For the first time, privately held Skydance Media has opened up its books, revealing it has been a largely unprofitable business since 2021, despite being valued at $4.75 billion in its merger deal to take over Paramount Global for $8 billion.
The David Ellison-led company, which beat out a number of bidders to take over the entertainment conglomerate controlled by Shari Redstone, posted a net loss of $56 million in 2023, a small profit of $7.99 million in 2022 and another loss of $81.5 million in 2021, according to a 669-page filing with the Securities Exchange Commission last week.
The company also saw its year over year revenue plunge by 40% in the first half of 2024, the year it closed the deal with Paramount Global.
The SEC filing is the first revealing look into the finances of Skydance, a film and television production company that also works in animation, sports and gaming. As a private company, it is not required to publicly report its earnings on a quarterly or annual basis.
One Wall Street investor told TheWrap that Skydance’s financials “make a bad deal look worse,” adding that “no one believed” its valuation projections. But they acknowledged that Paramount has “also fared poorly” and that in the grand scheme of the deal, Skydance’s valuation doesn’t matter as much.
The filing also revealed:
- Skydance generated total revenue of $992 million in 2023, up 3% from $967 million in 2022. In the first half of 2024, the company had $285.5 million in total revenue, compared to $447.4 million in the prior-year period.
- Film and TV revenue was $965.7 million in 2023, up 3% from $940.1 million in 2022. It plummeted 40% to $279.5 million for the six-month 2024 period, from $469.5 million, primarily due to the timing of available film and TV content following the Hollywood strikes.
- Skydance received 43% of its total 2023 revenue from Apple, 29% from Netflix, 16% from Amazon and 9% from Paramount. For the first half of 2024, that flipped to 70% from Netflix, 13% from Apple and 13% from Paramount.
- Skydance Television accounted for 1% of the company’s revenues in the first half of 2024 and 41% in 2023.
- Skydance has produced or co-financed 35 live-action and animated feature films, 24 co-financed with Paramount, including the “Mission Impossible,” “Star Trek” and “Terminator” franchises.
Skydance has been on pace to close its takeover of Paramount from National Amusements Inc. by the first half of 2025. But on Tuesday, Paramount Global shareholder Mario Gabelli, whose investment firm owns the second-most Class A shares behind Redstone and NAI, asked the Federal Communications Commission (FCC) to pause its review of the transfer of broadcast licenses so he can investigate potential securities violations against Paramount’s minority shareholders.
The Gabelli challenge is another potential roadblock for Skydance, which previously had to weather several competing bids from Sony and Apollo Global Management and Edgar Bronfman Jr. Other interested parties during the sale saga included Warner Bros. Discovery CEO David Zaslav, Allen Media Group founder Byron Allen and IAC chairman Barry Diller.
The Ellison family — which includes Oracle co-founder Larry Ellison, David’s father and the fifth-richest person in the world — controls 67% of the membership interests and 78% of the voting interest in Skydance, according to the SEC filing. The company’s other backers include RedBird Capital Partners, investment firm KKR, China’s Tencent Holdings and South Korea’s CJ E&M.
Ellison and his team have told Wall Street that they plan to build a “new Paramount” that will be a hybrid entertainment-technology company that leans into AI-infused efficiencies and works with companies like Oracle to boost the profitability of its direct-to-consumer business that includes Paramount+.
The SEC documents also show that the evolving merger proposal continued to downgrade the minimum implied valuation of Skydance in the deal.
A financial analysis conducted by Centerview Partners, which was based on qualitative and quantitative factors including the company’s historical and expected growth, determined Skydance’s implied equity value ranged between $3.1 billion to $4.4 billion. When including the $6 billion cash investment, that range was upped to $9.1 billion to $10.4 billion.
A company driven by film production
Skydance’s feature films generated more than half (53%) of is overall revenues in 2023, though that figure dropped to 13% in the first half of 2024. The division’s revenue comes from distribution of the feature films it produces or co-produces in theaters and on streaming platforms, home entertainment and licensing and merchandising of its films and characters in markets around the world.
Its distribution arrangement with Paramount expired in 2022 with respect to new original films, but Paramount continues to distribute the existing films produced under the deal, and Skydance has certain rights to co-finance certain derivative productions related to such films.
Skydance’s co-productions with Paramount include “Top Gun: Maverick,” which grossed $1.5 billion at the worldwide box office in 2022. It also recently launched a new horror film label, Nocturna, which announced its first project, “They Will Kill You.”
As of June 30, Skydance is currently producing nine live-action feature films with anticipated release dates by the end of 2025. In addition, it has a substantial number of projects in development that are expected to fill its release schedule in 2026 and beyond.
Its sales growth in 2023 was driven by “Heart of Stone,” “The Family Plan,” “Spy Kids: Armageddon,” “Foundation” Season 2, “Tom Clancy’s Jack Ryan” Season 3, “The Big Door Prize” Season 2, “Jack Reacher” Season 2, “Cross” Season 1 and episodes of the animated television series “WondLa.”
The company primarily generates revenue from licensing content to streaming platforms such as Netflix, Prime Video and Apple TV+. Skydance received 43% of its total 2023 revenue from Apple, 29% from Netflix, 16% from Amazon and 9% from Paramount in content licensing fees. Content availability for the year was negatively impacted by production delays related to the Hollywood strikes. Film, television and interactive costs grew 18% to $938 million in 2023, compared to $794 million a year ago.
Since the end of the Hollywood double-strikes, Skydance Television’s contribution to the company’s revenues plummeted to 1% in the six months ending June 30, from 41% in 2023.
As of June 30, Skydance Television has produced 27 aired television seasons across 12 series and is currently producing 11 television series that will air or deliver in 2025 and 2026. Its series include “Grace and Frankie,” “The Big Door Prize,” “Fubar,” “Reacher,” “Tom Clancy’s Jack Ryan” and “Cross.”
Skydance Animation, led by Pixar co-founder John Lasseter, generated 83% of Skydance’s revenues for the six months of 2024, and 3% in full-year 2023.
The division, which develops and produces animated feature films from studios in Los Angeles and Madrid, derives revenue from content distribution on streaming platforms and licensing and merchandising of its characters in consumer product markets around the world. Its projects include the Apple TV+ movie “Luck,” short film “Blush” and series “WondLa.”
In 2023, Skydance entered into a multi-year partnership with Netflix, which will include the release of upcoming musical “Spellbound” in 2024, as well as the animated feature film “Pookoo.”
Sports and games are a much-smaller slice
Skydance Sports accounted for less than 5% of the company’s revenues for the six months ending June 30 and the year ending Dec. 31, 2023, respectively. The division primarily generates revenue from its distributors’ worldwide exploitation of the content it produces, including distribution in theaters and on television and streaming platforms.
Since launching in 2021, the studio has become prominent among leagues, teams, athletes and A-list talent looking to produce sports-related entertainment. In 2023, Skydance Sports received an equity investment from NFL affiliate 32 Equity for a 45% stake.
The NFL selected Skydance Sports as its exclusive partner for certain league content outside of live games, prompting the launch of a joint venture in 2022. The first project under the partnership, “NFL Draft: The Pick Is In,” chronicled the NFL draft and was renewed for a second season. By the end of 2024, Skydance Sports expects to have delivered at least seven projects across buyers including Prime Video, Netflix, HBO, Roku and Paramount+. Upcoming projects include a docuseries chronicling the Dallas Cowboys’ dynasty and franchise owner Jerry Jones for Netflix and the Hallmark’s “Holiday Touchdown: A Chiefs Love Story.”
Skydance Games, which includes two gaming studios, a console gaming joint venture and a virtual reality studio, generated less than 5% of the company’s revenue for the first half of 2024 and for 2023. The VR studio generates revenue from the sale of its video games through platforms to consumers.
Its console gaming studio has not yet released a game and has not yet generated revenue.
The division’s portfolio includes VR titles such as “Archangel,” “The Walking Dead: Saints & Sinners,” which became a bestseller with over three million units sold across the franchise as of June, and the upcoming “Behemoth,” as well as console and PC titles such as “Marvel 1943: Rise of Hydra” and a video game developed in collaboration with Lucasfilm Games set in the Star Wars galaxy. It also licenses its intellectual property to third-party game developers, including the upcoming game “Foundation: Galactic Frontier” with FunPlus.
As of June 30, Skydance employed about 1,300 full- and part-time employees across Los Angeles; San Francisco; Stamford, Connecticut; Madrid and Vancouver, including some 200 animation project-based staff in the United States. About 140 animation employees, as well as some independent contractors hired on a project-by-project basis, are represented under collective bargaining agreements with IATSE, the DGA and SAG-AFTRA.
The future of Skydance
Skydance is expected to generate $974 million in revenue and adjusted EBITDA of $78 million for full year 2024, $2.27 billion in revenue and $275 million in adjusted EBITDA in 2025, $2.34 billion and $339 million in adjusted EBITDA in 2026, $2.45 billion in revenue and $338 million in adjusted EBITDA in 2027 and $2.6 billion and $460 million in adjusted EBITDA in 2028, according to Paramount’s filing.
The filing also forecasts that Skydance will report negative free cash flow of $210 million in 2024, followed by positive free cash flow of $37 million in 2025. As of June 30, Skydance had about $300 million in cash on hand, as well as $100 million of available borrowing capacity and $485 million outstanding under its credit facility.
The company expects to pay off its outstanding loans and to terminate its credit facility in connection with the Paramount closing.
Skydance is obligated to make payments under its operating and finance leases of $7 million in the last six months of 2024, $12 million in 2025, $11 million in 2026 and 2027 and $9 million in 2028. It also has various commitments with Apple and Paramount to co-finance film costs and expects to make $75 million in payments in 2025 in connection with those arrangements.
