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Sony and Paramount Are Getting New CEOs -- Here's What That Means for Investors

By Billy Duberstein - Apr 5, 2017 at 1:12PM

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These studios each have had vacancies at the top. One just filled the spot, while another is narrowing candidates; here's who they are and what they could mean.

Two Hollywood studios -- Sony (SONY -0.77%) and Paramount, which is owned by Viacom (NASDAQ: VIA) (VIAB) -- have been without CEOs for a few months. This week, however, Paramount filled the CEO role, and Sony has narrowed down its search to several high-profile executives. Both studios have experienced severe turmoil in recent years and have underinvested in big tentpole films compared to rivals Disney and Comcast's Universal Studios, so investors are hoping these new hires can rejuvenate them.

Paramount is in the midst of a huge turnaround effort under new Viacom CEO Bob Bakish. After former Viacom CEO Philippe Dauman was ousted in August 2016 and Bakish was given the job in the fall, the company parted ways with former Paramount president and CEO Brad Grey, and is hoping for a fresh start. The studio has struggled mightily, as it has ranked last among the major studios at the box office since 2012. It lost $445 million last year.

Wealthy man in a conference room by large window

Image source: Getty Images

Meanwhile, Sony Entertainment's CEO Michael Lynton has resigned in order to focus on his role as the chairman of Snap, Inc. ; he had been CEO for the past 12 years. Sony has also had a difficult recent history. In 2014, it experienced a devastating hack at the hands of a North Korean group as it was releasing the (hilarious) film The Interview. That hack revealed thousands of company emails, many of which weren't pretty. The head of the film division, Amy Pascal, resigned, and was replaced by Tom Rothman, who has rankled other executives and top talent. The studio has also struggled with high-profile underperformers, such as the remake of Ghostbusters (why?), Passengers, and Inferno. The studio lost $65 million for the six months ending September 2016.

New faces, new hope?

On March 27, Viacom announced it had selected Jim Gianopulos as the new CEO of Paramount. For 16 years, Gianopulos was the co-chair or chairman/CEO of Twenty-First Century Fox, and under his tenure, the studio produced hits such as Avatar and the X-Men films.

Still, his position is likely to be constrained by Bakish, who is aiming for greater synergies between Paramount and Viacom's television channels such as Nickelodeon and Comedy Central. In fact, the Wall Street Journal reported that talks were held up over the issue of Gianopulos' independence in making decisions. In the end, Gianopulos will have authority over all except the most expensive pictures, for which he will have to consult with Bakish and controlling shareholder Shari Redstone.

The Sony situation is still in flux. Names that have been mentioned include former Hulu head Jason Kilar, former Disney COO Tom Staggs, and Sony Interactive Entertainment division head Andrew House. It was recently reported that the company was also interviewing Warner Bros. CEO Kevin Tsujihara, but those rumors were shot down by the Wall Street Journal's Joe Flint.

House could be interesting, as he might take a more video game-inspired approach to film franchises. Tom Staggs also seems like an interesting choice, as he was the apparent heir to Bob Iger at Disney, before the company pulled the plug -- either due to the board feeling Staggs didn't have the creative chops, or Bob Iger wanting to extend his tenure. Still, if he was the heir apparent to Iger, maybe Staggs has some secret sauce.

To be sure, we won't know the results of the new hires for a while. From green light to release, a film can take one to two years to make. Moreover, each chief will be under the control of a larger corporate parent, so their resources may be limited by the overall company strategy.

Still, the new hires bear watching, as the current results from these studios couldn't get much worse. If they find success, the studios could become profit centers again rather than loss-leaders, and could boost profits for Viacom and Sony down the road. Those looking for a turnaround play should monitor these studios' releases in the years ahead for clues, but it is still far too soon to tell.

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Stocks Mentioned

Sony Corporation Stock Quote
Sony Corporation
SONY
$80.33 (-0.77%) $0.62
Viacom, Inc. Stock Quote
Viacom, Inc.
VIAB
The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$96.08 (-1.13%) $-1.10
Comcast Corporation Stock Quote
Comcast Corporation
CMCSA
$39.83 (0.00%) $0.00
Twenty-First Century Fox, Inc. Stock Quote
Twenty-First Century Fox, Inc.
FOX
Twenty-First Century Fox, Inc. Stock Quote
Twenty-First Century Fox, Inc.
FOXA
Snap Inc. Stock Quote
Snap Inc.
SNAP
$14.28 (-0.69%) $0.10

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