David Ellison’s Rocky Box Office History

If there is one thing Paramount Skydance CEO David Ellison knows full well that it’s an impossible task.

Ellison, the producer of five “Mission: Impossible” films, was trying to buy Warner Bros. Discovery For about six months. In September, he sent an unsolicited preview to WBD, prompting the rival media company to explore a sale that led to a deal with Netflix To sell the Warner Bros. movie studio. Popular and WBD’s live broadcast assets.

Ellison launched a hostile tender offer and, separately, was welcomed back to the negotiating table with WBD under a seven-day waiver from Netflix. Paramount this week increased its offer for the entirety of WBD.

Warner Bros. is a movie studio. A big part of the reason Ellison is so committed to winning over WBD’s board and shareholders.

Last year, Warner Bros. Second highest grossing company at the domestic box office. Paramount came in fourth place.

Ellison, a longtime Hollywood executive, has had some massive box office successes, but his track record has been far from consistent.

While Netflix has a fraught relationship with theatrical releases — disrupting traditional businesses and choosing for years to prioritize streaming movies to its subscribers — Ellison’s production company, Skydance, has followed the tried-and-true theatrical playbook.

Acquiring ownership of Warner Bros. It would be a game-changer for either company.

“If the merger is approved, the entity that then acquires Warner Bros. will add tremendous strength in terms of brand identity and revenue generation potential to its portfolio,” said Paul Dergarabedian, head of market trends at Comscore. “So, it is understandable why competition is fierce among potential suitors vying for their chance to take over the studio.”

Skydance released its first theatrical film in 2006, a World War I drama featuring James Franco as an American fighter pilot. Over the past two decades, the studio has released nearly 30 films, most of which were in partnership with Paramount, according to data from comScore.

Paramount and Skydance completed their merger, engineered by Ellison, in August.

Skydance’s biggest successes have come from one source in particular – Tom Cruise. The studio’s six highest-grossing films globally all star Cruise, including five films in the “Mission: Impossible” franchise and the 2022 hit “Top Gun: Maverick.”

Having a billion-dollar movie under your belt is no small feat, especially in the wake of the pandemic.

The theatrical business has been in a state of flux in recent years as consumer habits change, studios grapple with how long films must play in theaters before they reach the home market, and streaming crowds out potential releases.

For comparison, Disney It has released six billion-dollar films since 2021: “Avatar: The Way of Water,” “Inside Out 2,” “Deadpool & Wolverine,” “Moana 2,” “Zootopia 2,” and “Avatar: Fire and Ash.”

Warner Bros. had 2023’s “Barbie” movie, Universal had “The Super Mario Bros. Movie” the same year, and Sony had “Spider-Man: No Way Home” in 2021, according to Comscore data.

However, “Top Gun: Maverick” is a bit of an outsider for Skydance. In addition to being the studio’s only billion-dollar film, it is also the only film in its library to surpass $230 million domestically.

In fact, only five Skydance features to date have grossed more than $200 million in the United States and Canada.

Globally, the production company has seen seven of its films generate more than $500 million in ticket sales, which would be an even greater accomplishment — if the budgets of many of these films weren’t so high.

“The challenge for Ellison and Skydance, as for every studio, production company and distributor, is to keep budgets in line especially for recent installments of major franchises as these tend to have diminishing returns compared to previous releases to justify continued investment in these film franchises,” Dergarabedian said.

Of course, Skydance split production costs with its studio partners, so it’s unclear exactly how much the company allocated for each film it produced. However, many franchise films have seen their budgets increase with each new installment.

Watch the latest “Mission: Impossible” movie. “Mission Impossible: The Final Reckoning” grossed $599 million at the global box office, the fourth-best showing for a film in the series. However, the film’s budget was $400 million. That’s before marketing costs, which typically amount to about half of the production budget.

So, Skydance in conjunction with Paramount would have spent an estimated $600 million before The Final Reckoning’s theatrical release. The $599 million brought in from ticket sales is split.

Studios share box office revenues with theater operators, usually split 50-50 by the end of the film’s theatrical run.

The result is often a film that did well at the box office, but was ultimately unprofitable for the studios that produced it. And unlike some franchises — like Marvel, Star Wars, or Harry Potter — Mission: Impossible doesn’t have a strong marketing arm or huge fan demand for things like toys, apparel, or collectibles.

By merging with Paramount, Ellison’s Skydance now has more properties under the production company’s label. This includes the profitable Sonic the Hedgehog series and upcoming films such as “Scream 7,” “Paw Patrol 3,” “Street Fighter,” “Scary Movie 6” and “Focker-in-Law,” the latest installment in the Robert De Niro-led Meet the Parents series.

However, Paramount’s roster of franchises is still not the heavy hitters that WBD carries on its roster.

“Warner Bros. is one of the crown jewels in theatrical distribution,” Dergarabedian said. “Their film portfolio, relationships with filmmakers, brand recognition, and reputation as one of the leading and distinguished film studios make them a sought-after asset for any player in the entertainment industry.”

WBD includes DC superheroes in its library, such as Harry Potter, Lord of the Rings, Game of Thrones, Looney Tunes and Scooby-Doo. It is also the distributor of Legendary’s Dune, Godzilla, and King Kong franchises.

“In Paramount’s specific case, the studio’s market share was often challenged to keep pace with competitors and peaked in the years leading up to 2015,” said Sean Robbins, director of analytics at Fandango and founder of Box Office Theory. “While occasional hit films like the Sonic, A Quiet Place and Scream franchises have provided bright spots, as well as Top Gun: Maverick capturing lightning in a bottle four years ago, some of the studio’s most bankable IPs have seen diminishing returns among contemporary moviegoers.”

Paramount Skydance needs consistency at the box office, and well-known and beloved franchises are one way to do that. Of course, just having a big name doesn’t guarantee box office success, but it does lower the barrier to entry.

“Paramount is looking to capitalize on every opportunity it can with the recent completion of Tom Cruise’s Mission: Impossible series, the decline of Transformers from its biggest blockbuster days, and the cinematic dormancy of Star Trek, as this brand has been refocused towards multiplexed streaming series aimed mostly at its older audience,” Robbins said.

Disclosure: Versant is the parent company of CNBC and Fandango.