Paramount threatened to leave California. California sued. Everybody threatened everybody. Now Paramount and Warner Bros. are getting married anyway—and somehow the CEO of Mattel is helping run the household.
Well.
That escalated quickly.
A few weeks ago, I wrote about what appeared to be the beginning of the strangest Hollywood relocation since The Beverly Hillbillies loaded up the truck and moved to Beverly.
Paramount was threatening to leave California.
California was suing Paramount.
Paramount was trying to buy Warner Bros. Discovery.
Politicians were panicking.
Lawyers were billing.
And beginning October 1, a delay in the deal was going to start increasing the price Paramount owed Warner shareholders.
I called the whole thing:
HOW TO LOSE AN INDUSTRY IN 10 DAYS.
Turns out Hollywood didn’t lose the industry.
It just consolidated most of it into one gigantic corporate structure and handed somebody an $80 billion credit-card bill.
So…
Good news?
PREVIOUSLY ON: HOLLYWOOD
For anyone who missed our last episode, here’s what happened.
Paramount Skydance wanted Warner Bros. Discovery.
Badly.
California and 11 other states sued to stop the merger, arguing that putting this much entertainment under one corporate roof could hurt competition, workers and consumers.
Paramount responded with the corporate equivalent of:
“Fine. Maybe we’ll just move.”
Texas was mentioned.
Tennessee was mentioned.
Georgia was mentioned.
And somewhere in Burbank, a studio executive presumably opened Zillow and typed:
NASHVILLE HOMES WITH SCREENING ROOM.
Then everybody sat down.
And made a deal.
On September 30, a federal judge approved the settlement, clearing the path for Paramount’s acquisition of Warner Bros. Discovery.
The merger is expected to close October 6.
Price tag?
Roughly:
$110 BILLION.
For perspective, that is enough money to buy approximately 733 million large movie-theater popcorns.
Or six parking spaces in Beverly Hills.
SO WHAT DID CALIFORNIA GET?
Quite a bit, actually.
The settlement requires the combined company to release at least 30 theatrical movies annually during its first two years, followed by 32 per year during the next three.
It also requires at least $300 million in additional domestic film-production spending annually compared with 2025 levels.
That’s $1.5 billion over five years.
And if the company misses its annual movie quota?
There’s a potential $30 million penalty per missing film.
Which is fantastic.
Hollywood has finally invented something I’ve wanted for years:
A FINE FOR NOT MAKING ENOUGH MOVIES.
Think of the possibilities.
Can we expand this?
Movie is 45 minutes too long?
$8 million.
Movie ends with “PART ONE” even though nobody told us there was going to be a Part Two?
$12 million.
Character says, “So THAT happened”?
Studio loses a parking structure.
We could fix Hollywood by Thursday.
The agreement also requires the physical Paramount and Warner Bros. studio lots to remain in operation and includes workforce investments, labor protections and other conditions.
So that dramatic threat about Paramount packing up the mountain and moving to Tennessee?
For the foreseeable future:
The mountain stays.
BUT HERE’S WHERE THE STORY GETS REALLY INTERESTING
Because after all this fighting about Paramount and Warner Bros…
The company above them apparently isn’t going to be called Paramount.
Or Warner Bros.
It’s going to be called:
SKYDANCE.
David Ellison announced October 2 that the combined parent company will adopt the name of the production company he founded nearly two decades ago.
Paramount remains Paramount.
Warner Bros. remains Warner Bros.
But upstairs?
Skydance.
Imagine buying McDonald’s and Burger King and announcing that the parent company will henceforth be named:
DAVE’S BURGER SHED.
That’s confidence.
And I respect it.
AND THEN THEY HIRED THE BARBIE GUY
This is my favorite development.
Because apparently owning Paramount, Warner Bros., CBS, CNN, HBO Max, Paramount+, DC, Harry Potter, Mission: Impossible and everything else wasn’t interesting enough.
David Ellison needed a partner.
So he recruited:
Ynon Kreiz.
The outgoing CEO of Mattel.
Yes.
The company that makes Barbie.
And Hot Wheels.
And UNO.
And Fisher-Price.
And Masters of the Universe.
Kreiz helped transform Mattel from simply being a toy manufacturer into a company aggressively developing its intellectual property across movies, television, games and other entertainment.
Most notably?
Barbie.
You may remember it.
Pink.
Margot Robbie.
Made slightly more money than the average student film.
Kreiz will become co-CEO of the combined company, handling day-to-day operations and integration, while Ellison focuses on strategy, creative direction and technology.
Which means one of the largest collections of entertainment intellectual property ever assembled will partly be managed by the man who spent the last several years asking:
“Okay, what else in the toy aisle can become a movie?”
I literally just wrote a column about Matchbox: The Movie.
This is getting personal.
WELCOME TO THE BIGGEST FRANCHISE CLOSET IN HOLLYWOOD
Consider what is effectively gathering under this enormous umbrella.
Paramount.
Warner Bros.
CBS.
CNN.
HBO Max.
Paramount+.
DC.
Harry Potter.
Mission: Impossible.
Star Trek.
Yellowstone.
Game of Thrones.
Looney Tunes.
Food Network.
Comedy Central.
MTV.
Nickelodeon.
TBS.
And a tremendous amount more.
This isn’t a media company.
This is what happens when somebody clicks:
SELECT ALL.
The theoretical possibilities are staggering.
Batman on Survivor.
Harry Potter investigates crimes on NCIS.
Guy Fieri visits the Shire.
Diners, Drive-Ins and Dungeons.
I would watch that immediately.
AND NOW FOR THE PART THAT MAKES MY PAPER BAG TINGLE
Readers of my book Crash of the Titans know why giant corporate entertainment bets fascinate me.
The book looks back at famous Hollywood disasters—the movies where studios had enormous resources, recognizable intellectual property, experienced executives and every possible reason to believe they couldn’t fail.
And then…
Battleship.
There is a lesson buried underneath almost every legendary Hollywood flop.
The disasters rarely look ridiculous when somebody approves them.
That’s the important part.
Nobody walks into a boardroom and says:
“Gentlemen, I’ve developed a catastrophic idea that will embarrass us publicly and vaporize several hundred million dollars.”
No.
They say:
SYNERGY.
They say:
SCALE.
They say:
GLOBAL IP.
They say:
EFFICIENCIES.
They say:
STRATEGIC ALIGNMENT.
And eventually somebody puts an arrow on a PowerPoint slide.
Once the arrows appear, it’s over.
THE $80 BILLION ELEPHANT IN THE SCREENING ROOM
Here’s why I’m fascinated by this deal.
The new Skydance enters its next chapter carrying roughly:
$80 BILLION IN DEBT.
At the same time, management is targeting approximately:
$6 BILLION IN COST SAVINGS.
Those are not typos.
Six.
Billion.
Dollars.
In savings.
Now, executives have indicated those savings won’t come entirely from layoffs. Combining technology systems and eliminating duplicate corporate functions can obviously save enormous amounts of money.
That’s the rational explanation.
But I’m the Unknown Critic.
I’m contractually obligated to imagine the less rational version.
EXECUTIVE: We need to save six billion dollars.
ACCOUNTANT: I’ve canceled HBO Max.
EXECUTIVE: That’s one streaming service.
ACCOUNTANT: Fine. Paramount+ too.
EXECUTIVE: We own both.
ACCOUNTANT: Exactly. Synergy.
And this is where the story stops being merely funny.
Because whenever you hear phrases like “operational efficiencies,” thousands of employees hear something different.
They hear:
“Should I update LinkedIn?”
THIS IS THE PART HOLLYWOOD NEVER PUTS IN THE TRAILER
The studios remain.
That’s important.
Production commitments are part of the settlement.
That’s important too.
California has also dramatically expanded its film and television tax-credit program, and state officials say its first year generated commitments representing billions in production spending and tens of thousands of cast-and-crew jobs.
California is clearly fighting to keep production here.
But mergers this large inevitably create overlapping departments.
Two marketing operations.
Two finance structures.
Two distribution organizations.
Multiple streaming infrastructures.
Layers of management.
Technology systems.
Administrative departments.
And now management has promised investors billions in savings.
You don’t need to be Nostradamus to understand why Hollywood workers are nervous.
The buildings may stay.
The more important question is:
Who gets to keep working inside them?
THE GREAT HOLLYWOOD PARADOX
And that’s why this entire saga fascinates me.
Hollywood spent years worrying that technology companies were going to take over entertainment.
Netflix.
Amazon.
Apple.
Silicon Valley.
Algorithms.
Streaming.
Then one of Hollywood’s answers was apparently:
BECOME EVEN BIGGER THAN HOLLYWOOD.
Scale versus scale.
Franchise versus franchise.
Library versus library.
Platform versus platform.
The theory makes sense.
That’s what worries me.
Because the most interesting disasters in Crash of the Titans weren’t usually obviously stupid ideas.
They were reasonable ideas taken to unreasonable extremes.
Battleship wasn’t insane because somebody wanted an action movie.
It became insane when a familiar board-game title somehow justified building a gigantic effects-driven franchise hopeful around alien naval warfare.
Scale becomes its own argument.
The budget becomes proof of confidence.
The investment becomes evidence that the investment must have been smart.
Until opening weekend.
MAYBE SKYDANCE WORKS
And here’s where I disappoint anyone hoping I’ll simply predict disaster.
I can’t.
Because there is also a compelling argument for this combination.
Ellison has money, ambition and an obvious desire to modernize an old studio system.
Kreiz demonstrated at Mattel that old intellectual property can become culturally relevant again.
Warner Bros. possesses an extraordinary library.
Paramount possesses an extraordinary library.
The combined company gains tremendous scale.
California has created stronger incentives for production.
The settlement creates enforceable theatrical-production commitments.
There are legitimate reasons the strategy could succeed.
Which is precisely why it belongs in the Unknown Critic universe.
The fascinating question isn’t:
“Is this stupid?”
It isn’t.
The fascinating question is:
“What happens when an enormous, rational corporate strategy collides with an entertainment business that has become almost impossible to predict?”
That’s the movie I want to watch.
BECAUSE HOLLYWOOD STILL HAS ONE PROBLEM NOBODY CAN MERGE AWAY
You can merge studios.
You can consolidate streaming services.
You can combine technology platforms.
You can cut overhead.
You can acquire libraries.
You can own Superman, Tom Cruise, Bugs Bunny, SpongeBob, Harry Potter and Tony Soprano.
You can build the greatest entertainment arsenal assembled since someone discovered that Walt Disney owned both Darth Vader and Kermit the Frog.
But eventually…
Somebody still has to make something people want to watch.
That’s it.
That’s the whole business.
The audience does not care about your debt structure.
The audience doesn’t know what EBITDA means.
The audience has never once left a theater saying:
“The third act dragged, but I really admired their operational efficiencies.”
Stories win.
Characters win.
Movies win.
Everything else is accounting.
CRASH OF THE TITANS…PART TWO?
That’s why I’ll be watching Skydance very closely.
Not because I’m rooting for it to fail.
Quite the opposite.
Hollywood desperately needs successful movies.
California needs production.
Movie theaters need films people actually leave the house to see.
Workers need jobs.
And audiences could certainly use fewer corporate strategies masquerading as entertainment.
But history teaches us something.
Titanic companies rarely realize they’re standing near an iceberg.
That’s why they’re titans.
So perhaps the sequel to my previous column isn’t:
HOW TO LOSE AN INDUSTRY IN 10 DAYS.
Maybe it’s:
HOW TO BUILD THE BIGGEST STUDIO IN HOLLYWOOD AND HOPE NOBODY DROPS IT.
Because Paramount isn’t leaving California.
Warner Bros. isn’t leaving Burbank.
The lawsuit is settling.
The merger is moving forward.
Skydance is arriving.
And somewhere in Hollywood right now, I guarantee you…
There is a PowerPoint presentation.
There are arrows.
There is the word:
SYNERGY.
And someone has just said:
“What could possibly go wrong?”
I’ve written an entire book about that sentence.
It’s called Crash of the Titans.
— The Unknown Critic