Over the last few years, the rise of streaming video has created many problems for the old-school movie studios that once dominated Hollywood. Paramount, for instance, enjoyed more than a century of success as it produced huge film franchises like Top Gun and Mission: Impossible while owning major television networks like CBS, Nickelodeon, and MTV. But Paramount struggled as customers shifted away from movie theaters and traditional cable packages and toward streaming services like Netflix and Amazon. The company tried to break into the streaming space with Paramount+, but the service turned out to be a major money loser. 

With Paramount in desperate need of technological know-how, this week the conglomerate announced that it will merge with the startup Skydance Media to create a new venture worth an estimated $28 billion. Owned by the son of a tech billionaire, Skydance comes in with lots of expertise and plenty of cash, which Paramount will need to offset the hundreds of millions of dollars it has lost from Paramount+. In exchange for money to stabilize Paramount’s finances, Skydance and its staff will receive the legitimacy that comes with being one of the most powerful players in Hollywood. “Given the changes in the industry, we want to fortify Paramount for the future while ensuring that content remains king,” said Shari Redstone, chair of Paramount’s board. 

The Redstone family had long fought to retain control of their media empire, leading to a lengthy dealmaking process that nearly collapsed on several occasions. In fact, the company kept their options open and at one point almost struck a deal with Warner Bros. Discovery, but financial pressure ultimately led the Redstones to Skydance and its immense stash of cash. Although many details of this complicated deal have not been shared with the public, Paramount confirmed that a new management team comprised of Skydance staffers will be put in place in the coming months. Only time will tell if these executives will be able to return Paramount to its former glory.

Questions: 

1. What factors contributed to Paramount’s financial struggles in recent years?
2. Do you think Paramount’s merger with Skydance will help the company compete in the modern media marketplace? Why or why not?

Sources: Mullin, Benjamin and Lauren Hirsch, “Paramount Agrees to Merge With Skydance,” The New York Times, July 7, 2024; Passantino, Jon and Lian Reilly, “Paramount, the media empire behind CBS and ‘Top Gun,’ agrees to merge with Skydance,” CNN, July 8, 2024.