EDITORIALS

Discussion: What if Paramount Merged with Sony or Universal?

by Alex Billington
June 15, 2009
Source: Forbes

This isn't news - it's all a rather crazy claim from a Wall Street investor. But there is a great discussion worth having. In a Forbes article published yesterday, veteran investor Mario Gabelli claims that "Viacom Inc's Paramount Pictures could merge with Sony Pictures, Universal Studios or another movie studio amid a wave of consolidation in the industry over the next few months." It's a very lofty prediction, especially since Paramount is one of the studios who is doing very well right now (and will be doing even better when Transformers 2 opens next week). But the discussion is whether this could be beneficial if it ever happened.

"Today there are seven or eight motion-picture studios. A round of consolidation will occur in the next six to 12 months because of the costs of financing, prints and advertising, the benefits of globalization and such," claims Gabelli. "We hear talk of something going on." Over the last few years, we've seen some big changes in Hollywood, most notably New Line Cinema being merged into Warner Brothers and the elimination / consolidation of indie labels like Paramount Vantage, Picturehouse, and Warner Independent. While all of the studios have been cutting costs, most of them seem to be doing well, with each getting a fair share of big hits. The two studios that seem to be struggling are Lionsgate and The Weinstein Company.

If you look at the box office totals for this year so far, Paramount is ranked right below Warner Brothers as the second most profitable studio - with $740.6 million (and that's not counting the expect $500 million+ that Transformers 2 will probably bring in). They're a great studio, one of the best in Hollywood, and haven't shown any of the signs that other studios show when they seem to be struggling internally. So I don't know why Gabelli thinks they might end up merging with another studio - unless Viacom's owner Sumner Redstone is really worried about their financial situation. But even that seems a little far-fetched as well.

What is worth discussing, though, is whether this would be at all beneficial to anyone in Hollywood - or, more importantly, to the artists or the audience (meaning us). Right off the bat, it doesn't seem like a good idea at all. However, I believe it was a good thing for New Line to merge with Warner Brothers last year - and since then we've seen both studios doing very well. There haven't been as many flops and Warner Brothers has even taken more risks (with movies like Observe and Report and Watchmen). But none of the three studios involved in this - Paramount, Sony, Universal - are doing poorly and need the support of each other. I'd even claim that they're so different from each that it would be a disaster to bring them together.

So is there any benefit for a huge merger like this? Or is it all about making sure Sumner Redstone's bank account stays full? The argument that I ended up getting in on Twitter focused on the idea that fewer studios and/or fewer people working in Hollywood would instantly mean bad things - less good movies, less movies in general, and so on. There is obviously more to that side of the argument, but I also feel like that is a hasty conclusion to jump to right off the bat. I don't think a Paramount merger would be good at all, but do more studios in Hollywood immediately mean better things? I'm not sure it does. What do you think?

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