New Hollywood Mogul David Ellison Tackles Daunting To-Do List After Paramount Deal

“We really want Paramount to be the first stop for creatives,” Ellison said, adding that he envisions turning the beleaguered entertainment company into what he called “a media and tech hybrid,” to make it a viable competitor against the likes of Disney, Netflix and Warner Bros. Discovery WBD 3.23%increase; green up pointing triangle.

But before any of that is likely to happen, Ellison and his team are continuing plans put in place by Paramount’s current management amid a difficult media environment: cost-cutting, asset sales and layoffs. Ellison’s team has identified $2 billion in cost savings and said it would make the company cash-flow positive by the end of 2026. 

When he takes over Paramount, Ellison will be rubbing shoulders with the likes of Disney Chief Executive Bob Iger and Warner Bros. Discovery CEO David Zaslav, a remarkable ascension for the 41-year-old. The son of Oracle co-founder Larry Ellison, he relied on his billionaire father’s largess to create a production company, and managed to turn it into a reliable maker of box-office hits, an unusual feat for a company of its size.

Like many of its peers, Paramount has been struggling with the decline in traditional TV networks while investing in Paramount+. Cord-cutting has greatly reduced the reach of its cable networks, such as MTV and Comedy Central, which means less revenue from subscriber fees and ad dollars.

As a result, spending on programming for the networks has been decreased, creating something of a vicious cycle for the company: Less original programming means more cord-cutting, which leads to less investment.

Ellison can help Paramount navigate the challenging media landscape in that he understands and appreciates the movie business but also has a technical background to help grow its streaming service, said Ari Emanuel, CEO of sports and entertainment companies Endeavor and TKO Group Holdings. Endeavor’s WME talent agency has previously represented Skydance in content deals.

“A lot of people with the success he has had would never risk that to do what he is doing,” Emanuel said. “I take my hat off to him.”

Channels on the block

Paramount’s efforts to sell its BET cable network will continue as the deal progresses, people close to the situation said. Other channels could also potentially go on the market, said Jeff Shell, the former NBCUniversal CEO who is set to be president of Paramount after the Skydance deal closes. Potential assets for sale could include TV stations owned by CBS that aren’t affiliated with the broadcast network and hence aren’t core to its business.

One challenge facing Ellison and his team is how to make sure its Paramount+ streaming service can compete with bigger rivals. The service has seen decent subscriber growth over the past few years and was profitable domestically in the quarter that just ended, according to people familiar with the situation. But the hypercompetitive nature of streaming requires constant investment to compete with the likes of Netflix.

Skydance said it would continue to pursue the strategy set out by Paramount’s current leadership for the streaming service, including exploring an international joint venture, which is where much of the financial strain lies. Shell also said Paramount+ can benefit by doing more deals to bundle itself with other streaming services. 

“There is going to have to be some form of bundled solution” to streaming, Shell told investors, adding that right now “they are sorting their way through the muck” of how streaming services are currently distributed. 

Ellison also said the Paramount+ platform needs to be overhauled and become more user-friendly, which can be done by improving the algorithms that make sure consumers get served the shows and movies they are most likely to watch.

Ellison has been a would-be Hollywood mogul for more than a decade. He built Skydance, a production company that was launched in 2010, into a powerful and profitable maker of big-budget movies and TV shows. Although Hollywood is littered with the carcasses of scions with dreams of being a player, Ellison and Skydance have thrived when much of the industry is in contraction.

Part of the reason for Skydance’s success was that it positioned itself as something of a boutique purveyor of big-budget fare for streamers such as Netflix and Amazon.com’s Prime Video. As other studios were shying away from selling to competitors to focus on building their own streaming platform, Skydance saw an opening and pounced. 

People who have worked closely with Ellison say he is a soft-spoken and thoughtful executive and not a stereotypical billionaire’s son.

That doesn’t mean he is a pushover. Ellison gets in the weeds of producing, and while his attention to detail is praised by those who have worked with him, some say he can be inflexible in a business often based on making compromises. Some of his mentors, including the late Steve Jobs and David Geffen, were cut from similar cloth.

Shell’s comeback

Ellison is entrusting much of the day-to-day operation of the combined companies to Shell, an industry veteran who has had long stints at Comcast’s NBCUniversal and Fox.

For Shell, the deal represents something of a comeback. He left NBCUniversal in 2023 after admitting to an inappropriate relationship with a woman at the company. Shell joined RedBird earlier this year to lead its sports and entertainment businesses.

Now, he will essentially hold the same position he held at NBCUniversal with a very similar portfolio of broadcast, cable, movie and television production and streaming assets.

For Skydance, explaining to investors the rationale behind the deal is key to potentially fending off shareholder lawsuits. Earlier this year, many of Paramount’s nonvoting shareholders expressed dismay about an earlier offer from Skydance, which they said was only good for Paramount controlling shareholder Shari Redstone.

Under the transaction that was announced Sunday night, Skydance will acquire National Amusements, Redstone’s privately held movie theater company through which she controls Paramount, in a deal with an equity value of $1.75 billion. 

Then in a second step of the deal, Paramount will acquire Skydance at a valuation of around $4.7 billion. Skydance and its backers, including Larry Ellison and RedBird Capital Partners, will inject $1.5 billion into Paramount’s balance sheet, which it can use to pay down debt.

Skydance has familiarity with parts of Paramount. The company has co-produced some of Paramount’s highest-profile movies, including “Top Gun: Maverick” and the most recent installments of the “Mission: Impossible” franchise as well as TV series such as “Reacher” and “Jack Ryan” for Amazon’s Prime Video, which are co-produced by Paramount’s TV studio.

Skydance and Paramount’s overlapping businesses will be combined, like their respective movie studios. Skydance has an animation unit that supplies content to Netflix among other platforms, while Paramount is a big player in children’s programming with its Nickelodeon cable channel. Skydance also has a videogame division.

Both entities have a relationship with the National Football League: Skydance has a joint venture with the NFL’s investment arm that creates sports-related content, while Paramount’s CBS broadcast network carries live NFL games.

Paramount is currently run by a committee of three CEOs, who are expected to stay on until the merger is complete, which the company expects to happen next year after regulatory review.

Skydance’s owners are additionally motivated to turn Paramount around. Under the terms of the deal, they stand to receive 200 million warrants, which they can exercise in the event Paramount’s stock hits $30.50. Paramount’s B shares closed at $11.18 on Monday.

Write to Jessica Toonkel at jessica.toonkel@wsj.com and Joe Flint at Joe.Flint@wsj.com