The Checkered Box Office History of David Ellison

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

Ellison, producer of five of the “Mission: Impossible” films, tried to buy Discovery of Warner Bros. for almost six months. In September, it sent an unsolicited initial offer to WBD, prompting the rival media company to explore a sales process that resulted in a deal with Netflix to sell the famous film studio Warner Bros. and WBD’s prestigious streaming assets.

Ellison launched a hostile takeover bid and, separately, was welcomed back to the negotiating table with WBD as part of a seven-day waiver from Netflix. This week, Paramount upped its offer for the entire WBD.

The Warner Bros. film studio. explains in large part why Ellison was so committed to convincing the WBD board and its shareholders.

Last year, Warner Bros. was the second highest-grossing studio at the domestic box office. Paramount was fourth.

A longtime Hollywood executive, Ellison has produced huge box office hits, but his track record is far from consistent.

While Netflix has had a strained relationship with theatrical releases — disrupting the traditional industry and choosing for years to prioritize streaming films for its subscribers — Ellison’s production company, Skydance, has followed the tried-and-true theatrical playbook.

Take ownership of Warner Bros. would be a game changer for either company.

“If a merger were to be approved, the entity that subsequently acquires Warner Bros. would add considerable strength in both brand identity and revenue-generating potential to its portfolio,” said Paul Dergarabedian, head of market trends at Comscore. “We therefore understand why competition is fierce between potential suitors fighting for the chance to acquire the studio.”

Skydance released its first feature film theatrically in 2006, a World War I drama starring James Franco as an American fighter pilot. Over the past two decades, the studio has released nearly 30 films, the majority of which were in partnership with Paramount, according to Comscore data.

Paramount and Skydance completed their merger, engineered by Ellison, in August.

Skydance’s biggest hits come from one source in particular: Tom Cruise. The studio’s six highest-grossing All Star Cruise films worldwide, including five “Mission: Impossible” films and the 2022 hit “Top Gun: Maverick.”

Having a billion-dollar film under your belt is no small feat, especially in the wake of the pandemic.

The movie business has been evolving in recent years as consumer habits have changed, studios question how long films should run in theaters before hitting the domestic market, and streaming siphons off potential releases.

For comparison, Disney has released six billion-dollar films since 2021: “Avatar: The Way of Water”, “Inside Out 2”, “Deadpool & Wolverine”, “Moana 2”, “Zootopia 2” and “Avatar: Fire and Ash”.

Warner Bros. had “Barbie” in 2023, Universal had “The Super Mario Bros. Movie” the same year and Sony had “Spider-Man: No Way Home” in 2021, according to Comscore data.

However, “Top Gun: Maverick” is a bit of an exception for Skydance. In addition to being the studio’s only film to gross a billion dollars, it is also the only film in its library to exceed $230 million domestically.

In fact, only five of Skydance’s feature films have grossed more than $200 million in the United States and Canada to date.

Globally, the production company has seen seven of its films generate over $500 million in ticket sales, which would be an even greater feat if the budgets for many of these films weren’t so high.

“The challenge for Ellison and Skydance, as with any studio, production company and distributor, is keeping budgets in line, especially for the later installments of major franchises, as these tend to have diminishing returns compared to previous releases in justifying continued investment in these film franchises,” Dergarabedian said.

Of course, Skydance shared production costs with its partner studios, so it’s unclear how much the company invested in each film it produced. However, many of its franchise films have seen their budgets increase with each new installment.

Watch the latest movie “Mission: Impossible”. “Mission Impossible: Final Judgment” generated $599 million at the worldwide box office, the fourth highest grossing for a film in the franchise. However, the film had a reported budget of $400 million. That’s before marketing costs, which typically make up about half of the production budget.

Thus, Skydance, in collaboration with Paramount, would have spent approximately 600 million dollars before the theatrical release of “The Final Reckoning”. And that $599 million from ticket sales is shared.

Studios share box office revenues with theater exhibitors, usually in a 50-50 split at the end of a film’s theatrical release.

The result is often a film that performed well at the box office, but was ultimately unprofitable for the studios that produced it. And unlike some franchises – think Marvel, Star Wars or Harry Potter – Mission: Impossible doesn’t have a robust merchandising department or as strong demand from fans for things like toys, clothing or collectibles.

By merging with Paramount, Ellison’s Skydance now owns more properties that fall under the production company’s designation. That includes the lucrative Sonic the Hedgehog franchise and upcoming films like “Scream 7,” “Paw Patrol 3,” “Street Fighter,” “Scary Movie 6” and “Focker-in-Law,” the latest installment in the Robert De Niro-led Meet the Parents franchise.

However, Paramount’s roster of franchises still isn’t quite the heavy hitters that WBD carries on its roster.

“Warner Bros. is one of the jewels of theatrical distribution,” Dergarabedian said. “Their catalog of films, relationships with filmmakers, brand recognition and reputation as a leading and iconic film studio make them a coveted asset for anyone in the entertainment space.”

WBD has DC superheroes Harry Potter, Lord of the Rings, Game of Thrones, Looney Tunes and Scooby-Doo in its library. It is also the distributor of Legendary’s Dune and Godzilla and King Kong franchises.

“In the specific case of Paramount, the studio’s box office market share was often challenged to keep pace with its competitors and its own peak performance in the years leading up to 2015,” said Shawn Robbins, director of analytics at Fandango and founder of Box Office Theory. “While occasional hits such as the Sonic, A Quiet Place and Scream franchises have provided bright spots, as well as “Top Gun: Maverick” which caught lightning in a bottle four years ago, some of the studio’s most profitable IP licenses have seen diminishing returns among modern moviegoers.”

Paramount Skydance needs box office consistency and well-known and beloved franchises are one way to achieve that. Of course, just having a big name doesn’t guarantee box office success, but it does lower the barriers to entry.

“Paramount is looking to exploit every opportunity it can following the recent conclusion of Tom Cruise’s Mission: Impossible series, the regression of Transformers from its biggest dollar blockbusters, and the cinematic dormancy of Star Trek as that brand has been refocused toward multiple streaming series aimed at its predominantly older audience,” Robbins said.

Disclosure: Versant is the parent company of CNBC and Fandango.