Paramount's China Partners Now Financing 30 Percent of Slate

Paramount Studios -Entrance -Hollywood-Getty-H 2016
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"There is no question that Paramount will turn," says Viacom CEO Bob Bakish as he praises new studio head Jim Gianopulos, but acknowledges a networks carriage issue with Charter.

Viacom management emphasized on its quarterly earnings conference call Thursday that Paramount Pictures' film slate financing deal with two Chinese partners was on track despite concern amid China's recent moves to keep money in the country.

As The Hollywood Reporter reported in March, Paramount had back then yet to receive the first payment it had expected from the deal.

Viacom CEO Bob Bakish said on Thursday's call that the company has "moved ahead" with the deal. Viacom CFO Wade Davis gave analysts more details, saying that Paramount's slate deal with Shanghai Film Group and Huahua Media remains "remains on track and is in operation."

He added that the two companies are actually committing more money. "The partners have elected to upsize their commitment from 25 percent to 30 percent," the exec said. 

The deal has been known to be worth around $1 billion and run over a three-year period. Davis said that remains the case, also mentioning the partners' option to extend for a fourth year.

"We never really had concerns about payment," he said. "There is a payment schedule in the agreement, and we are going to receive cash this quarter per the schedule that was always in the agreement." 

Paramount's cash infusion from China was announced in January, but believed to be in jeopardy because of increased scrutiny from Beijing regulators and a recent leadership shakeup at the studio that brought in Jim Gianopulos as chairman and CEO to take over from Brad Grey.

Sources said Gianopulos spent much of a recent week in Beijing meeting with executives from the two Chinese investors. The talks were a continuation of discussions held between the parties in Los Angeles in the weeks prior, sources said. Gianopulos' primary task during the talks was to sell his vision and establish a relationship, according to sources. 

On the call, Bakish also gave a shout-out to Gianopulos, calling him a "smart, seasoned executive" who is looking to re-energize the studio and its film pipeline. He also said Gianopulos was working with the company's TV networks to develop co-branded projects.

Bakish said he has already felt the presence of the new studio boss in a positive way, saying he was "very optimistic" about its outlook under the new leader. "There is no question that Paramount will turn," he said.

Davis added that Gianopulos has "jump-started the culture there" and fine-tuned certain processes at Paramount. The CFO said those are some things that "we expect to have a positive impact on [2018]."

Davis also said there could be more, but smaller, film unit charges ahead as Gianopulos assesses previously ordered films. The CFO signaled the new studio boss could, for example, choose not to go ahead with select projects if he doesn't see real potential in them. Viacom previously took a $115 million write-down for Monster Trucks, which was released in the first calendar quarter of this year.

Bakish also articulated what specific changes Viacom has made in its pursuit of a turnaround and what’s still to come. He reiterated the need to refit the organization, create partnerships instead of adversaries, especially in affiliate sales, and a focus on core brands and values.

Asked about reports that cable giant Charter Communications was making Viacom's MTV, Nickelodeon, VH1, Spike, BET and Comedy Central only available to new subscribers that pay for its most expensive package, Bakish acknowledged the issue, which could hurt ratings and carriage fees. "It's not a broader re-tiering," he argued, though. "We have a strong point of view and are in conversations. We believe this will get resolved."

The exec highlighted that MTV remains a particular focus as it will need time to gain traction by concentrating on its traditional live and unscripted programming. Bakish said he was excited about an expanded slate of new content and new talent set to debut on the channel in the near future.

The CEO on Thursday also discussed two issues of investor concern in recent days — advertising trends and broader pay TV subscriber trends.

On the ad market, Bakish mentioned early upfront market talks, saying, “While it is early days, I am optimistic about this year’s upfront and believe that both television and Viacom are well positioned.”

On pay TV and distribution issues, he said his team was focused on “how we can build more value for all parties.”
That is why “we are not waiting until [carriage] renewals to engage," Bakish continued. "In fact, we are currently actively engaged with a number of parties all outside the traditional renewal discussions." He detailed that "we are speaking with several [pay TV distributors] regarding variations on the entertainment skinny pack concept," adding, "We are optimistic that one could launch by the end of this year.”

The call took place after Viacom earlier on Thursday reported better-than-expected underlying financials for its fiscal second quarter. Right after the earnings report, Viacom's stock in pre-market trading rose, but it dropped once the market opened. As of 10 a.m. ET, it was down 3 percent as investors seemed to focus more on ad and carriage concerns than the better-than-expected results.