Business
David Ellison is taking control of Paramount. Now the real work begins
Tech scion David Ellison battled hard to get Paramount Global.
The Skydance Media chief executive first made overtures last summer to Paramount’s nonexecutive chair, Shari Redstone, then spent months negotiating and renegotiating a deal acceptable to Redstone, Paramount’s board and the company’s shareholders.
Now that he’s clinched the company through a complicated, multipronged transaction valued at more than $8 billion, the real work begins. Ellison is set to become the company’s chief executive, while former NBCUniversal Chief Executive Jeff Shell will be president (Shell left his old job after acknowledging an “inappropriate relationship” with a colleague).
The legacy media and entertainment company has major challenges Ellison will need to address quickly to get Paramount back on the right footing, once the deal closes during the first half of next year.
Like many entertainment companies, Paramount is facing a decline in theatrical box office revenue as audiences haven’t returned to movie theaters with the same frequency as before the COVID-19 pandemic. Add to that Paramount’s particular woes with its money-losing streaming business as well as its heavy investment in cable networks that face challenges from cord cutting and declining advertising dollars, and it’s clear there is a lot for Ellison and his investors to fix.
“There really are amazing assets in this company,” said Jessica Reif Ehrlich, senior media and entertainment analyst at Bank of America Securities. “They just haven’t been managed well.”
For example, Paramount Pictures’ historic Melrose Avenue studio is valuable, as is Paramount’s broadcast network CBS. Some of the company’s cable networks, which include Nickelodeon, BET and MTV, have prized content and recognizable names. But they’re shells of what they used to be, Reif Ehrlich said.
“Every part of the business is under siege at this moment,” she said. “They really do need to resolve what they will be and have a clear point of view and way to achieve that as soon as possible.”
Paramount’s heavy debt load
First and foremost is paying down Paramount’s debt. Part of the company’s balance sheet problem will be addressed with a $1.5-billion cash infusion from Skydance and RedBird Capital Partners.
Getting Paramount on solid financial footing is key to its future success.
“This is very much about the fact that David Ellison and Skydance have had a 15-year relationship with Paramount,” RedBird Capital founder Gerry Cardinale said in an interview. “So it made it a lot easier to look at a strategic recapitalization, as opposed to just doing a deal.”
Paramount’s three current co-CEOs have already embarked on a $500-million cost-cutting plan that will continue as the Skydance transaction unspools. That plan involves evaluating the sale of certain Paramount assets, potentially including BET, as well as an unspecified number of layoffs. During an investor presentation Monday, Skydance executives said they had identified as much as $2 billion in “cost efficiencies” that would help increase cash flow.
Kenneth Leon, research director at CFRA Research, sounded cautiously optimistic about the plan in a note to investors.
“We think the new company has major opportunities for content production and distribution, but the challenges of competing in today’s disruptive movies and entertainment industry remain,” he wrote.
Cable networks: Asset and liability
It’s no secret that linear television revenue is declining as more customers cut the cord and abandon their traditional cable and satellite packages. But though the financial returns are diminishing, the cable networks are still making money for Paramount. That makes them an important asset to keep managing — strategically.
Last year, Paramount’s TV media segment, which includes CBS and the cable networks, brought in about $20 billion, or 68% of the company’s total revenue, according to its annual report. But that was about an 8% decrease compared with 2022.
Things were slightly better in the first fiscal quarter of 2024, when TV media brought in $5.2 billion in revenue, an increase of 0.7% compared with the same period a year ago.
“The linear business declining is not necessarily a bad story for Paramount,” said Laurent Yoon, senior analyst at Bernstein. “It’s already reflected in the stock price, and it’s not Paramount’s problem alone. There’s not much they can do. They just have to manage the decline.”
During Monday’s investor call, Skydance and RedBird executives touted the value and reach of CBS, noting that the network was a “driver” for the company.
The studio: A new shine on the crown jewel?
As one of Hollywood’s first studios, 112-year-old Paramount Pictures is the crown jewel of the company. That’s certainly how Sumner Redstone, Shari’s late father, saw it.
It has churned out such landmark films as “The Godfather,” “Chinatown” and “Breakfast at Tiffany’s,” while moving into the modern age with franchises like “Top Gun” and “Star Trek.” But the company’s studio business has been a mixed bag of late.
Paramount’s filmed entertainment segment, which includes Paramount Pictures, its animation arm, Nickelodeon Studios and Miramax, brought in about $3 billion in revenue last year, down 20% from the previous year, according to regulatory filings. For the three-month period ending March 31, Paramount’s filmed entertainment sector revenue totaled $605 million, up about 3% from last year.
In some respects, the studio is being hit by the same external forces battering the rest of the entertainment industry — the 2024 box office receipts are not reaching the levels they did last year and fall far short of pre-pandemic levels. But the studio’s creative strategy needs to be rethought, as well as film budgets, said Reif Ehrlich of Bank of America.
Rethinking the studio strategy means leaning into franchises, Shell said in an interview.
“In Hollywood, you really make money when you have big franchises and are able to monetize them, and they really have not done that very effectively at Paramount,” Shell said. “For example, there’s no ‘Top Gun’ theme park ride anywhere in the world.”
If the studio’s finances were optimized — meaning if it cut back on expenses — it could be a $3-billion to $4-billion business with a potential for a 10% to 15% margin, said Yoon of Bernstein.
“Paramount obviously has a great heritage when it comes to moviemaking,” he said. “It feels like they should do better, but they’re not. But it does have the potential to stabilize.”
Ellison also said the Skydance deal would bolster the combined company’s animation capabilities, allowing Paramount to expand its family entertainment business.
Paramount+: The struggles of streaming profitability
The foray into the streaming business has been a costly one for Paramount. The company was late to join the so-called streaming wars, lagging behind competitors Netflix and even Disney, and then spent heavily on the service.
Even so, the company is struggling to add subscribers, leading to about $2 billion in losses for Paramount+ since launch. In the first fiscal quarter of 2024, however, the company’s streaming division reported revenue of nearly $1.88 billion, up 24% compared with a year earlier. The segment’s quarterly loss was $287 million.
Ellison laid out a plan Monday for tech upgrades to the Paramount+ service, including improved ad technology and a better algorithmic recommendation engine that could help reduce subscriber churn and increase users’ time on the platform.
One option currently being explored by the company is a joint venture for the streaming service, Paramount executives have said. Having a partner could help Paramount turn a profit in streaming, Yoon said.
Such a partnership would not be unprecedented. In May, Warner Bros. Discovery and the Walt Disney Co. said they would join together to offer a new streaming bundle this summer that would allow subscribers to access Max, Disney+ and Hulu in the same deal. Separately, Disney, Warner Bros. and Fox are preparing to launch a streaming venture for sports.
“It’s generally believed at this point that Paramount+ could be profitable in 2025, but ‘profitable’ is relative,” Yoon said. “Is it a dollar or is it a billion? They need to make sure the margin increases.”
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Politicians in Washington and the reporters who cover them have an often adversarial relationship.
But on the last Saturday in April, they gather for an irreverent celebration of press freedom and the First Amendment at the Washington Hilton Hotel: The White House Correspondents’ Association dinner.
Hosted by the association, an organization that helps ensure access for media outlets covering the presidency, the dinner attracts Hollywood stars; politicians from both parties; and representatives of more than 100 networks, newspapers, magazines and wire services.
While The Times will have two reporters in the ballroom covering the event, the company no longer buys seats at the party, said Richard W. Stevenson, the Washington bureau chief. The decision goes back almost two decades; the last dinner The Times attended as an organization was in 2007.
“We made a judgment back then that the event had become too celebrity-focused and was undercutting our need to demonstrate to readers that we always seek to maintain a proper distance from the people we cover, many of whom attend as guests,” he said.
It’s a decision, he added, that “we have stuck by through both Republican and Democratic administrations, although we support the work of the White House Correspondents’ Association.”
Susan Wessling, The Times’s Standards editor, said the policy is a product of the organization’s desire to maintain editorial independence.
“We don’t want to leave readers with any questions about our independence and credibility by seeming to be overly friendly with people whose words and actions we need to report on,” she said.
The celebrity mentalist Oz Pearlman is headlining the evening, in lieu of the usual comedy set by the likes of Stephen Colbert and Hasan Minhaj, but all eyes will be on President Trump, who will make his first appearance at the dinner as president.
Mr. Trump has boycotted the event since 2011, when he was the butt of punchlines delivered by President Barack Obama and the talk show host Seth Meyers mocking his hair, his reality TV show and his preoccupation with the “birther” movement.
Last month, though, Mr. Trump, who has a contentious relationship with the media, announced his intention to attend this year’s dinner, where he will speak to a room full of the same reporters he often derides as “enemies of the people.”
Times reporters will be there to document the highs, the lows and the reactions in the room. A reporter for the Styles desk has also been assigned to cover the robust roster of after-parties around Washington.
Some off-duty reporters from The Times will also be present at this late-night circuit, though everyone remains cognizant of their roles, said Patrick Healy, The Times’s assistant managing editor for Standards and Trust.
“If they’re reporting, there’s a notebook or recorder out as usual,” he said. “If they’re not, they’re pros who know they’re always identifiable as Times journalists.”
For most of The Times’s reporters and editors, though, the evening will be experienced from home.
“The rest of us will be able to follow the coverage,” Mr. Stevenson said, “without having to don our tuxes or gowns.”
A former female staffer who worked for Beast Industries, the media venture behind the popular YouTube channel MrBeast, is suing the company, alleging she was sexually harassed and fired shortly after she returned from maternity leave.
The employee, Lorrayne Mavromatis, a Brazilian-born social media professional, alleges in a lawsuit she was subjected to sexual harassment by the company’s management and demoted after she complained about her treatment. She said she was urged to join a conference call while in labor and expected to work during her maternity leave in violation of the Family and Medical Leave Act, according to the federal complaint filed Wednesday in the U.S. District Court for the Eastern District of North Carolina.
“This clout-chasing complaint is built on deliberate misrepresentations and categorically false statements, and we have the receipts to prove it. There is extensive evidence — including Slack and WhatsApp messages, company documents, and witness testimony — that unequivocally refutes her claims. We will not submit to opportunistic lawyers looking to manufacture a payday from us,” Gaude Paez, a Beast Industries spokesperson, said in a statement.
Jimmy Donaldson, 27, began MrBeast as a teen gaming channel that soon exploded into a media company worth an estimated $5 billion, with 500 employees and 450 million subscribers who watch its games, stunts and giveaways.
Mavromatis, who was hired in 2022 as its head of Instagram, described a pervasive climate of discrimination and harassment, according to the lawsuit.
In her complaint, she alleges the company’s former CEO James Warren made her meet him at his home for one-on-one meetings while he commented on her looks and dismissed her complaints about a male client’s unwanted advances, telling her “she should be honored that the client was hitting on her.”
When Mavromatis asked Warren why MrBeast, Donaldson, would not work with her, she was told that “she is a beautiful woman and her appearance had a certain sexual effect on Jimmy,” and, “Let’s just say that when you’re around and he goes to the restroom, he’s not actually using the restroom.”
Paez refuted the claim.
“That’s ridiculous. This is an allegation fabricated for the sole purpose of sparking headlines,” Paez said.
Mavromatis said she endured a slate of other indignities such as being told by Donaldson that she “would only participate in her video shoot if she brought him a beer.”
“In this male-centric workplace, Plaintiff, one of the few women in a high-level role, was excluded from otherwise all-male meetings, demeaned in front of colleagues, harassed, and suffered from males be given preferential treatment in employment decisions,” states the complaint.
When Mavromatis raised a question during a staff meeting with her team, she said a male colleague told her to “shut up” or “stop talking.”
At MrBeast headquarters in Greenville, N.C., she said male executives mocked female contestants participating in BeastGames, “who complained they did not have access to feminine hygiene products and clean underwear while participating in the show.”
In November 2023, Mavromatis formally complained about “the sexually inappropriate encounters and harassment, and demeaning and hostile work environment she and other female employees had been living and experiencing working at MrBeast,” to the company’s then head of human resources, Sue Parisher, who is also Donaldson’s mother, according to the suit.
In her complaint, Mavromatis said Beast Industries did not have a method or process for employees to report such issues either anonymously or to a third party, rather employees were expected to follow the company’s handbook, “How to Succeed In MrBeast Production.”
In it, employees were instructed that, “It’s okay for the boys to be childish,” “if talent wants to draw a dick on the white board in the video or do something stupid, let them” and “No does not mean no,” according to the complaint.
Mavromatis alleges that she was demoted and then fired.
Paez said that Mavromatis’s role was eliminated as part of a reorganization of an underperforming group within Beast Industries and that she was made aware of this.
Lululemon, the yoga pants and athletic clothing company, has hired a former executive from a rival, Nike, as its new chief executive.
Heidi O’Neill, who spent more than 25 years at Nike, will take the reins and join Lululemon’s board of directors on Sept. 8, the company announced on Wednesday.
The leadership change is happening during a tumultuous time for Lululemon, which had grown to $11 billion in revenue by persuading shoppers to ditch their jeans and slacks for stretchy leggings. But lately, sales have declined in North America amid intense competition and shifting fashion trends, with consumers favoring looser styles rather than the form-fitting silhouettes for which Lululemon is best known.
“As I step into the C.E.O. role in September, my job will be to build on that foundation — to accelerate product breakthroughs, deepen the brand’s cultural relevance, and unlock growth in markets around the world,” Ms. O’Neill, 61, said in a statement.
Lululemon, based in Vancouver, British Columbia, has also been entangled in a corporate power struggle over the company’s future. Its billionaire founder, Chip Wilson, has feuded with the board, nominated independent directors and criticized executives.
Lululemon’s previous chief executive, Calvin McDonald, stepped down at the end of January as pressure mounted from Mr. Wilson and some investors. One activist investor, Elliott Investment Management, had pushed its own chief executive candidate, who was not selected.
The interim co-chiefs, Meghan Frank and André Maestrini, will lead the company until Ms. O’Neill’s arrival, when they are expected to return to other senior roles. The pair had outlined a plan to revive sales at Lululemon, promising to invest in stores, save more money and speed up product development.
“We start the year with a real plan, with real strategies,” Mr. Maestrini said in an interview this year. “We make sure decisions are made fast.”
Lululemon said last month that it would add Chip Bergh, the former chief executive of Levi Strauss, to its board to replace David Mussafer, the chairman of the private equity firm Advent International, whom Mr. Wilson had sought to remove.
Ms. O’Neill climbed the organizational chart at Nike for decades, working across divisions including consumer sports, product innovation and brand marketing, and was most recently its president of consumer, product and brand. She left Nike last year amid a shake-up of senior management that led to the elimination of her role.
Analysts said Ms. O’Neill would be expected to find ways to energize Lululemon’s business and reset the company’s culture in order to improve performance.
“O’Neill is her own person who will come with an agenda of change,” said Neil Saunders, the managing director of GlobalData, a data analytics and consulting company. “The task ahead is a significant one, but it can be undertaken from a position of relative stability.”
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