On March 5, a week after inking a $111 billion deal, Paramount CEO David Ellison and Warner Bros. Discovery CEO David Zaslav conspicuously lunched in the executive dining room on the Warner Bros. Studio lot, breaking bread over their megamerger that will reshape Hollywood.
Unlike December’s visit from Netflix co-CEOs Ted Sarandos and Greg Peters to the WB lot, no glamour photos were taken, but the public appearance of Ellison on his property-to-be underscores the new world order that is about to engulf the industry. The rich and powerful are poised to get richer and more powerful, and much of the rest of the industry is wondering what comes next.
The Paramount-Warners marriage is perhaps the quintessential example. A year ago, Ellison was the CEO of Skydance, a studio with a valuation of $4.75 billion. When this deal closes, he will control two of Hollywood’s legacy studios, an empire valued at north of $120 billion.
Zaslav is running a company that had a share price of $10 a year ago. Now he is the toast of Wall Street, more than tripling the company’s value as Paramount, Netflix and NBCUniversal circled the prize. Zaslav himself is poised to exit with shares worth just shy of $800 million, according to Equilar, including the $114 million or so in stock he sold March 3, just days after the Paramount deal was announced. The executive, of course, now oversees a studio set to dominate the Oscars, and a resurgent HBO.
“Give Zaslav credit, he’s my hero,” investment manager Mario Gabelli, who is also a large WBD shareholder, told The Hollywood Reporter when Paramount and Netflix were still engaged in a battle for the prize.
Wall Street and the mogul class are winning, even as the working class in the business are holding their breath. Paramount, after all, shed 10 percent of its workforce after the Skydance takeover, and with $6 billion in synergies targeted after it eats Warners, significant cuts totaling thousands of employees are once again in the cards for both companies as they merge.
Ellison has used his post-deal comments to emphasize that the company only wants to expand production, citing a promise to release 30 theatrical films a year and to continue as a buyer and seller of TV shows. But a slew of previous mergers have left the creative class skeptical, to say the least.
And after years of production pullbacks, there are signals that it’s going to get worse before it gets better. Call it a Hollywood of haves and have-nots.
Paramount Skydance’s pursuit of Warner Bros. Discovery will create a trio (alongside Netflix and Disney) of global entertainment giants, while the tech giants Amazon, YouTube and Meta are encroaching farther on territory that was once the realm of legacy media. New kings of Hollywood, from Ellison and Sarandos to YouTube’s Neal Mohan and Disney’s Josh D’Amaro, will benefit, while others figure out how to proceed without their scale.
“The transformation that’s happening in our business today, it’s massive,” laments a C-suite level executive at a company that’s been left out of that top tier. Their company, and others in a similar situation, are evaluating their options.
“I wish we lived in a benign world. We live in a world where Silicon Valley is coming,” says one trusted industry leader and adviser. “There’s a virtue to consolidation and scale. It’s true in any industry that is being technologically disintermediated.”
The result for many of the companies left out is smaller ambitions, and in some cases, a sales process. A+E Global Media is on the market, while Lionsgate executives are touting their “scarce asset” in chats about dealmaking. NBCUniversal CEO Mike Cavanagh told a conference in March that “domestic is our path” for Peacock, underscoring the pared-back moment.
Up next, the Writers Guild will join SAG-AFTRA in negotiating a new contract with the studios, and those negotiations will take place precisely when guild health plans are at a breaking point. In a blunt Feb. 27 memo to WGA membership, the guild cited the end of peak TV as putting its health plan in dire straits.
“The severity of the contraction and the increase in writers using Extended Coverage points mean that the current contribution rate is not enough to keep up with costs,” leadership wrote.
In other words, the clock is ticking on a turnaround moment.
Meanwhile, crews and creatives are bracing for what is already a production drought to get even worse, thanks in no small part to arguably the richest and most powerful entity in media today: the National Football League.
During the next few months, the NFL, led by Roger Goodell, is expected to open discussions about renegotiating its $10 billion per year rights deals that it inked with NBCUniversal, Paramount, Fox, Disney and Amazon only five years ago. The NBA’s 2024 media deals set a benchmark, and the NFL, which controls the most popular programming on TV, wants its piece. The result will be billions more dollars flowing annually from the entertainment giants to the NFL. “It does not appear that anyone will emerge from the process unscathed,” Bernstein analyst Laurent Yoon wrote Feb. 26.
The impact will be felt across Hollywood. A senior agency source says that they are preparing for “significant” pullback in entertainment content spend. Stars “will get paid,” but the fear is that it will be harder for anyone not already established to break in, and middle-class talent could be hit hardest of all.
Fox CEO Lachlan Murdoch told a Wall Street confab in February that his company would consider “rebalancing our portfolio” if the NFL renegotiates. Indeed, sources at multiple companies dealing with the NFL say they are gaming out where they could trim content budgets. Smaller sports could be cut, but they agree that it will also mean a reexamination of entertainment budgets.
It’s not that companies will stop making films or TV shows, but the pace of decline will only get worse once the fees rise. Bank of America analyst Jessica Reif Ehrlich wrote Feb. 25 that the renegotiations are “potentially ominous for traditional media’s long-term trajectory,” as “premium sports become a larger cost, while the legacy monetization base continues to structurally weaken and streaming has yet to prove that it can fill the gap of lost linear economics.”
“At least you know your economics with sports, you can make a decision as to whether they’re good economics, but you know what you’re getting,” says a veteran media executive. “Do I have to do Game of Thrones? Do I have to do The Crown? The answer is, ‘Yeah, I may do a Crown, but I may not do something else.’ The aggregate will be less scripted and I think fewer high-end series made.”
Or as Murdoch explained, “we balance scripted and non-scripted programming efficiently to maintain an efficient and ultimately profitable cost-base in that business.”
And yet, multiple sources also cite “green shoots” that they see on the horizon — signals that there might be a path forward for the average worker in the entertainment business.
Some top YouTube creators are building out professional studio facilities in the L.A. area and are hiring staff from legacy companies. One top YouTuber tells THR that in the past six months, they have had meetings with leadership at every Hollywood studio and streamer, eager to work together on projects at a more manageable cost. Depending on what happens, it could bring the creator economy into the larger Hollywood economy.
In a makeshift auditorium inside a Manhattan office building earlier this month, YouTube hosts Colin Rosenblum and Samir Chaudry addressed some top CMOs, seeking to get them to buy in.
“When we talk about this concept of creator TV, what we’re talking about is content that people are remembering in a world of abundance,” Chaudry said, as marketers nodded in agreement. “So for everyone who’s in here, everyone who’s involved in the future of media, the future of media isn’t about creating more content, it’s not about adding more to the feed, it’s about partnering with the right creators.”
Similarly, L.A. has emerged as the biggest hub for podcast production, which is increasingly moving toward video-first formats and gaining traction with major streaming services like Netflix and even TV channels including MS NOW. Major advertisers are getting on board.
New media is still growing even as old media deteriorates. Inside entertainment giants, there is already anxiety brewing about Instagram’s recent TV app launch for its Reels video product. One person said they had flashbacks to when YouTube first launched its smart TV app. Now more people watch YouTube on their TV sets than any other media company, including Netflix and Disney, according to Nielsen.
In fact, Instagram’s TV app has already become a burgeoning home for microdramas, the soapy short-form content that had become a reliable source of work for creatives in recent months.
“As we get into [the TV app], as we often do, we’ll learn from creators how they want to use this new medium to connect with their audiences, and we’ll build things to support that,” says Tessa Lyons, Instagram’s VP of product.
And then there’s the burgeoning trend that has guild leaders holding their breath: Could the serialized series make a comeback?
It’s no secret that as broadcast networks devote more of their hours to live sports, that sitcoms and serialized dramas have been in decline. Streaming platforms have largely eschewed the model as well, instead leaning into high-concept fare that deliver maybe 8 episodes of TV every couple of years.
But The Pitt on HBO Max has revived the serial model, delivering 15 episodes a year at a lower cost than most high-concept dramas, while retaining the prestige of prestige TV. Multiple streaming platforms are thinking about dipping their toes in that water as HBO Max continues to seek more shows in that “elevated broadcast” model, sources say.
“I think we as an industry, we’ve gotten away from television,” HBO Max chairman Casey Bloys said, speaking to journalists at WBD’s New York office late last year. He wants to bring it back.
Should the serial and the sitcom make a comeback, it would mean more work for writers, more work for crews, and more work for actors, at a time when it is badly needed, even if overall production sees a decline.
And some analysts think that as AI-generated content proliferates on social platforms, Hollywood could even emerge as a beneficiary. “While it’s too early to know how AI will change the TV & film business, we are confident that humans will continue to place a high value on star human talent, branded IP, live experiences, & ‘made by humans’ terroir,” Wolfe Research analyst Peter Supino wrote Feb. 16.
But even if the guilds save their health plans, and cut deals with studios that provide for working wages; Even if serialized formats and creator-led content helps offset the looming cutbacks coming from the NFL’s looming renegotiations; Even if the Paramount-Warners deal and other consolidation that follows isn’t as catastrophic to working Hollywood as some in the industry fear: The K-shaped economy still appears to be careening toward the business, with a new generation of moguls and media giants at the top, the last generation cashing out or selling off, and the next generation still in a development phase.
♦♦♦
Inside the Ellison Empire
From tech giants and entertainment giants to sports and one of the Hawaiian islands, the Ellison family’s assets span industries and touch every part of the media and technology sector.
If David Ellison closes his company’s $111 billion takeover of Warner bros. Discovery, it will propel the entertainment executive into true mogul status.
But the deal, backed by $46 billion from his father Larry Ellison, also underscores the vast empire that the Ellison family owns. It spans technology and entertainment, real estate and sports, and includes sizable stakes in companies of enormous consequence.
And if the Warners deal goes through, that influence and reach will only get bigger. Below, THR digs into some of the assets that the family controls (or will, in the case of Warner Bros. Discovery), and underscores just how vast that empire is.
-
Paramount Skydance
Image Credit: Eric Thayer/Getty Images When David Ellison decided that he wanted to level up his entertainment ambitions, Paramount was his first target. The Skydance founder used backing from his father, as well as from Gerry Cardinale’s RedBird Capital, to pursue the Redstone-controlled entertainment business, taking it over last year.
Paramount includes the famed Paramount Pictures film studio and its historic Hollywood lot on Melrose Avenue. It also includes a pair of major streaming platforms in Paramount+ and Pluto TV, the CBS broadcast network, a host of cable channels including MTV, Comedy Central, BET and Nickelodeon, not to mention a number of TV production studios.
And Paramount’s intellectual property includes franchises like Star Trek, Top Gun, Mission: Impossible, Spongebob Squarepants, Yellowstone, and others.
-
Warner Bros. Discovery
Image Credit: Eric Thayer / Los Angeles Times via Getty Images If David Ellison has his way, Warner Bros. Discovery will be his next prize.
WBD includes another historic film studio, as well as a historic studio lot in Burbank. It includes a category-leading TV studio, that produces a slew of hits for other networks and streaming platforms (as well as its own), and a major streaming platform in HBO Max. it does not have any U.S. broadcast networks (it does have some in Europe), but it has a lineup of major cable channels, including TNT, TBS, HGTV, Food Network, Discovery, Cartoon Network, and others.
But it is the Warners IP that Ellison covets. From HBO hits like Game of Thrones, The Last of Us (and the apt Succession) to the DC Comics universe, Harry Potter, Looney Tunes and Lord of the Rings, WBD owns a trove of characters matched only by Disney in its breadth and depth.
-
Sports Rights Domination
Image Credit: Fred Kfoury III/Icon Sportswire via Getty Images If Ellison’s deal comes to fruition, the combined Warner Bros. and Paramount would be a sports behemoth, rivaling only ESPN for its reach and scale.
CBS holds one of the to core Sunday afternoon NFL game packages, as well as the UEFA Champions League among other global soccer rights. It owns one-half of the March Madness college basketball tournament, but WBD holds the other half, potentially unifying that major sports property under one roof. It struck a major deal with the UFC, while also striking deals with niche sports like PBR, NWSL, SailGP (More on that below), Formula E, and the annual Army-Navy football game.
WBD holds a sizable Major League Baseball package and a big NHL rights package. It owns rights to the Olympics in Europe, and the French Open in the U.S., and some other college sports rights and NASCAR.
-
CBS News + CNN
Image Credit: Michael Tessier/CBS A deal between the companies would create the largest TV news operation in the world, combining CBS News, which produces he most-watched news program in America, 60 Minutes, as well as CNN, which has a global brand and reach that is unmatched.
Combining the CBS Evening News and CBS Mornings with CNN’s 24/7 programming would be a giant undertaking, but it also has staff on edge. Ellison installed Free Press founder Bari Weiss at CBS News last year, and her changes have rankled staff, rightly or wrongly.
While Ellison and Weiss have spoken frequently about the need to appeal to the majority of Americans who are not to the far right or far left, but in a world where news is being splintered into pieces, what that looks like is not entirely clear. And Larry and David Ellison’s personal relationship with President Trump, who has demanded specific changes at CNN, is also of concern.
-
Oracle Corporation
Image Credit: Photo by Justin Sullivan/Getty Images The Ellison family’s wealth is derived primary from Oracle, the database infrastructure and cloud services company that propelled Larry Ellison to become one of the richest people on planet earth (and for a period last year, the richest person in the world).
Oracle’s business isn’t sexy or consumer-facing, but as the tech industry rushes toward investments in artificial intelligence, Oracle finds itself at the center of that race.
With Oracle shares backstopping David Ellison’s entertainment rollup, the tech giant’s success or failure is now interconnected with the date of Hollywood.
-
A Multi-Billion Dollar Real Estate Portfolio, Including a Hawaiian Island
Image Credit: Photo by Mike Mulholland/Getty Images Outside of their tech and media conglomerates, the Ellison family is one of the largest owners of real estate in the world, spanning mansions and property in California, Texas, Florida, Japan and Nevada, a historic mansion that once belonged to the Astor family in Newport, Rhode Island, and hotels that include the Four Seasons Lanai and the Eau Palm Beach Resort & Spa in Manalapan, Florida.
But there is no bigger real estate asset that the Hawaiian island of Lanai, where Ellison owns approximately 98% of the land and property. It’s the sixth largest of the Hawaiian islands, and Ellison has effective control over its economy, making it the crown jewel of a real estate portfolio filled with crown jewel properties.
-
Annapurna Pictures
Image Credit: Courtesy of Annapurna Pictures David Ellison’s sister Megan Ellison has forged a Hollywood career of her own, but while David’s Skydance pursued the action blockbusters, Megan’s efforts have been more auteur. Her Annapurna Pictures produced or financed films like Zero Dark Thirty, Her, and Hustlers, with TV projects that included The Plot Against America and Pam & Tommy. The company’s video game division includes projects like Silent Hall: Townfall.
Her efforts, like David’s, came with the backing of her father, who brought in outsiders to help Annapurna manage costs at a pivot point for the studio. Now Megan is hiring at Annapurna once again.
-
SailGP and Oracle Team USA
Image Credit: Jon Buckle for SailGP Larry Ellison is an avid sailer, and his Oracle Team USA yacht-racing team now competes in competitive events like the America’s Cup.
Seeking to grow the sport, however, Ellison and his partner Sir Russell Coutts also founded SailGP, a competitive sailing league that travels the world with ultra-high tech catamarans to bring races to the masses.
From harbors in Sydney and New York to races in Bermuda and Abu Dhabi, the circuit is trying to do to competitive sailing what UFC did for MMA. And SailGP’s U.S. TV partner? David Ellison’s Paramount, which just inked a multi-year deal.
-
BNP Paribas Open at Indian Wells
Image Credit: Photo by Matthew Stockman/Getty Images The biggest competitive tennis tournament in the U.S. is the U.S. Open, of course. But one tier below that sits the BNP Paribas Open, held annually at the Indian Wells Tennis Garden.
Larry Ellison owns both the tournament (sometimes called the “fifth grand slam” thanks to its prominence in the tennis calendar and large attendance) and the venue, which attracts the very best players in the world.
As avid tennis fans, the Ellison family will also soon have the U.S. rights to the French Open, should the WBD deal close.
-
Stakes in TikTok, X and Tesla
Image Credit: Getty Images The Ellison family’s holdings don’t just include entire companies… they include sizable stakes in other companies of note as well.
Early this year, Oracle acquired 15 percent of the U.S. operations of TikTok, with the company also having a large operational role in its data security.
And when Elon Musk was seeking to buy Twitter, Ellison signed on as a major financial backer. Ellison and Musk, as it happens, go way back, with the tech giant also a sizable investor in Musk’s Tesla. With X subsequently selling itself to xAI, and xAI selling itself to SpaceX (all Musk companies) Ellison now owns a piece of all of Musk’s core businesses.
And the family owns stakes in a slew of other, smaller companies, with Ellison’s Lawrence Investments making frequent bets on startups.
Read the full article here
