”We are running a business in a pandemic,“ one insider says of the recent moves
Paramount, one of Hollywood’s most cherished movie brands, has found itself between a rock and a hard place during the coronavirus pandemic: battling the short-term challenges of an industry-wide production shutdown while still aiming for its long-term plan to turn around the moribund studio.
After three years under the leadership of former Fox Studios chairman Jim Gianopulos, the studio has during the pandemic sold four of its films, ranging from projects at the script stage to finished features. The studio has also brought in Apple to help finance Martin Scorsese’s “Killers of the Flower Moon,” a $200 million-plus period thriller starring Robert De Niro and Leonardo DiCaprio. (Four films represents nearly half of the studio’s recent annual release slate; the studio has average 11 films per year since 2016 and just nine in 2019.)
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In the past five months, Netflix bought from Paramount an untitled Ryan Reynolds/Shawn Levy adventure film, Aaron Sorkin’s fact-based drama “The Trial of the Chicago 7” and the rom-com “The Lovebirds,” while Michael B. Jordan’s “Without Remorse” is bound for Amazon Studios. In June, Lionsgate picked up the Mark Wahlberg adventure drama “Arthur the King” that Paramount had been in negotiations to acquire though the deal was never finalized.
The sell-off has fed an industry gossip mill that the studio is in trouble. “They are incredibly strapped for cash and it is playing out all over town on current deals, deals they are trying to make and retreading on older deals for better terms,” said an executive who works with the studio but declined to be identified. A leading producer who has made movies at Paramount observed, “I’ve heard they are out of money,” while a third industry executive cited “deep financial troubles” at the century-old studio.
Last year, Paramount grossed a total of $564 million at the domestic box office — dead last among the major Hollywood studios for the second straight year, and well behind mini-major Lionsgate. Between 2016 and 2018, the studio racked up $764 million in operating losses, according to its annual reports.
But an individual familiar with ViacomCBS’ thinking denied that Paramount is facing imminent financial trouble. The studio posted its first full year of profitability in 2019 after four years of losses — though first quarter profits in 2020 were just $27 million despite an uptick in revenue to $811 million.
The insider characterized Paramount’s recent 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.”
ViacomCBS, which nearly halved in market value since the corporate re-merger was finalized last December, has aggressively sold off other projects in its empire to a slew of deeper-pocketed streaming competitors: The company offloaded the Paramount Network show “Emily in Paris” to Netflix, sold the streaming rights to the TV hit “Yellowstone” to the same service and signed a $500 million licensing deal with HBO Max for the streaming rights to the Comedy Central hit “South Park.”
Representatives for ViacomCBS and Paramount had no comment for this story. ViacomCBS will report earnings on Thursday.
“Lovebirds,” a rom-com starring Issa Rae and Kumail Nanjiani, was supposed to premiere at SXSW and open April 3 before theaters shut down. The film was picked up by Netflix, which rolled it out on on May 22. In the case of “Chicago 7,” on which Paramount only had North American distribution rights, director Sorkin and production company Cross Creek were insisting that the film open before the 2020 election due to its political nature — something that Paramount couldn’t guarantee given the ongoing pandemic, an individual close to Paramount said.
“When you have an opportunity to sell these movies and make money, you’re going to decide on a case-by-case basis,” the individual said.
The ViacomCBS insider added, “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.”
It’s unclear 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 hits. In May, ViacomCBS CEO Bob Bakish told analysts: “We sold ‘The Lovebirds’ to Netflix where we saw an attractive monetization opportunity in the early COVID environment. We are in ongoing discussions with a broad range of partners to expand our streaming footprint in the coming months. There’s no question the crisis has proven the power of streaming, and we’re moving quickly to seize on the significant revenue opportunity.”
In other instances, Paramount was merely the planned theatrical distributor and the lead producer or financier made the call. While Paramount was supposed to release “The Spongebob Movie: Sponge on the Run” in theaters, ViacomCBS decided to forgo that plan and launch the film on PVOD and its own CBS All Access streaming service in early 2021. And Skydance, which owns the Ryan Reynolds project, opted to distribute via Netflix instead.
But the studio is even offloading franchise-ready projects that might have seemed like safe bets — like “Without Remorse,” a spinoff of Tom Clancy’s Jack Ryan series with “Black Panther” star Michael B. Jordan as a Navy SEAL turned CIA operative. At the time, the ViacomCBS insider said the studio is prioritizing franchises that are absolute guarantees, like Tom Cruise’s “Top Gun Maverick” and John Krasinski’s “A Quiet Place II.”
The volume of projects that Paramount has offloaded is noteworthy, accelerating a shift that began several years ago: Without a robust streaming service of its own, the studio increasingly acts as a producer for Netflix and other streamers hungry for original content.
Two years ago, the studio announced a multipicture deal with Netflix — just months after selling the J.J. Abrams-produced sci-fi sequel “The Cloverfield Paradox” to the service. An insider had told TheWrap at the time that the deal made the film “immediately profitable” and a “welcome injection of cash.” This came after a deal between Paramount and Netflix on the film “Annihilation,” which allowed Netflix to distribute the film internationally just 17 days after Paramount’s North American theatrical release. The studios have also partnered on “To All the Boys: I Still Love You,” and last year Bakish said that the studio’s long-awaited new “Beverly Hills Cop” sequel would also go to Netflix.
Another aspect of the studio’s sell-off strategy is the growing backlog of major studio releases for later this year and 2021, given the lingering effects of the pandemic. Paramount still has “Clifford the Big Red Dog” and the Eddie Murphy comedy “Coming 2 America” on this year’s release calendar, and next year is filled to the brim with films like “Monster Problems,” “A Quiet Place II,” “Top Gun Maverick,” the Chris Pratt sci-fi adventure “The Tomorrow War” — as well as several more it hopes to shoot as soon as that becomes safe, including a new “Jackass,” “Mission: Impossible 7” and Damien Chazelle’s period drama “Babylon” with Brat Pitt and Emma Stone.
But every other Hollywood studio has a similarly glutted slate, and nearly every weekend of 2021 is already booked with a big release — sometimes two or three. In such an atmosphere, it may make sense to sell off a film now, at a profit, rather than risk a hefty marketing spend and possible box office disappointment down the road.
“The new normal is now to expect companies like Paramount and others to reassess and reevaluate their strategies. I think it’s become an essential part of every studio, especially their film divisions, to decide on a case-by-case basis how best to serve the content, the financial dynamics, the shareholders, the clients and the consumers,” Paul Dergarabedian, senior analyst at Comscore, told TheWrap. “I take this all at face value: To leap to any conclusions about the financial situation based on decisions that seem unusual during the pandemic is misguided because if you took that approach, you would think everyone is in trouble, no matter what business you’re in.”
Even Disney — which has its own Disney+ streaming service — is in talks to sell the in-the-can Amy Adams thriller “The Woman in the Window” to Netflix.
“They have a lot of money vested in these movies and the longer you’re waiting to get a return, the more money you have leveraged where you’re not seeing benefit,” Dergarabedian said of the studios.
And all of Hollywood finds itself in uncharted territory as the pandemic drags on.
“It’s hard enough to release any film in a packed market like this,” the individual with knowledge of Paramount’s operations said, “especially when it’s a film that isn’t based on well-known IP or part of an iconic franchise.”
Studio insiders insist that Paramount is still in the movie-making business, noting the recent hire of powerhouse Fox veteran Emma Watts to replace Wyck Godfrey as president of Paramount’s motion picture group. Bakish was similarly bullish in June, during the Credit Suisse conference.
“When you think about Paramount, you really got to remember, it’s a scarce and valuable asset,” he said. “Our film and TV product is in high demand. We are monetizing on multiple platforms, including on our own linear and streaming services, as well as benefiting from a robust third-party marketplace. So, the Paramount story has great days ahead of it.”
For the record: A previous version of this story incorrectly said Paramount Network’s “Yellowstone” had been sold to Netflix and that the studio had completed a deal for “Arthur the King”; the story also cited a New York Times report with inaccurate information about the studio’s operating losses from 2016-18.
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