Hollywood is back in the news. Fabled names (Paramount! Warner Brothers!) are on the auction block, and much newer big names (the Ellisons! Netflix!) are in the crowd waving their paddles. It all sounds glamorous, like titans playing on a giant media chessboard. The reality? It isn’t, really.
Paramount and Warner Brothers: Those are the shorthand terms for conglomerates that each include a major movie studio and then a lot of other media assets of varying quality and value. They are indeed fabled, but mismanagement and financial legerdemain in recent years have brought them both to a sad pass.
Donald Trump and Larry Ellison, the father of Paramount head David Ellison.Credit: AP
Paramount, which includes the TV network CBS, was the domain of mogul Sumner Redstone; he went into an extended dotage with no clear succession plan and an accompanying tabloid orgy of embarrassing sex, family and financial imbroglios. By the early years of this decade, it was long past its peak value as it struggled to find its place in the streaming world.
Warner Bros, which includes HBO and CNN, has been limping since its disastrous merger with AOL way back when. A few years ago, then-owner AT&T tossed the company off into a merger with a group of cable networks. Warner ended up saddled with the galumphy name Warner Bros Discovery – and even more saddled with debt. (And in case you haven’t heard, cable channels aren’t exactly a growth industry these days.)
Plans for a CNN streaming service were abandoned. And then the company renamed the HBO streaming service – to Max – tossing aside one of the most valuable brand names in American cultural life. (It eventually tacked back to HBO Max.) Its stock price was in the toilet.
Next up, another grand Hollywood business story: Rich outsiders buying in to hang out with movie stars. Enter David Ellison, son of Larry Ellison, one of the three or four richest people in the world. David Ellison wasn’t really an outsider. His production company, Skydance, has had its name on a lot of movies. Look closely at the slate, however, and you notice that a lot of the company’s prominence involves supplying money for films starring David’s good buddy Tom Cruise. That’s a business anyone with a few hundred million dollars to spend can get into.
David Ellison, chairman of Paramount Skydance, in October.Credit: Bloomberg
Ambitious and with the deepest of deep pockets, Ellison paid $8 billion for Paramount, renaming it Paramount Skydance, and then immediately started cutting staff to reduce debt. Word spread that Warner would be his next target – and its stock rose in anticipation. Netflix jumped in with an offer that priced the stock at three times what it had been worth earlier in the year. Warner quickly accepted. Then Ellison made a hostile takeover offer 30 per cent higher than Netflix’s.
The stand-off is one of those in which you wish both parties would knock each other out – and that’s before you think of the antitrust issues, both in the US and the EU. Ellison could end up controlling two major news organisations, CNN and CBS – and since both Ellisons have been publicly attaching their lips to Donald Trump’s ample buttocks in recent months, it’s a given that the Trump administration would approve it. But the truth is that the influence of CBS News, for all the hand-wringing over Bari Weiss’ takeover, was already at a nadir from which it will never recover. The insane level of debt the company will take on will be crippling from the start.
