“It feels like the calm before the storm,” says an executive at Skydance, the newly minted media empire formed from the megamerger of Paramount and Warner Bros Discovery (WBD). “David has got what he wanted, but now there is a price to pay.”
Earlier this month, David Ellison, Skydance’s chief executive, sealed the $110bn (£82bn) deal, creating a global powerhouse spanning two Hollywood studios each more than a century old, the TV networks HBO, MTV and Discovery, and news outlets CBS and CNN.
Having seen off a rival bid from Netflix and faced significant political and industry opposition, in a process Ellison told employees was at times “downright ugly”, the battle is far from over for Hollywood’s newest magnate.
With an aggressive target of reducing an eyewatering debt load of more than $80bn in just three years, it is what is going to be cut, sold and restructured that will be uppermost in the minds of Skydance’s more than 53,000 employees.
Ellison, 43, who studied film and acted in the 2006 film Flyboys before moving into producing, is targeting $6bn in savings within three years. Executives and financial backers are steering away from the need for swingeing job losses, but a memo from management earlier this month warned that there would be “difficult decisions that affect our workforce”.
“It is business as usual but, to be honest, everyone is worried about what happens next,” says another Skydance executive. “Cuts inevitably mean jobs.”
There are also concerns about the political direction of the new entity, given Ellison’s closeness to Donald Trump – a longtime friend of his father, Larry, who co-founded the software company Oracle. David Ellison has pushed back at such framing, stating: “We do not want to politicise the company.”
Nevertheless, fears in the news division have been stoked by events at Paramount before the merger. It came under fire for cancelling the long-running Late Show with Stephen Colbert after its host said it had paid a “big fat bribe” for settling a $16m lawsuit with Trump.
Days later, US regulators agreed the $8.4bn merger of Paramount with Ellison’s Skydance Media, with Trump ally Kenneth Weinstein’s appointment as ombudsman at CBS News to root out “complaints of bias” as one of the conditions to get regulatory approval.
Christiane Amanpour, CNN’s international anchor, criticised the “ideological realignment of CBS” and warned that changes and cuts could lead to the potential “destruction” of flagship news show 60 Minutes. This week, she announced she was leaving CNN after 43 years, although her exit is not thought to be tied to the new ownership.
CNN staff were relieved at Skydance’s decision shortly after closing the deal to keep Mark Thompson, the former New York Times boss and BBC director general, as chair and chief executive.
Many had feared that the network, which alongside MS Now and Politico had faced a now-lifted White House media ban in apparent retaliation for critical coverage of Trump, might face a sweeping overhaul that could have seen the divisive Bari Weiss, the editor in chief of CBS News, installed at the top.
While Thompson has said that Skydance supports CNN’s independence, fresh concerns over rightwing influence emerged this week when it was reported that Elon Musk, a Trump ally and supporter of far-right causes through his X platform, has invested $1bn for a stake in the media conglomerate.
“The preservation of editorial independence is a growing concern among media consumers,” said Mike Proulx, an analyst at Forrester. “Private wealth is getting a greater foothold on public information channels.”
In terms of creative television output, star performers such as HBO will be left to keep churning out the all-important hits the business needs.
Ellison immediately extended the soon-to-expire contract of Casey Bloys, promoting the HBO boss to also oversee streaming services Paramount+ and HBO Max, to ensure the golden goose keeps making must-watch dramas such as The White Lotus, Game of Thrones, The Pitt, Succession and The Sopranos.
However, there are longer-term questions over some of the group’s cable and TV channels – such as MTV, Nickelodeon, the UK’s Channel 5 and Network 10 in Australia – which are in decline but still account for 70% of profits, according to CreditSights.
“In a world where the majority of consumers can access content through a smart TV, it should be a natural consideration to sell physical broadcast assets,” said Brian Wieser, chief executive of consultancy Madison and Wall.
“At a Skydance level they have made the choice to go all in on streaming. But the problem you have is maybe you don’t get offered enough to sell it, and, given the cashflow we know they make, they might be better served to hold on.”
Newly filed accounts for Channel 5 show the broadcaster paid a £215m dividend to Paramount last year. In the UK, the culture secretary only cleared the takeover after Ellison made commitments including pledging to keep Channel 5 operating as a free-to-air, public service broadcaster until at least the end of 2034. However, according to sources, these agreements do not preclude any potential sale of Channel 5 in the future.
Last month, Paramount moved its £300m TV advertising sales business from Sky’s sales team to Channel 4. That came after WBD extended its deal for Sky to handle its £90m-£100m ad sales business from January, covering TNT Sports, Discovery, Animal Planet and streaming service HBO Max. However, multiple media sources believe now the Skydance deal is done the business will eventually also move to Channel 4.
The megamerger also paves the way for BT to exit its joint venture with WBD – TNT Sports – which would finally end the telecoms company’s costly foray into pay-TV sport after almost 15 years.
Last year, Paramount outbid WBD for the rights to Champions League football, the flagship rights owned by TNT Sports. That blow prompted BT to write off the entire value of its stake in the joint venture.
However, with Ellison intending to merge Paramount+ with HBO Max, the rights will effectively be retained, and viewers will not have to sign up to yet another streaming or pay-TV service to watch all top-flight football.
Skydance says it will spend an estimated $30bn a year on content across all divisions, and as part of the takeover Ellison promised to release at least 30 major films a year until 2031.
This promises to be a boon for the UK production industry, especially for WBD’s studio at Leavesden, which is home to all of its DC superhero franchises and the forthcoming Harry Potter TV series destined for HBO Max this Christmas.
However, Warner is enduring one of its worst box office showings for years, the most recent flop being Tom Cruise’s Digger, prompting Ellison to put Paramount’s leadership in charge of both studios.
Analysts point out that Ellison is unlikely to maintain that level of moviemaking beyond the five-year pledge, as it goes against the grain of a Hollywood trend towards fewer films and lessons from past takeovers.
Since Disney’s acquisition of Rupert Murdoch’s entertainment assets in 2019, which included the then 20th Century Fox and Fox Searchlight studios, the number of film releases has broadly halved.
“After the 2031 deal ends there will be fewer films, obviously,” says Tom Harrington, a media analyst at Enders. “It has never happened before when there has been a takeover that more have ended up being made.”
Skydance declined to comment.
