"Monster Trucks" won't hit theaters for four months, but it appears to have already driven Paramount Pictures off course.

Viacom Inc.'s movie studio took the unusual step Wednesday of announcing a $115 million impairment charge "related to the expected performance of an unreleased film." Analysts quickly zeroed in on "Monster Trucks," a Jan. 13 release about a teenager who discovers a creature that gives his pickup special powers.

The write-down has put an unwelcome spotlight on the project, which was conceived in 2013 by Adam Goodman, then the president of Paramount's film group, off an idea he had bandied about with his then-4-year-old son. "Monster Trucks," which had a budget of about $125 million, was initially scheduled for release in summer 2015 but has been postponed three times.

Now the movie arrives at a terrible time for Paramount. It has been in last place for market share among major Hollywood studios since 2012, and executives have been called on the carpet by the newly installed Viacom board.

Viacom announced Wednesday that its interim chief executive, Thomas Dooley, was leaving the company in November, and that it was abandoning plans to find a minority investor in Paramount.

A Paramount spokeswoman didn't return requests for comment.

Taking an impairment charge on a movie is nothing new in Hollywood. But announcing it months before its release is extremely rare, said Hal Vogel, a longtime media analyst. Paramount followed best accounting practices in announcing the charge when it did, Mr. Vogel said, since studios are supposed to notify investors of a dud as soon as the writing is on the wall.

"If you know it's going to be a turkey, you have to write it down," he said. Paramount's charge of $115 million doesn't mean the studio will necessarily lose that much money on the production. If "Monster Trucks" performs better than expected, Paramount will have to reverse or decrease the charge, said Mr. Vogel.

Studios traditionally announce write-downs on underperforming movies during quarterly earnings reports. In 2013, Walt Disney Co. said it would lose between $160 million and $190 million on "The Lone Ranger," and DreamWorks Animation SKG Inc. booked a $57 million write-down on "Penguins of Madagascar" last year.

Assessing how a movie will perform months before its release isn't an exact science. Analysts and executives say Paramount could look at the finished film and predict what kind of audience it would attract and calculate how much more marketing is needed to pull in crowds ahead of the movie's debut. So far, only a trailer for "Monster Trucks" has been released, though the movie has been well-received in test screenings, according to people familiar with the matter.

Paramount gave "Monster Trucks" the green light, originally as an animated film, when the studio was hungry for family entertainment that could sell toys and produce sequels, a model exemplified by competitors like Disney's "Cars." Paramount's distribution deal with DreamWorks Animation had recently ended, and Paramount wanted to start making its own animated features.

Along the way, "Monster Trucks" became a live-action movie with costly computer graphics. The production itself proceeded smoothly, said people familiar with the matter, but postproduction work on the special effects have contributed to the movie's delay. Mr. Goodman from Paramount now runs Le Vision Entertainment, a movie production company owned by Chinese technology company LeEco.

One week after "Monster Trucks" opens, Paramount has another question mark on its release calendar: "xXx: The Return of Xander Cage," a new take on a Vin Diesel franchise whose previous installment flopped. After that, the studio's brighter spots include "Ghost in the Shell" starring Scarlett Johansson and "Transformers: The Last Knight," the fifth installment in the studio's best-known franchise.

Write to Erich Schwartzel at erich.schwartzel@wsj.com

 

(END) Dow Jones Newswires

September 22, 2016 17:15 ET (21:15 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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