEO of the National Association of Theatre Owners. “A merger that results in fewer films being produced would not only hurt consumers and reduce revenues, but would also negatively impact the people who work in all sectors of this great industry of creation, distribution and exhibition.”

Sumner Red Stone He used National Amusements, the family’s movie theater chain, to build a vast media empire that included CBS and Viacom, which merged and split several times over the years. Most recently, the companies joined forces in 2019, undoing the split consummated in 2006. The company, ViacomCBS, changed its name to Paramount Global in 2022.

Under Sumner Redstone, Viacom became one of the country's media giants, home to pay television channels MTV and Comedy Central and film studio Paramount Pictures.

It's a company with a rich history, as well as a sizable bank of media assets, and Skydance wasn't alone in its interest in acquiring Paramount in recent months. Apollo Global Management and Sony Pictures also made competing offers.

Late last year, Warner Bros. Discovery also made headlines for exploring a potential merger with Paramount. But by February, Warner had apparently interrupted these talks.

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AP film writer Lindsey Bahr contributed to this report.