Comscore Inc

If there’s one thing Paramount Skydance CEO David Ellison knows well, it’s an impossible mission.

Ellison, producer of five of the “Mission: Impossible” films, has been trying to acquire Warner Bros. Discovery for nearly six months. In September, he sent an initial, unsolicited offer to WBD, prompting the rival media company to explore a sale process that ultimately resulted in an agreement with Netflix to sell the Warner Bros. Film studio and WBD’s prestige streaming 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. This week, Paramount upped its offer for the entirety of WBD to $31 per share, a significant increase from previous bids of $19, $22, and $23.50. The WBD board is now reviewing the proposal, but emphasizes that its merger agreement with Netflix “remains in place,” suggesting a counter-offer from Netflix is likely.

The Warner Bros. Movie studio is a central component of Ellison’s pursuit. Last year, Warner Bros. Was the second-highest grossing studio at the domestic box office, while Paramount ranked fourth. However, the pursuit extends beyond simple market share; it’s about securing a consistent stream of blockbuster content.

A longtime Hollywood executive, Ellison has produced some significant box office hits, but his track record is uneven. While Netflix has historically had a complex relationship with theatrical releases, prioritizing streaming, Skydance has largely adhered to the traditional theatrical model. Acquiring Warner Bros. Would fundamentally alter the competitive landscape for either company.

“If a merger were to be approved, the entity that then grabs up Warner Bros. Would add tremendous horsepower both in terms of brand identity and revenue generating potential to their portfolio,” said Paul Dergarabedian, head of marketplace trends at Comscore.

A History of Skydance at the Box Office

Skydance released its first theatrical feature in 2006. Over the last two decades, the studio has launched nearly 30 films, the majority in partnership with Paramount, according to Comscore data. The merger between Paramount and Skydance was finalized in August of last year.

Skydance’s biggest successes are overwhelmingly tied to Tom Cruise. The studio’s six highest-grossing films globally all star Cruise, including five “Mission: Impossible” films and the 2022 hit “Top Gun: Maverick.”

“Top Gun: Maverick” stands out as an exceptional success for Skydance. It is the studio’s only film to exceed $230 million domestically. In fact, only five Skydance features have generated more than $200 million in the U.S. And Canada.

Globally, seven Skydance films have generated over $500 million in ticket sales. However, high production budgets often offset box office revenue. The most recent “Mission: Impossible” film, “The Final Reckoning,” grossed $599 million globally, but had a reported production budget of $400 million, not including marketing costs.

The combined production and marketing costs for “The Final Reckoning” were estimated at $600 million, split between Skydance, and Paramount. The typical box office revenue split with theater operators further reduces the net profit for studios.

While “Top Gun: Maverick” was a significant win, Skydance’s franchise films haven’t consistently delivered substantial profits.

A Mountain of Content

The merger with Paramount has expanded Skydance’s portfolio to include franchises like Sonic the Hedgehog, and upcoming films such as “Scream 7,” “Paw Patrol 3,” “Street Fighter,” “Scary Movie 6,” and “Focker-in-Law.” However, Paramount’s franchise slate doesn’t yet match the strength of Warner Bros. Discovery’s.

WBD’s library includes DC superheroes, Harry Potter, Lord of the Rings, Game of Thrones, Looney Tunes, and Scooby-Doo. It also distributes Legendary’s Dune and Godzilla/King Kong franchises.

“Warner Bros. Is one of the crown jewels of the theatrical distribution,” said Dergarabedian. “Their slate of films, filmmaker relationships, brand recognition, and reputation as one of the premier and iconic movie studios makes them a coveted asset by any player in the entertainment space.”

Shawn Robbins, director of analytics at Fandango, noted that Paramount’s box office performance has been inconsistent in recent years, despite successes like the Sonic films and “Top Gun: Maverick.”

The pursuit of Warner Bros. Discovery represents a high-stakes gamble for David Ellison, one that could reshape the future of Hollywood. The outcome remains uncertain, with Netflix poised to potentially match Paramount’s latest offer, and the WBD board carefully weighing its options.