Brad Grey might have looked forward to this Sunday as a chance to take to the Oscar red carpet with a little extra bounce in his step. And why not? The chairman and CEO of Paramount Pictures had led his studio to 18 Oscar nominations, including best picture nods for the sci-fi brain-twister “Arrival” and the Denzel Washington drama “Fences.”
But Hollywood’s night of nights promises to be a somber one for Grey, coming just days after his ouster from the job he held for nearly a dozen years. Through it all, Grey exhibited as much resilience as the Transformers Paramount so frequently put on the screen. Even the studio chief’s critics marveled at his ability to shake off corporate infighting and costly film flops while keeping his throne. The red ink continues to build: The studio had an operating loss of $457 million in fiscal 2016.
But last week Grey, whose contract was due to expire in 2020, ran out of ways to charm his corporate masters. Despite the awards attention, Paramount has endured a steady stream of flops, exacerbated by an aging set of franchises and a shrinking slate of films. Under Grey, Paramount did hit it big with “Mission: Impossible” and “Transformers” sequels, and the studio chief recently inked a $1 billion slate financing deal with the Shanghai Film Group and Huahua Media. However, his taste in projects was questionable, with Paramount backing stinkers like “Zoolander 2,” “Whisky Tango Foxtrot,” and “Allied” and failing to field the sort of super-hero smashes and animated blockbusters that have propped up its competitors. Paramount finished behind all of the five other major Hollywood studios in each of the last five calendar years, even slipping behind Lionsgate at points.
In 2016, “Star Trek Beyond” was the only Paramount film to take in more than $100 million domestically. The bleeding got so bad that the studio took a $115 million write-down in advance of the release of “Monster Trucks,” which, indeed, flopped when it opened in January. Drexel Hamilton analyst Tony Wible pegged the losses for the year at $500 million “despite a favorable box office, home entertainment, and licensing environment.”
Bob Bakish, chairman and CEO of Paramount’s parent, Viacom, will visit the Melrose Avenue studio on Feb. 21, where he is expected to discuss a management shift with Paramount employees. Whoever steps into Grey’s shoes will face a herculean task. Turning around a studio takes three to four years, and Paramount has lost its reputation for being talent-friendly during its period in the box office doldrums. It needs to reestablish itself as a destination for top directors and writers to pitch their projects, instead of the studio of last resort.
|Grey with Philippe Dauman, who was ousted as Viacom chairman-CEO in September.
Bakish unveiled a plan this month that would see Paramount strengthening its ties to Viacom’s cable brands, with the likes of MTV and Comedy Central contributing one or two film projects a year, and the film studio creating movies that could be turned into shows on those networks. The only problem is that Viacom has flirted with a similar strategy in the past, with MTV and Nickelodeon offering up “Jackass” and “SpongeBob” movies. That didn’t prevent the studio from sliding to the bottom.
“They definitely need to make more movies, and they need to be more bold in the movies that they make,” says a producer who works frequently with Paramount. “If you are going to make noise in the marketplace, you are going to have to be somewhat original.”
Then there are financial restrictions. Viacom is carrying nearly $12 billion in debt. It’s unclear how much financial flexibility Paramount will have to bid on the best projects or to sign lucrative talent deals given that its corporate parent is so heavily leveraged.
“Whoever replaces Grey will have to manage the funds available shrewdly and place bets with lots of thought,” says Hal Vogel, a media analyst.
It’s not clear that there’s still a place for Paramount. The domestic box office is stagnant, and the home entertainment market is a shell of its former self, brought low by the collapse of the DVD business. With revenue shrinking, the industry has become positively Darwinian.
“A case could be made that maybe six major studios is one too many, and there ought to be another round of consolidation,” Vogel says.
Despite Paramount’s murky future, there’s rampant speculation about who might replace Grey. Former 20th Century Fox chairman Jim Gianopulos has surfaced in discussions about every significant opening in Hollywood in recent months. However, Gianopulos is currently negotiating a deal to run Legendary Entertainment. Former Warner Bros. president Jeff Robinov, currently bridling under his production deal at Sony, has expressed interest in the Paramount role, but there’s no indication of how his entreaties have been received.
Some close to the company say Bakish might not announce a permanent replacement, instead turning to a management committee to run the studio’s various divisions. The Viacom boss has spoken highly of Amy Powell, president of Paramount’s television and digital entertainment unit. Recently arrived COO Andrew Gumpert (previously at Sony Pictures Entertainment) and former HBO programming chief Michael Lombardo are among others who might take more prominent roles in Paramount’s next iteration, insiders say.
Beyond Powell and Gumpert, Paramount doesn’t have a very deep bench. Under Grey, the studio regularly rotated through executives, making the Hollywood lot akin to the island in “Survivor.” One of the last to get voted off was vice chairman Rob Moore, who was ousted in September. The year before, studio president Adam Goodman lost his job. Critics complained that the executive revolving door never reached as high as Grey, the man ultimately in charge.
“There were an amazing number of people who lost their jobs there, from the highest level to the lowest level,” says one former executive, who asked not to be named. “You had so many people let go as a result of the management of the company. That is why many people have been waiting for him to get his just deserts.”
While he laid out his vision for a more integrated Viacom universe in early February, Bakish made it clear that the conglomerate’s film studio had been underperforming. “It’s an incredible opportunity for the media networks to extend the reach of their brands in the theatrical space and an incredible opportunity for the studio in this market of competition to develop great ideas and great talent,” he said.
The CEO argued in that interview that he was running out of patience with his stumbling film studio. “I fundamentally believe that leadership needs to be accountable,” said Bakish. “We are now turning the page on the strategy for Paramount. Now we are increasingly focused on execution.”
The studio’s silver lining came in creative recognition for not only “Arrival” and “Fences,” but for Meryl Streep’s turn as tone-deaf opera star “Florence Foster Jenkins.” Instead of basking in the glow of Oscar night, Grey has been held to account. It will fall to someone else to execute Bakish’s vision.