David Ellison’s rocky box office history

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

Ellison, producer of five of the “Mission: Impossible” films, has been trying to buy Warner Bros. Discovery for nearly six months. In September, he sent an initial, unsolicited offer to WBD, prompting the rival media company to explore a sale process that resulted in an agreement with Netflix to sell the famed Warner Bros. film studio and WBD’s prestige streaming assets.

Ellison launched a hostile tender offer and, separately, was welcomed back to the negotiating table with WBD under a seven-day waiver from Netflix. This week, Paramount upped its offer for the entirety of WBD.

The Warner Bros. movie studio is a big part of why Ellison has been so committed to winning over WBD’s 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 some massive hits at the box office, but his track record has been far from consistent.

Where Netflix has a fraught relationship with theatrical releases — disrupting the traditional business and opting for years to prioritize streaming films for its subscribers — Ellison’s production company, Skydance, has followed the tried-and-true theatrical playbook.

Taking ownership of Warner Bros. would be a gamechanger for either company.

“If a merger were to be approved, the entity that then grabs up Warner Bros. would add tremendous horsepower both in terms of brand identity and revenue generating potential to their portfolio,” said Paul Dergarabedian, head of marketplace trends at Comscore. “So, it is understandable why the competition is fierce among the potential suitors vying for their chance to acquire the studio.”

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 2023’s “Barbie,” Universal had “The Super Mario Bros. Movie” that 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 outlier for Skydance. In addition to being the studio’s only billion-dollar film, it’s also the only film in its library to exceed $230 million domestically.

In fact, only five of Skydance’s features to date have generated more than $200 million in the U.S. and Canada.

Globally, the production company has seen seven of its films generate more than $500 million in ticket sales, which would be a bigger feat — if budgets for many of these films weren’t so high.

“The challenge for Ellison and Skydance, as it is for every studio, production company, and distributor, is to keep budgets in line particularly for latter installments of major franchises as these tend to have diminishing returns as compared the earlier releases to justify the continued investment in these movie franchises,” said Dergarabedian.

Of course, Skydance split production costs with its studio partners, so it’s unclear exactly how much the company put toward each film it produced. Still, many of its franchise films saw budgets balloon with each new installment.

Look at the most recent “Mission: Impossible” film. “Mission Impossible: The Final Reckoning” generated $599 million at the global box office, the fourth-best showing for a film in the franchise. However, the film had a reported budget of $400 million. That’s before marketing costs, which usually run at about half of the production budget.

So, Skydance in conjunction with Paramount would have spent an estimated $600 million ahead of the “The Final Reckoning’s” release in theaters. And that $599 million brought in from ticket sales gets split.

Studios share box office proceeds with theater operators, typically in a 50-50 split by the end of a film’s run in theaters.

The result is often a movie that performed well at the box office, but ultimately was not profitable 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 arm or as much demand from fans for things like toys, apparel or collectibles.

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

“Paramount is looking to mine every opportunity it can following the recent conclusion of Tom Cruise’s Mission: Impossible series, the regression of Transformers from its biggest blockbuster dollar days, and the cinematic dormancy of Star Trek as that brand has been re-focused toward multiple streaming series targeted at its predominately older audience,” Robbins said.

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