Paramount Pictures to produce films for Netflix
Studio will provide streaming content after a dry spell and heavy financial losses.
Paramount Pictures has struck a multi-picture deal with streaming giant Netflix Inc., Jim Gianopulos, the studio’s chairman, announced Friday.
The Melrose Avenue film and television studio plans to produce a handful of films for Netflix next year, Gianopulos said during parent company Viacom Inc.’s fiscal fourth-quarter earnings call with analysts.
“Our priority is to expand our role as a global content provider,” Gianopulos said.
The move represents a significant departure for Viacom, which was burned before by selling Netflix the streaming rights to its most popular Nickelodeon shows several years ago.
Wall Street analysts largely blamed Viacom’s previous management for accelerating the rapid migration of children’s viewership to streaming platforms and away from traditional TV networks. Ratings for Nickelodeon and Viacom’s other television channels faltered — and have never fully recovered.
But Paramount is coming off a prolonged dry spell and heavy financial losses. It has been ramping up its pipeline of movies and TV shows to turn around the studio, which lost nearly $450 million in fiscal 2016.
Gianopulos noted that Netflix, Amazon.com Inc., Hulu and Apple Inc. are collectively spending $20 billion this year on content. The streaming services are hungry for programming at a time when other major studios, such as Walt Disney Co. and Warner Bros., have been pulling back because they plan to use their content to launch their own streaming services.
Viacom Chief Executive Bob Bakish said the new Netflix deal was different from past arrangements. About eight years ago, Viacom sold Netflix the right to stream episodes of its TV tentpoles such as Nickelodeon’s “SpongeBob SquarePants,” which encouraged the audience flight.
“This strategy is about new original productions,” Bakish said.
Paramount will produce “a small number of titles” exclusively for the Los Gatos streaming company, Gianopulos said.
“We will sell to them when and where it makes sense,” he said. “They are looking for great properties, and we have great intellectual property. We are looking at properties that are suitable for them.”
The century-old studio also is expanding its slate of theatrical movies. Paramount will release 13 movies to theaters in this fiscal year, up from nine in 2018. Its goal is to release 19 films in 2020.
“That remains our core business,” said Gianopulos, who joined Paramount in early 2017 after a long and successful run at 20th Century Fox. He compared the Netflix deal to studios’ practices about 20 years ago of producing movies of the week for major TV networks such as CBS and NBC.
In recent years, Viacom scaled back the availability of existing TV shows on streaming platforms to encourage viewers to watch TV the old-fashioned way. It removed “The Daily Show With Trevor Noah” from Hulu last year, but the New York-based company has begun putting together small deals to create new versions of shows for Netflix, Amazon and Facebook Watch.
Meanwhile, Paramount beat analyst expectations for its fiscal fourth quarter by posting its third consecutive quarter of profit. The improvement was due, in large part, to “Mission: Impossible — Fallout,” with Tom Cruise, which generated nearly $800 million in ticket sales worldwide.
The studio also scored with “A Quiet Place,” which cost less than $20 million to make. The John Krasinskihelmed film, starring Emily Blunt, generated $341 million worldwide.
Paramount produced $984 million in revenue for the quarter that ended Sept. 30 — a 25% increase over the year-earlier period — and reported adjusted operating income of $38 million compared with a loss a year earlier.
Viacom’s cable networks, including Nickelodeon, MTV, Comedy Central and BET, generated $2.52 billion in revenue during the quarter, a decline of 1% from the year-earlier period due to lower advertising revenue. Cable channels industrywide have suffered a loss of viewership as more consumers cut the cord.
The networks contributed $708 million in adjusted operating income.
Companywide, Viacom generated $3.49 billion in revenue in its fiscal fourth quarter, a 5% increase compared with the year-earlier period of $3.31 billion.
Viacom’s net income declined to $394 million, or 98 cents per share, compared with $674 million, or $1.67 per share, in the year-earlier period. On an adjusted basis, Viacom posted earnings of 99 cents a share, topping analyst estimates.
Its stock climbed 3.6% to $32.99 a share on Friday.
“Viacom should experience continued profit growth at Paramount for the next few years,” media analyst Michael Nathanson wrote Friday in a report. “However, given their size, the biggest risk to Viacom still remains declines in linear domestic advertising and affiliate fee revenues.”