Paramount’s Trio of CEOs to Be Trimmed After Ellison Merger

(Bloomberg) — David Ellison plans sweeping changes at Paramount Global, including cuts at the company’s TV networks, billions of dollars more for streaming and an overhaul of top management, according to people familiar with his plans.

Ellison, who will take over as chief executive officer of Paramount when it merges with his Skydance Media next year, is exploring combining all of Paramount’s TV networks, including CBS and MTV, into one unit. Those businesses are mostly run by two of the company’s co-CEOs, Chris McCarthy and George Cheeks. While Cheeks is expected to stay, McCarthy’s future is less certain.

The company’s third co-CEO, Brian Robbins, who leads the Paramount Pictures film studio and the Nickelodeon kids channel, is expected to leave around the close of the deal, said the people, who asked to not be identified discussing plans that are still being formed.

A movie fanatic who has co-financed most of Paramount’s biggest films of the last decade, Ellison was initially interested in the company’s namesake movie studio. While Ellison and Robbins have worked together on several titles, they are said to have both conceded it’s unlikely Robbins will stick around. No final decision has been made, however.

Ellison has discussed putting Dana Goldberg, the head of production at Skydance, in charge of the film business, at least for the time being. Spokespeople for Paramount and Skydance declined to comment.

Since agreeing to merge Skydance with Paramount in July, Ellison and his deputies have been meeting with their future employees, seeking opinions about what is working and what isn’t. Ellison told employees at Paramount that he hasn’t made any decisions about personnel. 

Ellison agreed to the deal knowing Paramount would require a major overhaul. The company still makes almost all its profit from cable networks such as Nickelodeon, MTV and Comedy Central that defined an era in pop culture. But those networks have hemorrhaged viewers and advertisers to technology companies such as Netflix Inc. and YouTube. The company’s namesake film studio isn’t expected to show a profit for 2024, according to analysts’ estimates.

“The business needs to be transitioned,” Ellison told Bloomberg shortly after the deal was announced.

When Donald Trump won the presidential election, Ellison and the team at Skydance began preparing to take over Paramount even sooner than they once thought. They now believe the deal could close as soon as the end of March or early April.

The Federal Communications Commission, which approves the transfer of broadcast licenses, still must bless the deal. Petitions from those opposing the transaction are due Dec. 16, according to the commission. Final responses from the parties are due Jan. 13.

Two areas requiring Ellison’s immediate attention are TV networks and streaming. Ellison is looking at potentially cutting hundreds of millions of dollars in costs by folding the company’s TV networks into one group, consolidating teams across departments like programming and marketing. The amount of original programming produced for the cable networks will decline, as will the staffing. 

Ellison will combine two groups, one that currently reports into McCarthy and another into Cheeks. While McCarthy was a favored son of former CEO Bob Bakish, Cheeks has a good relationship with Jeff Shell, who will serve as Ellison’s No. 2 at Paramount. Cheeks and Shell worked together at NBCUniversal.

Ellison stated plans to streamline the company’s operations in an investor presentation earlier this year, without getting into specifics.

Paramount will also explore strategic partnerships involving cable networks that could result in a divestiture of some of those businesses. While Ellison may not formally explore the sale of any of these networks, as was done under the previous regime, he is open to selling almost any network in the portfolio other than CBS.

Ellison plans to cut back on the company’s real estate holdings and will look to sell facilities like the CBS Broadcast Center, a production facility used for 60 Minutes and Last Week Tonight with John Oliver. CBS also owns the Ed Sullivan Theater, the home of Stephen Colbert’s late-night show.

“We’re not going to sell Paramount, we’re not going to sell CBS, but we’re looking to maximize value,” Ellison previously told Bloomberg.

The transaction has already led to negotiations between Ellison, Paramount and the NFL. The league is able to opt out of its broadcasting agreement with CBS as part of a provision in its contract. While the NFL doesn’t plan to do so, it has talked to Ellison about turning some of its stake in a joint venture with Skydance into an equity stake in Paramount. It has also discussed selling some or all of the NFL Network to Paramount.

The cuts in TV will help pay for a greater investment in streaming. Paramount has grown to 72 million customers and has made money two quarters in a row. Yet it ranks last in viewership among mass-market services and is still much smaller than competitors such as Netflix, Walt Disney Co. and Amazon.com Inc.

Cindy Holland, who’s serving as an adviser to Skydance, is consulting on the streaming strategy and is seen by many at Paramount as the person likely to take over that business.

Ellison is particularly concerned with the poor user experience in the app and has talked about making it easier for viewers to find shows to watch by improving the recommendation algorithm. Ellison, the son of Oracle Corp. co-founder Larry Ellison, grew up around technology luminaries such as Apple Inc. co-founder Steve Jobs. Ellison speaks often about marrying technology and art at Paramount, and more quotidian changes like improving Paramount’s use of enterprise software.

Ellison will also more closely integrate Pluto, a free streaming service, into Paramount . A free service like Pluto can serve as an on-ramp for viewers to use Paramount more often while also benefiting from the marketing around Paramount programs. Pluto was once the leader of a new crop of free, advertising-supported services, but has since lost ground to Fox Corp.’s Tubi and the Roku Channel.

Paramount is one of three services, alongside Peacock and Max, that are seen as too small to survive independently. Paramount’s current leaders have talked to both Peacock and Max about strategic partnerships to leverage their shared resources. The company has also spoken to Amazon and foreign streaming services.

While Paramount will continue to pursue those deals, Ellison sees less urgency to do so. He believes the company has a solid foundation upon which it can build.

Paramount is much smaller than most of its competitors, even those struggling like Warner Brothers Discovery Inc. But, after this transaction, it will have a healthier balance sheet. And, unlike most of these other companies, it will have access to the bank account of the Ellison family. While David oversees Paramount day-to-day, his father, one of the world’s richest men, financed much of the transaction.

–With assistance from Kelcee Griffis.

More stories like this are available on bloomberg.com