LOS ANGELES—Paramount Pictures Chief Executive Brad Grey is
facing the pitch meeting of his life.
As head of one of Hollywood's oldest and most iconic movie
studios, Mr. Grey has overseen many duds of late, most recently a
remake of "Ben-Hur" that grossed only $11.2 million in its debut
weekend.
Now Paramount Pictures parent Viacom Inc. is getting ready to
crack the whip on Mr. Grey. In a Securities and Exchange Commission
filing this week outlining its corporate restructuring, Viacom said
new interim CEO Tom Dooley and the board will call on the Paramount
team to defend their film record and present a turnaround plan.
They need to win over a key skeptic. While Mr. Grey has long
enjoyed the support of Viacom management, Shari Redstone—the
daughter of controlling shareholder Sumner Redstone and herself a
Viacom board member—has expressed concerns about the current
leadership at Paramount, according to people close to her.
Mr. Grey has run Paramount for 11 years, and his contract was
renewed last year through 2020. He didn't respond to requests for
comment.
"There is no consideration of replacing him," said Mr. Dooley on
Wednesday. "Paramount employees and the board are enthusiastic
about discussing Paramount's plans for the future."
Ms. Redstone declined to comment but a person close to her
stressed her desire to have the new board determine what is best
for Paramount.
Famous for classics like "The Godfather" and "Forrest Gump,"
Paramount is tied for last place in market share among Hollywood's
six largest studios—a ranking it has held annually since 2012.
"Star Trek Beyond" is the only one of its movies this year to have
grossed more than $100 million, and that was considered a
disappointment because it was the lowest gross of the series.
Besides wanting details on Paramount's spending for 2016 and
2017, Viacom in its filing also said it may put the studio under
tighter control. It said that could include requiring board
approval for matters as basic as talent contracts and production
and financing deals.
The scrutiny is overdue, said Wall Street analysts who are tired
of Paramount dragging down Viacom results. On its earnings call
last month, Viacom said it expected Paramount to generate an
operating loss for the full fiscal year.
"The problem at Paramount is truly shocking," said
MoffettNathanson Research analyst Michael Nathanson in a report
last week. "Short of firing the entire Paramount leadership team,
there is little a new CEO could do quickly to improve its film
pipeline."
Other recent bombs included "Zoolander 2," "Whiskey Tango
Foxtrot" and "Florence Foster Jenkins."
"This summer was a tough one," said Paramount Vice Chairman Rob
Moore.
Viacom's outgoing chairman and former CEO, Philippe Dauman, had
been looking to lessen the burden of Paramount on its balance sheet
by bringing in a partner. Talks have been held with China's Dalian
Wanda Group Co. about taking a 49% stake in the studio that would
value it at between $8 billion and $10 billion, a person familiar
with the matter said.
Mr. Dauman, who will leave Viacom on Sept. 13, is still pursuing
a Paramount sale and has until Sept. 7 to provide an update on a
possible deal to the board, with a potential vote scheduled for
Sept. 10.
While Mr. Dooley supported Mr. Dauman's efforts to sell a chunk
of Paramount, Mr. Redstone and his holding company, National
Amusements Inc., whose president is Ms. Redstone, have expressed
doubts. Earlier this year, National Amusements amended its bylaws
to require unanimous board approval of any Paramount deal.
Part of Paramount's problem is Hollywood's problem. Audiences
have shunned many sequels and remakes this summer, and the studio's
biggest releases so far have fallen into that camp.
But Paramount's struggles are also due to an indecisive
corporate strategy over the number of movies it wants to make. The
studio is now ramping up its output after several years of
cost-cutting that reduced the release schedule by nearly half.
The goal was to find a lean-and-mean way to make more money
while producing less. But the cost-cutting soured relationships in
Hollywood as agents and producers took hot projects elsewhere.
To impress the board, Paramount brass will have to make the case
that it has potential franchises to build on for the future and
promising new titles on the calendar.
In its favor, the studio produces the "Transformers" and
"Mission: Impossible" series.
"I think we have a good balance of original movies, a couple of
our tentpole franchises and attempts to develop new franchises,"
said Mr. Moore.
The studio is scheduled to release seven more movies this
year—two sequels ("Jack Reacher: Never Go Back" and "Rings") and
several adult-oriented dramas.
Mr. Moore cited several forthcoming releases that are potential
franchises, including "Baywatch," a big-screen take on the campy
lifeguard drama, and "Ghost in the Shell," an anime adaptation
starring Scarlett Johansson.
In addition, the studio's relatively new television unit has
shows in the works for HBO and Netflix and produced last season's
hit musical "Grease: Live" for Fox.
Ben Fritz
Write to Joe Flint at joe.flint@wsj.com and Erich Schwartzel at
erich.schwartzel@wsj.com
(END) Dow Jones Newswires
August 24, 2016 17:15 ET (21:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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