From "Iron Man 2" to "Shrek Forever After," Paramount has released some of the biggest films of the year. So where's the respect?
After years as a box-office also-run, the studio has finally climbed to the top of the heap. But while it commands an impressive share of the market -- second only to Warner Bros. domestically -- it doesn't actually own its biggest blockbusters.
The studio’s three highest grossing films this year are the result of distribution deals with Marvel and DreamWorks Animation, on which the studio makes an 8 percent distribution fee.
Marvel already has left the lot for Disney.
But the bigger danger looms with Paramount's deal to distribute DreamWorks Animation movies ending in 2012 -- which CEO Jeffrey Katzenberg is not inclined to renew, TheWrap has learned.
According to multiple individuals with knowledge of Katzenberg's thinking, the executive believes that his films get insufficient attention for bringing in nearly half of Paramount's box office in 2010.
What's more, his relationship has become frazzled with COO Rob Moore, even as his compatriots at DreamWorks have decamped for Disney, and his former deputy Steve Bertram in the home-entertainment division has left Paramount to be COO at Relativity.
"He's sick of how they've treated him," said one person close to the situation.
On the surface, Paramount appears to be doing well, fielding recent high-profit margin hits "Paranormal Activity 2" and "Jackass 3D." And cash registers will keep ringing through 2011 with “Thor,” “Transformers 3,” “Kung Fu Panda 2" and “Captain America” all hitting theaters under the studio’s banner.
“Their summer of 2011 looks unbelievable. Nobody’s going to match them,” Jeff Bock, a box-office analyst with Exhibitor Relations, told TheWrap.com.
Yet the same problem remains. With the exception of "Transformers 3," it's other people's content who will be driving that release schedule, namely films belonging to Marvel and DreamWorks.
Last month, Paramount sold its worldwide rights to “Iron Man 3” and “The Avengers” to Disney for $115 million, a short-term move that helps the company’s income recognition and guarantees high executive bonuses. But it leaves the studio without those reliable titles in two to three years.
Paramount executives maintain that this was a brilliant deal, since they were paid regardless of whether Disney makes those titles. On the other hand, it robs the studio of two potentially lucrative releases down the line.
Meanwhile, part of the tension with DreamWorks Animation stems from the hard-nosed re-negotiating of the deal. Paramount wants to increase its fees, but Katzenberg feels his company already accounts for a huge slice of the studio’s no-risk profits.
DreamWorks Animation and Paramount declined to comment for this article.
All of this while Paramount has climbed to slim profitability of late, after years of moribund to nonexistent profit margins.
But Paramount’s bottom line hasn’t improved as much as Wall Street would like.
