Inside Paramount’s 2020 Survival Strategy: Earn More Selling Off Films Than Releasing Them

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According to analysts, the studio has earned $450 million so far this year from Q1 releases and selling titles to streamers

Paramount Pictures studio gate Trial of the Chicago 7 The Lovebirds Coming 2 America Eddie Murphy Michael B. Jordan Ryan Reynolds
Getty/Warner Bros./Netflix

2020 was supposed to be a strong box office year for Paramount Pictures, but the pandemic-fueled shutdown of theaters had the studio look at different ways to succeed financially. The studio has begun offloading at least five of its films to streamers — including Aaron Sorkin’s “The Trial of the Chicago 7” — a survival strategy that seems to be paying off at a time when no studio can count on box office returns from movie theaters that remain closed or operate at limited capacity. Paramount has sold Netflix Aaron Sorkin’s fact-based drama “The Trial of the Chicago 7” (for a reported $56 million), “SpongeBob: Sponge on the Run,” an untitled Ryan Reynolds/Shawn Levy adventure film that has yet to shoot and the Issa Rae-Kumail Nanjiani rom-com “The Lovebirds” that one insider said sold in the high-$20 million/low-$30 million range. Meanwhile, Amazon Studios is closing in on a reported $125 million deal for Eddie Murphy’s “Coming 2 America” as well as a separate sale of the upcoming Jack Ryan spinoff “Without Remorse” starring Michael B. Jordan. All of those sales add up. In fact, three financial analysts estimate that the combined revenue from Paramount’s offloading and its domestic box office total $450 million. The combined sale prices dwarf the studio’s domestic box office gross from the first quarter of $178.3 million, stemming from films like “Sonic the Hedgehog” ($146 million), “Like a Boss” ($22.2 million) and “The Rhythm Section” ($5.4 million) that managed to open before the pandemic shut down theaters. By comparison, Paramount’s 2019 U.S. box office revenue stood at a dismal $563.9 million, the second-lowest for the studio since 1995 and the second time in three years that the studio’s domestic revenue fell below $600 million. “So far, I think Paramount has done a good job making the best of a difficult situation,” box office analyst Bruce Nash told TheWrap. “They’re still holding on to the big films like ‘Top Gun: Maverick’ and ‘Quiet Place II’ that they need to get a strong box office performance from but finding some form of replacement for the months of lost revenue that they really needed after the poor results last year.” Another insider said, “It’s a solid move for Paramount — it keeps some revenue going.” A spokesperson for Paramount had no comment for this story.
The Trial of the Chicago 7
“The Trial of the Chicago 7” (Photo: Nico Tavernise/Netflix © 2020)
In addition to selling off films, Paramount has found other ways to lower its risks on pricey projects. Apple stepped in to help finance Martin Scorsese’s upcoming “Killers of the Flower Moon,” a $200 million-plus period thriller starring Robert De Niro and Leonardo DiCaprio. Two insiders told TheWrap that Apple is forking over an estimated $225 million for the production budget in exchange for the streaming rights, while Paramount will still receive a distribution fee on the theatrical release. One studio insider with knowledge of the deal said the number is actually closer to mid-$100 million. A spokesperson for Apple Original Films declined to comment. For Paramount, there’s a clear advantage to earning film revenue that would be impossible given the state of the exhibition industry mid-pandemic. According to insiders, the streamers license the films for five to 10 years at cost plus, meaning they usually cover the production cost plus an additional 15-30% of the budget as a cash payment, given that streamers don’t give back-end deals with bonuses for hitting box office targets. One insider told TheWrap that the streamers have been paying between 20-30% above budget to give the studio some profit margin. It’s unclear exactly how much profit Paramount has made on the films it has sold, but the studio does save tens of millions of dollars on marketing costs while mitigating the risks on projects that might not be guaranteed box office hits. That’s especially important since parent company ViacomCBS’ newly announced streaming platform, Paramount+, is in no position to acquire films (unlike bigger streaming competitors like Disney’s Disney+ and WarnerMedia’s HBO Max). Because other studios have put greater priority on finding revenue via premium on-demand sales and streaming subscriptions, it’s difficult to say how well Paramount’s pandemic strategy holds up compared to other major studios. The other four major studios have taken in more from the box office this year than Paramount, though Warner Bros.’ only just recently did so thanks to the release of “Tenet,” which has performed decently overseas but struggled in the U.S. with just over $53 million grossed. With the exception of “Scoob!”, which was moved to PVOD and later to HBO Max, all of Warner’s major film releases have been postponed for later theatrical release.
Issa Rae and Kumail Nanjiani in The Lovebirds
“The Lovebirds” (Netflix)
Paramount’s sell-off also supplies badly needed revenue during a year in which the pandemic has dried up most income sources. In August, an individual familiar with ViacomCBS’ thinking characterized  the film sales as a strategic effort to generate revenue when movie theaters have shut down while also weeding out the studio slate ahead of a 2021 release calendar that could be more competitive than ever given the glut of studio films looking to hit reopened theaters. “What we’ve been doing is proactively managing our way through the period we’re in,” the individual close to ViacomCBS said. “In the environment we’re in, where there is so much uncertainty, there are certain movies we’re holding for theatrical distribution, while there are others that we’re monetizing in the immediate term to streamers. “Are there economic and financial issues at play? Yes. Are we doing it because we have to? No. We are running a business in a pandemic.” Another individual close to Paramount added: “When you have an opportunity to sell these movies and make money, you’re going to decide on a case-by-case basis.” Paramount had a full release slate for the first time in 20 years lined up for 2020 and 2021, which included films like “A Quiet Place 2” and “Top Gun: Maverick,” that were bound to be major successes at the box office. One studio insider said that if it hadn’t sold off films, Paramount would have been forced to release two years’ worth of films within one year or less — likely in a more crowded field since other studios might have faced the same backlog.
Sonic the Hedgehog
“Sonic the Hedgehog” (Paramount)
Still, Nash noted that one reason Paramount has been able to sell off its films is because, ironically, it has fewer potential blockbusters than its rivals — making it less likely to face outcry from theater owners who griped when Disney’s “Mulan” and Univeral’s “Trolls: World Tour” skipped theaters for an at-home release. “There isn’t going to be that much backlash to ‘Coming 2 America’ being pulled from theaters as there is to Disney films because the latter have become so crucial to theaters,” he said. “Paramount is still on good terms with theaters by keeping ‘Quiet Place’ and ‘Top Gun’ away from streaming, so they can go ahead and make moves with titles that aren’t four-quadrant.” Of course, depleting your film slate is only a temporary fix. Aside from Tom Cruise’s “Mission: Impossible” series, the studio has been looking for ways to bring in a reliable stable of franchises to boost revenue as older IP like the “Transformers” series has faded. They found one with “Sonic the Hedgehog,” which opened just a month before the pandemic truly sunk in and managed an impressive $308 million worldwide gross that might have been even bigger. Still, the film became the first Paramount release to top $100 million domestically in nearly 18 months, and a sequel has been greenlit. For the record: A previous version of this story incorrectly suggested that the streamers acquired Paramount’s films outright rather than held long-term licensing deals.            


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