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Is Paramount Gearing Up For A Spinoff Of Its Own?

Search for a minority partner might take film studio in a different direction

New Viacom Inc. chairman Philippe Dauman hasn’t even warmed his seat yet, but there could be some big changes coming to one of his company’s biggest units: Paramount Pictures.

The studio behind nearly four decades of Star Trek movies, including the upcoming “Star Trek: Beyond,” is quite publicly looking for what the company has described as a “significant strategic minority equity investment” partner. In other words, Viacom is willing to sell some of its ownership in Paramount in exchange for a cash influx that could possibly turn around the financial misfortunes lately of the studio.

“In this time of change and enormous opportunity in our industry, a partnership will bring significant benefit to Paramount and Viacom — both strategically and financially — provide new opportunities for Paramount’s employees and talent, and enhance long-term value for all Viacom shareholders,” Dauman said in a statement Tuesday.

Any investment stake would not be enough for Viacom to lose control of the century-old studio, but it’s not clear how big of a stake the company is willing to part with, or for how much. However, it is possible that any such deal could pave the way for a potential spinoff of the studio from Viacom, or even an outright sale down the road — one that could possibly put part of the Star Trek franchise into the hands of a brand-new owner.

An influx of cash could certainly be welcome to Viacom shareholders. In its most recent quarterly earnings report released Feb. 9, Viacom reported a profit to the U.S. Securities and Exchange Commission of $449 million, compared to a $500 million the year before. However, “filmed entertainment” — which is primarily Paramount — lost $146 million during the quarter, even worse from the previous year when the film division finished $60 million in the red. Viacom blames the loss on lower “theatrical and home entertainment revenues,” according to its SEC filing.

Overall film revenue for Paramount, Nickelodeon and its related companies dropped 44 percent year-over-year from $169 million in the last three months of 2014 to $94 million leading up to the end of 2015. Part of that was from the fact that Paramount had films like “Daddy’s Home” and “Paranormal Activity: The Ghost Dimension” (which grossed just less than $312 million combined worldwide), compared to “Interstellar” the year before, which alone would go on to gross $665.4 million worldwide.

But Paramount could indeed use a boost at the box office. Since 1995, the studio is ranked fifth in market share at 11.4 percent with revenue of $21.5 billion, according to The Numbers. Although Paramount does average a very respectable $51.3 million in revenue per film (behind only Walt Disney Co. and Dreamworks SKG), it’s only released 420 films during that time, compared to the more than 650 from market-leader Warner Bros., which controls 15 percent of the total market.

Paramount also hasn’t had the top-grossing movie of the year since 2009, when “Transformers: Revenge of the Fallen” earned $402.1 million. Before that, Paramount hadn’t been on top since “Titanic” in 1998. Disney has dominated since “Revenge of the Fallen,” taking nearly every year but one thanks to its Marvel properties like “The Avengers,” “Iron Man 3,” “Guardians of the Galaxy” and last year’s “Star Wars: The Force Awakens,” which earned $742.2 million in 2015.

Finding financial partners is nothing new with Paramount. In fact, the last two Star Trek films (including “Star Trek: Into Darkness”) have been co-funded by Skydance Media, the production company founded in 2010 by David Ellison, the son of billionaire Oracle executive Larry Ellison.

Investors, at least, seemed to like the idea of Viacom finding a financial partner for Paramount. Company shares were up 1 percent Tuesday in heavy trading, its first time above $40 a share since Feb. 4.

Source: 1701News


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