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Paramount Pictures is arguably the world's oldest surviving movie studio, tracing its lineage back to 1912. It now forms the core of the Filmed Entertainment division within media group Viacom. Although a giant of the movie industry from the 1970s to the 1990s with films including the Godfather, Star Trek and Indiana Jones series and all-time box-office champion Titanic, Paramount scaled down its operations in the early 2000s. As a result, however, the studio came close to falling off the Hollywood map. A return to big-budget blockbusters has paid a few dividends since 2007: Paramount was re-established as the #1 studio that year for the first time in decades. Some of the credit for that achievement was due to an alliance with the DreamWorks studio, acquired in 2005. However that partnership proved fractious. Several key figures, including director Steven Spielberg, left the company at the end of 2008. The termination of a separate relationship with DreamWorks Animation has prompted a prolonged slump in box office performance since 2011, although the Transformers franchise continues to be a substantial moneyspinner every couple of years.
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Paramount forms the core of the Filmed Entertainment division of media group Viacom. The key unit in that division is legendary movie studio Paramount Pictures. Among the studio's biggest past hits are Titanic (via a co-production deal with News Corporation's 20th Century Fox), Braveheart, Forrest Gump, Beverly Hills Cop, Mission: Impossible and the Godfather, Indiana Jones and Star Trek franchises. In the early 2000s, Paramount gradually shifted to a new strategy of avoiding expensive stars and risky pictures in an attempt to play it safe. Yet the results of this experiment were disappointing. More of Paramount's films broke-even than those from other studios, but there were no major hits. Paramount exceeded $100m at the box office only four times between 2002 and 2004, and only one movie made the annual Top 20 by US box office. It was a dismal record by industry standards, and as a result big stars, directors and producers began to bypass the studio in favour of other companies.
The studio announced a significant change of tack in 2004 in an attempt to reverse this negative spiral, assembling a slate of higher-budget star vehicles. Towards the end of 2005, it also paid around $1.6bn to acquire the live action division of DreamWorks SKG, as well as distribution duties for DreamWorks Animation (which otherwise remains an independent company). A controlling interest in DreamWorks' 59-title movie library, which includes titles such as Gladiator and American Beauty, was sold on to investor George Soros for $675m in 2006, although Paramount retained rights to distribute those titles on video. Those shares were reacquired in 2010, giving Paramount full control to the DreamWorks library.
Behind the scenes, however, the relationship between Paramount studio heads and the team at DreamWorks was unravelling as a result of a series of perceived slights towards the smaller studio's senior officers. Ironically, much of this friction resulted from the spectacular success of Shrek and Transformers, both DreamWorks-initiated productions distributed by Paramount. DreamWorks executives felt that their contribution to this success was taken for granted by Paramount, and towards the end of 2007, the company began negotiations to end its relationship with the parent company. The DreamWorks management team finally agreed a new funding deal in 2008, and became independent once again in 2009. Paramount's distribution deal with DreamWorks Animation expired at the end of 2012, at which point the animation studio transferred rights to Fox. The final DreamWorks Animation release for Paramount, Madagascar 3, was the company's only significant hit in 2012.
Specialty production label Paramount Vantage operated separately for several years, but was merged with the main Paramount studio in 2008. Other subsidiary labels include MTV Films and Nickelodeon Pictures. Along similar lines to its arrangement with DreamWorks Animation, Paramount also inked a distribution partnership with the production arm of comic book publisher Marvel, which spawned the first two, hugely successful Iron Man movies. However, following Marvel's acquisition by Disney, Paramount agreed to an early termination of that relationship in 2010, although it released two further Marvel-inspired pictures which were already in development. There are also "first look" deals with directors and producers including JJ Abrams, Lorenzo di Bonaventura, Martin Scorsese and Brad Pitt. There is also a long-standing but occasionally fractious relationship with actor Tom Cruise.
Paramount was the #1 movie studio by US box office in 2007 for the first time in a decade as a result of Shrek The Third and Transformers, both DreamWorks-originated pictures. For 2008, it was kept from the top spot only by the unstoppable force of Warner's Dark Knight but held a more than respectable second position with a gross of almost $1.6bn. It was #2 again in both 2009 and 2010, before seizing the #1 spot again in 2011 as a result of the huge success of Transformers: Dark Side of the Moon.
Performance since then has been considerably less impressive. Paramount was ranked a lowly #7 in both 2012 and 2013 in the US, moving up to #6 for both 2014 and 2015. Globally its biggest hit in 2015 was a reprise of the Mission Impossible franchise (Ghost Nation, total gross $682m), supported by a similar return to the Terminator series (Genisys, $440m worldwide). The Spongebob Movie and Daddy's Home also did reasonable business in the US. The most recent addition to the studio's all-time US Top 20 was Transformers: Age of Extinction from 2014. However, 2016 saw the company release a series of disappointing releases and outright flops including Zoolander 2, Ben-Hur and Whiskey Tango Foxtrot. The studio even wrote off $115m against one movie - Monster Trucks - before it had even released it.
Outside North America, the company now maintains its own distribution network, Paramount Pictures International, formed after the break-up in 2007 of UIP, a long-established partnership with Universal Studios. Paramount Home Entertainment handles video and DVD distribution worldwide, with a library of around 3,500 Paramount or other acquired titles. Among the classic films in the library are Titanic, Braveheart, It's A Wonderful Life, Sunset Boulevard, Chinatown, Love Story, High Noon and the Godfather, Star Trek and Indiana Jones series. A new television and digital entertainment was launched in 2014 to develop content for network and streaming channels.
Combined revenues from filmed entertainment hit $5.9bn in the year to Sept 2011, but have fallen sharply since then. The figure for the year to Sept 2015 was just $2.88bn, down by 23% on the year before. Operating income fell by a further 46% to $111m.
In ye 2015, theatrical distribution accounted for 29% of revenues ($841m), home entertainment for 30% ($871m), television license fees for 34% ($980m), and digital and other streams for the remaining $191m.
For the year to 2016, revenues slumped 8% to $2.66bn. The division reported an operating loss of $445m as a result of write-offs and poor performance.
The Paramount Pictures name began as the distribution business for a film studio created by Hungarian-born entrepreneur Adolph Zukor. Originally the owner of a small nickelodeon theatre in New York, Zukor gambled a considerable sum to acquire rights to Queen Elizabeth, a four-reel film made by and starring the legendary stage actress Sarah Bernhardt. When it opened in July 1912, it was the first full-length film drama ever to be screened in the United States. Its success prompted Zukor to set up his own production company, The Famous Players Film Company, to deliver a succession of similarly grandiose classical adaptations, billed as "Famous Players in Famous Plays". Titles included The Prisoner of Zenda and The Count of Monte Cristo. In 1914, Zukor acquired a small distribution company named Paramount Pictures Corporation to release his products to other cinema owners. It was America's first national film distribution company.
In 1916, Zukor's Famous Players merged with a fledgling studio run by Jesse Lasky in Hollywood to form Famous Players-Lasky Corporation. Both companies' interests were merged, with the resulting films released through the Paramount distribution company. Eventually, the Paramount name became so significant that the company changed its name to Paramount-Famous Lasky. In 1926, partners Zukor and Lasky also constructed a huge new production studio on Marathon Street in Hollywood, which Paramount remains to this day. Many of the biggest names in Hollywood worked under the Famous Players-Lasky banner in its early days, including Cecil B DeMille (who had got his start in pictures from Lasky), Douglas Fairbanks, Mary Pickford, Gloria Swanson and cowboy star William S Hart. Later stars included Rudolph Valentino and Clara Bow. The company's World War I drama Wings was the very first recipient of the Oscar for Best Picture in 1929.
In the mean time, Zukor also accumulated numerous other interests including a national chain of almost 2,000 cinemas, and was one of the principal backers of William Paley's Columbia Broadcasting System in 1928. However this rampant expansion led to serious problems in the Great Depression of the early 1930s and the business narrowly avoided bankruptcy in 1935. It managed the transition into the sound era with some success, and launched to a new generation of stars during the course of that decade including Marlene Dietrich, the Marx Brothers, Bing Crosby and Bob Hope. Paramount was also one of the main early rivals to Walt Disney in cartoon shorts, through the work of animator Max Fleischer, whose creations included Betty Boop and Popeye.
Throughout this period, the group had continued to expand its extensive national cinema chain, and this led to numerous run-ins with monopoly regulators. Eventually in 1946, the government ruled that none of the major studios should be allowed to own their own cinemas, and Paramount was effectively split in two in 1949, its movie exhibition business hived off into an independent company. The loss of this enormously profitable sideline, as well as the emergence of a powerful new rival, television, sounded the death knell for all the great Hollywood studios, Paramount included. The business suffered a steady decline during the course of the 1950s, punctuated by a few occasional triumphs, not least Cecil B DeMille's remake of The Ten Commandments, a massive commercial hit in 1956.
In 1966, Paramount was acquired by Gulf & Western, an industrial conglomerate run by the obsessive and notoriously foul-mouthed Austrian entrepreneur Charles Bludhorn. Paramount was by now one of the weakest of the major studios, having failed to develop a strong position in TV production. In what was considered at the time to be the final nail in Paramount's coffin, Bludhorn appointed a virtual novice, former actor Robert Evans, as its head of production. In fact Evans managed to engineer a spectacular turnaround of Paramount's fortunes. Over the next eight years, he delivered a string of huge hits, including Love Story, The Odd Couple, Rosemary's Baby and above all The Godfather, which re-established Paramount as the #1 Hollywood studio. When Evans quit to become an independent producer, he was succeeded by another young turk, TV-trained Barry Diller.
Diller maintained Paramount's run of movie hits - including Grease, the first two Indiana Jones movies, Terms of Endearment and Beverly Hills Cop - while also building the company as a major force in television comedy. In the late 1970s and early 1980s Paramount was responsible for developing and creating long-running hit shows Taxi and Cheers. (The latter, in turn, spawned the equally successful Frasier in the 1990s). Diller also trained up a new generation of executives who would come to dominate the industry by the end of the 1980s, including Michael Eisner, Jeffrey Katzenberg, and Don Simpson. However the sudden death of Charles Bludhorn in 1983 left a vacuum at parent group Gulf & Western. His successor, Marvin Davis, began a restructuring of the conglomerate's widely spread interests in mining, metal production and sugar plantations to concentrate on media and entertainment. In 1989, Gulf & Western changed its name to Paramount Communications.
In 1994, the group was targeted by cable group Viacom, which agreed to buy the business for $8.2bn, mostly to be paid in stock. Viacom's offer was quickly topped by a higher cash offer from the TV home shopping network QVC, now run by former Paramount Studios boss Barry Diller. Both sides spent the next five months in a bruising bidding war, upping the stakes by bringing on a host of corporate partners. Viacom recruited cable operator Nynex to back its bid, and added firepower by announcing a second mega-deal. In January of 1995, with the Paramount takeover still unresolved, Viacom announced it would spend a further $8.4bn to acquire video retail chain Blockbuster, and also upped its bid for Paramount to over $10bn. (Beaten on Paramount, Diller went on to create the interactive entertainment group IAC).
Having clinched the takeover of Paramount, Viacom then spent several years digesting its various acquisitions, selling off non-core businesses, before pulling off another big deal in 1999 with the takeover of CBS. In the mean time, the movie studio scored several more spectacular successes, not least Titanic in 1997 and the first two Mission: Impossible features in 1996 and 2000. However, the need to deliver more consistent profits led to a change of strategy in the early 2000s. Rather than gamble on expensive star actors and directors, Paramount opted for a line-up of what looked on paper at least like less risky ventures. Yet the results were, arguably, disastrous. Not one Paramount release made the US Top 20 in either 2002 or 2003, and only one (Lara Croft: Tomb Raider) took more than $130m in the four years from 2001 to 2004.
In 2005, Paramount bought out the live action division of DreamWorks SKG, the "mini-major" established by Steven Spielberg with David Geffen and Jeffrey Katzenberg. That same year, The War of the Worlds, directed by Spielberg and starring Tom Cruise, signposted a return to blockbusters. However, it was clear that the company - or at least owner Sumner Redstone - still had reservations regarding top-dollar talent. In late summer 2006, when another blockbuster, Mission Impossible III, was slow to deliver results at the box office, Sumner Redstone surprised many observers by delivering an unprecedented personal criticism of superstar actor Tom Cruise. He accused Cruise of committing "creative suicide" by making several unconventional and outspoken public appearances which, said Redstone, reduced the potential appeal of M:I III to a female cinema audience. Though by no means a flop, M:I III generated less at the box office than either of its predecessors, and Paramount's income was reduced by a substantially higher payout to its star. As a result Redstone declined to renew Paramount's longstanding production partnership with Cruise.
A similar succession of slights also weakened the studio's relationship with star director Steven Spielberg. In 2007, reports began to circulate that the DreamWorks team felt underappreciated by Paramount management and were considering whether or not to renew their contracts when they expire in 2008. Viacom CEO Philippe Dauman expressed his public regrets over any such dissatisfaction and hoped that the contracts would be renewed. But if not, he said, Paramount would move ahead and "achieve its goals without missing a beat". That comment only appeared to exacerbate the bad feeling on the part of Spielberg and his supporters. In June 2008, Spielberg agreed a deal to establish a new independent DreamWorks studio with backing from Indian billionaire Anil Ambani and his Reliance conglomerate. Reliance's Big Entertainment movie production subsidiary has already signed development deals with a string of other Hollywood stars including Jim Carrey, Tom Hanks and George Clooney. The DreamWorks management team left Paramount at the end of the year.
Last full revision 29th September 2016
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