David Ellison says Paramount will become a ‘media and tech’ company

Billionaire scion David Ellison wants to transform Paramount, the storied Hollywood company with roots in the silent film era, into a modern media and technology giant capable of challenging Netflix.

A day after agreeing to acquire Paramount from Shari Redstone, Ellison told the Financial Times the century-old company needs to move faster to adapt to the technological shifts that are disrupting Hollywood, from streaming to artificial intelligence. 

“We recognise the transition that the broader industry is going through,” said Ellison, the 41-year-old son of Oracle founder Larry Ellison, one of the world’s richest people. “In order to effectively navigate this transition, what is required for Paramount as a pure-play media company is to transition to becoming a media and technology company.” 

The younger Ellison reached a deal on Sunday to combine his production studio, Skydance, with Paramount, transferring control of the group from Redstone after a gruelling eight-month negotiation process. His father was a major backer of the deal. 

The deal, which is expected to close next year, gave the new Paramount an enterprise value of $28bn. Shares fell 5 per cent on Monday after the deal was announced. The stock has fallen by 30 per cent over the past year and nearly 80 per cent since 2019.   

Paramount’s struggles began in 2021, when Redstone decided to pump up its investment in the Paramount+ streaming service. Since then the streaming business has soaked up billions of dollars in investment but remains unprofitable, with a sparse audience, widespread complaints of glitchy technology and advertisements plugged into content despite a monthly subscription fee.  

But Ellison said he plans to rebuild the technology behind Paramount+ to make it more consumer-friendly — including by improving the algorithm-powered recommendation engine that helps users discover new shows. 

“There are several things we can do in terms of how the platform is designed to reduce ‘churn’ and maximise time spent on the platform,” he said. 

Ellison and his team have their work cut out. Even the largest legacy media companies, such as Disney, have struggled to catch up to Netflix in a costly and ultra-competitive streaming battle. 

“Even for a company like Apple, who has unlimited money, at some point the investment return becomes a complicated question in a cluttered market,” said a veteran media executive.

Ellison intends to work with his father’s company, which is a leader in cloud computing, to boost efficiency and reduce costs. Skydance is already using cloud technology in its animation business, which is headed by former Pixar chief John Lasseter. 

“We’re building studios on the cloud” in the animation business, he said, allowing production and rendering processes to be done virtually at lower costs. “Content will always be the tip of the spear for Paramount, but it does require technological prowess to be able to effectively navigate and transition the business at this particular moment in time.”

Jeff Shell, the former chief executive of NBC who will become president of the newly combined company, told the FT that Paramount+ will explore partnerships with other streaming services and potential bundling agreements to help cut costs and decrease customer churn.  

“We want to be in the streaming business and win the streaming business,” said Shell. “We’ve had a number of inbound calls from a lot of different potential partners. If we can find the right partnership agreement with somebody that gets us more scale and also gets us more rapidly to that cash flow break-even point, we’re going to evaluate it.”

He said Netflix is the only streaming service that is “doing technology well right now”. 

“It’s a pretty poor experience on every other platform,” Shell said. “So, however we end up, with a partner or on our own, we will be the technological leader.”

Paramount has struggled as its cable networks, which include MTV, Comedy Central and Nickelodeon, fell into steep decline due to the popularity of streaming. Shell said some of the cable assets could be sold.

“There’s been speculation about some assets for us to sell . . . We certainly will not be wedded to some of the non-strategic assets,” he said. But any divestitures would be “strategic mini-sales”.

However, he said the CBS network is an asset that Skydance sees as a growth opportunity — particularly in sports, where it has rights to NFL games and the Uefa Champions League. 

Gerry Cardinale, founder of RedBird Capital Partners, which is backing Skydance’s deal, rejected any ideas that his private equity company had designs on breaking up Paramount.  

Skydance‘s plan to invest in Paramount and keep the company intact was critical to winning Redstone’s approval, he said.   

“We’re not breaking it up and killing it,” Cardinale said. “We are preserving a company that is over 100 years old and rejuvenating it and recapitalising it. I frankly think it’s probably the philosophical point that won over Shari, because she’s very much focused on her family’s legacy.”