Thursday, November 14, 2013

Studio Analysis Part Three: Behind the Paramount Gates & Inside Corporate

paramount backlot high res
By Neil Turitz

Here we come to the nitty-gritty, taking a peak behind the mountain gates to look at the business side of how Paramount makes its movies. Unlike Warner Bros., which has weathered a tumultuous year, things at Paramount have been largely sure-and-steady.

It starts at the top with Chairman and CEO Brad Grey. The former talent manager and TV producer took over for longtime studio head Sherry Lansing in 2005 amidst a fair amount of controversy attached to his hiring. Grey, after all, had produced a few movies but had no real executive experience. Needless to say, the decision was met with much skepticism.

When Grey took over, Paramount wasn’t a sixth place studio—it was seventh, behind New Line (which now counts as part of Warner Bros.). Grey had his work cut out for him, but he managed it in fairly short order.

So, in 2004, Paramount was seventh in market share and box office grosses. In 2005, when Grey started, it was up to sixth. In 2006, Grey’s first full year, it was fifth. By 2007, it was the number one studio in town, partly because of the distribution deals Grey set up with DreamWorks and Marvel Entertainment. The following year was also the first in which Marvel’s films started making money, the year of Robert Downey Jr.’s first foray into the world of superheroes. Iron Man was a huge win for Paramount, and Grey looked like a genius.

brad grey paramountThe good fortune continued as Paramount was second only to Warner Bros. in 2008 and 2010 (slipping briefly to third in 2009) before it took the crown in 2011 as the number one studio in Hollywood. But the honeymoon was over when the DreamWorks deal ended and Marvel followed. Both companies defected to Disney (with DreamWorks Animation heading to Fox), leading to an unavoidable drop in grosses and market share. Thankfully, it didn’t hurt the bottom line too much, and the change may have made everyone’s job at Paramount a tad easier.

Regarding Paramount’s sixth place standing, there are two extenuating factors. The first is that market share becomes much less important if a studio is releasing fewer films and those films show marked and distinct profits. Fewer films means smaller market share by definition. But if those fewer movies are performing up to—and even beyond—expectations, market share becomes an afterthought.

The second thing is that, regardless of market share, Paramount’s bottom line is impressive enough that we’re going to see Brad Grey at the top of the mountain for quite some time. He’s already been at it for eight years, and last year he signed an extension through at least 2017.

That qualifies as a major vote of confidence from parent company Viacom in Grey, his team and the job they’re doing—even with the downturn of 2012. Yes, Viacom CEO Philippe Dauman has vowed that the company would increase profits by controlling costs on the entertainment front (vis-à-vis both Paramount Pictures and Paramount TV), and that announcement was followed in October by the layoff of 110 staffers. Still, that doesn’t mean the people running the show are suddenly looking over their shoulders. But it does mean that the days of the studio spending $200 million on a single project are behind them, and that co-financing deals will become increasingly important (more about that below).

Interestingly, as successful as Grey quickly became, it took him a while to find a Paramount Film Group topper with whom he could work well. First came Gail Berman followed by Alli Shearmur, Brad Weston and, finally, Jon Lesher. None of them lasted very long, raising speculation that Grey’s tenure itself would soon flame out. Then, in 2009, two things happened: First came the expiration of the unhappy DreamWorks partnership. Next, Grey hired Adam Goodman to run the film division. While the first event was an ending, the second proved to be the beginning of an exceedingly successful relationship.

adam goodman paramountGoodman came to Paramount from DreamWorks, where he was president of production, before taking the same job at Paramount in 2008, a year before his promotion. Something of a renaissance man who absorbs as much as he can on every aspect of the film business, Goodman’s responsibilities encompass overseeing all the shingles under the Paramount Motion Picture Group umbrella (Paramount Pictures, Paramount Animation, Paramount Vantage, Insurge Pictures, MTV Films and Nickelodeon Pictures). That means not only the bigger studio pictures (like, say, Star Trek Into Darkness) but also the smaller, more independent-minded projects (Alexander Payne’s upcoming Nebraska) and kids’ fare (the Nickelodeon flick Fun Size) fall under his purview.

Running the film group is only part of Grey’s responsibilities. He also runs business operations for Paramount Pictures International, Paramount Home Entertainment, Paramount Digital Entertainment, Paramount Famous Productions, Paramount Licensing Inc., Paramount Studio Group and Worldwide Television Distribution. But it’s how he fares at the helm of the film group—the most visible and high profile part of the operation—that will determine, fairly or not, how he is judged by the press and the industry.

Skydance logo twitterGrey’s deal with Skydance Productions to finance or co-finance four to six movies per year takes some of the pressure off him and the studio. Prior to that, Paramount was the only studio in town without a regular finance partner (though it did have a longstanding partnership with MGM). For years, Paramount and parent company Viacom were either on the hook for each movie on its slate or entered into one-off deals with individual financiers. While that still remains largely the case—next month’s The Wolf of Wall Street was financed by Red Granite Productions, a relative newcomer to the game—the new deal with Skydance takes some heat off Paramount and, by extension, Viacom.

Previously, Skydance, run by David Ellison (brother of Annapurna topper Megan Ellison), had come aboard for a movie here and there. But 2013 saw several collaborations between Paramount and Skydance, including World War Z and next January’s Jack Ryan: Shadow Recruit. There are plenty co-financing projects in the hopper, including the next installments in the Mission: Impossible, G.I. Joe and Terminator franchises (all due in theaters in 2015), among a host of others. Partnerships are how modern studios thrive, and Paramount is no exception.

bad robot logoGoodman has also gone out of his way to streamline things at the studio so that it can continue to produce as many films as it does each year. He slashed expenses around the lot—everything from writer step deals to discretionary fund deals to things as small as flowers in a particular producer’s office. He got rid of most of the producing deals the studio had on the lot, whittling them down from around 40 to a select few, like J.J. Abrams’ Bad Robot, Michael Bay’s Platinum Dunes, Brad Pitt’s Plan B, Mary Parent’s Disruption Entertainment, Sacha Baron Cohen and Todd Schulman’s Four By Two Films, Josh Schwartz and Stephanie Savage’s Fake Empire, Martin Scorsese’s Sikelia and both Ian Bryce’s and Lorenzo di Bonaventura’s eponymous shingles.

Similarly, Goodman has also streamlined the various operations under the Paramount umbrella so that there are no separate staffs. Now, executives can work on both an MTV film and an Insurge picture. Projects are still released under the auspices of a specific banner, but they are separated by genre and cost rather than by which group of executives generated and developed them. The new system has everyone working on the same team, with plenty of cross-pollination and interaction. Unlike other companies, where there is a firm wall between the various divisions, Paramount has united them all under the same roof, with the same personnel.

bad grandpa stillWhile the synergy is a definite positive, there is a downside too. With no official divisions, certain banners can see less attention and by extension release fewer films. MTV and Nickelodeon, for instance, are down to about one film per year. The former gave us Bad Grandpa a few weeks ago but has only a pair of projects in active development as well as a Hansel and Gretel sequel moving forward. The latter hasn’t given us anything since 2012’s Fun Size and has nothing on its slate till the Teenage Mutant Ninja Turtles reboot next August and Spongebob Squarepants 2 in 2015. Nickelodeon does have a trio of other movies in active development. Still, that’s not exactly a cornucopia of projects.

As with other majors, when it comes to actually greenlighting a film for the banners that are more active, there is a committee in place. Led by Goodman and reporting to Grey, it also includes input from Paramount Vice Chairman Rob Moore, Chief Marketing Officer Josh Greenstein, President of Domestic Marketing and Distribution Megan Colligan, President of International Marketing Nic Crawley, President of Production Marc A. Evans, President of Domestic Theatrical Distribution Don Harris, International Theatrical topper Anthony Marcoly, Physical Production boss Lee E. Rosenthal and President of Consumer Products and Global Marketing Partnerships LeeAnne Stables. Once everyone has given their input, Goodman makes a decision and runs it up the flagpole to Grey, the final decision maker.

Sending material up the ladder is an impressive roster of executives who’ve contributed to the successful run of projects over the last calendar year. President of Production Evans oversees Geoff Stier (who has ties to Four By Two) and recent hire (from 20th Century Fox) Peter Kang, who was immediately handed the keys to one of the studio’s biggest franchises—the third entry in the G.I. Joe series.

Senior Vice President Elizabeth Raposo works on nearly every Bad Robot film that comes down the pike, fellow SVP Ashley Brucks oversees the Paranormal Activity franchise while Vice President of Production Amanda Countner Brown is the point person on a wide variety of films and was the liaison for the Anchorman sequel. Allison Smalls was recently named Vice President of Paramount Insurge while VP Eben Davidson oversees acquisitions and the incredibly lucrative Jackass franchise. Jill Gilbert and Annie Laks are two more Vice Presidents, both on the animation side.

Speaking of animation, Executive Vice President Bob Bacon is the head of production for the fledgling operation that won an Oscar out of the gate with Rango. The division that began because of its faltering deal with DreamWorks Animation has otherwise been slow-going. The next entry on the slate is not due until summer, 2015. Still, it’s not often when any operation is batting 1.000, so the company can take solace in that.

Hansel and Gretel Witch HuntersWorth singling out too is the stellar job of the Paramount marketing team. You want to know the surest way to turn a definite flop into a surprise hit that spawns an unlikely sequel? Put together an ad campaign that intrigues people enough to get them into theaters. Case in point: Hansel and Gretel: Witch Hunters. Granted, the movie came out in the dead of January against little competition, but it was greeted by resoundingly bad reviews. That’s when the marketing team stepped in to revitalize its prospects, and the rest is a study in how to build a franchise. In this case, credit goes to Greenstein and his team led by Colligan, Crawley and company. From the top down, it’s a crack staff at the top of its game.
It’s also worth nothing that, with the exception of Kang who is an experienced studio exec in his own right, the entire production team is homegrown. Goodman, Evans, Stier, Brucks, Smalls, Davidson, Broan and Raposo all began at Paramount either as junior executives or assistants. The fact that virtually the entire team has stayed loyal to their house is as rare as it is impressive.
Of the six major studios in town, only Sony has had its leadership in place longer than Goodman has been at the top of the film division at Paramount. As long as he, Grey and the rest of the team continue to rebuild from the losses of DreamWorks and Marvel and keep putting profitable projects into theaters, there’s every reason to expect that Paramount will continue its steady, solid performance.

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