Paramount Takes Write-Down for Movie That Isn't Released Yet
September 22 2016 - 5:30PM
Dow Jones News
"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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