Friday, February 14, 2020
Why ‘Parasite’ Studio CJ Entertainment Is Betting Big on Skydance
On the heels of its historic and celebrated multi-win night at the 92nd Academy Awards, the South Korean powerhouse studio behind “Parasite” is looking to parlay its best picture win into a bigger spotlight in Hollywood.
CJ Entertainment and Merchandising, headed by Miky Lee, along with RedBird Capital Partners, this week announced an investment of $275 million in Skydance Media, the film and TV production vehicle founded by David Ellison.
The move not only positions Skydance for foreign expansion, even as it comes off two significant box office flops with “Terminator: Dark Fate” and “Gemini Man,” but also extends the reach into Hollywood for CJ Entertainment, which already has a host of english-language films in the pipeline, including a Kevin Hart remake of Korean box office hit “Extreme Job.”
“Every successful foreign film company wants to plant its flag in Hollywood,” said Sky Moore, a partner at the law firm Greenberg Glusker. “This is the center of the universe.”
Lee, who stepped to the microphone on the Dolby stage on Oscar Sunday to uproarious encouragement, is an heiress who took her slice of the family fortune to become the most powerful media mogul in South Korea.
CJ Group was founded in the early 1950s by Lee’s grandfather, who was also the first chairman at Samsung. The CJ entertainment arm, which Lee oversees, financed not only “Parasite,” but Bong Joon Ho’s other films, “Snowpiercer,” “Mother” and “Memories of Murder.”
Lee’s Korean conglomerate is not the first foreign company to show interest by dumping a chunk of change in Hollywood. Despite the company’s success already, Moore isn’t convinced CJ Entertainment will thrive where so many have failed before it.
“Generally, American films play better around the world, but if history be our guide, they’re going to have a tough time finding success,” Moore said. “It’s hard, the road is littered with dead bodies… fundamentally, the model of you give money to a studio and hope to get money back is a scary proposition.”
Skydance, meanwhile, is looking to tap into overseas markets as growth at the U.S. box office slows.
“There are a lot of reasons to get into the foreign market with content, but the thing is, the U.S. box office is never growing again,” said Ross Gerber, CEO of media investment firm Gerber Kawasaki.
The $275 million investment comes as Skydance clears the smoke from a pair of high-profile, big-budget box office bombs for the production house. Such a one-two punch as a succession of bombs followed by new investments in Hollywood typically raises questions about the state of a company, especially for an industry that’s eaten so many independent studios alive.
Skydance declined to comment for this story, as did representatives for CJ Entertainment.
“We are honored to partner with RedBird Capital and CJ ENM. These are sophisticated strategic partners who believe in our creative vision and our ambitious strategy to build the studio of the future,” Ellison said in a statement “Their partnership will help propel us to another decade of exponential growth as we look to shape the future of where entertainment is heading.”
Gerber said it’s a sign that Skydance “desperately needed the capital,” which shouldn’t necessarily be a knock against Skydance. Part of the cost of doing business when you own and operate an independent studio in Hollywood is constantly needing to raise money to fuel and grow the company.
“I’m sure these investors aren’t stupid. You’re not there to just bail out the studio,” Moore argued. “I work on these deals all the time. They’re likely going to cabin off past losses and make sure the money is used for future growth.”
Last year, Skydance suffered two of its biggest box office let downs in “Terminator: Dark Fate” and “Gemini Man.” Both were done in conjunction with Paramount. Ellison’s company also co-produced Netflix’s “6 Underground” with Michael Bay’s production company.
While “Terminator: Genisys” garnered a solid international draw, reviews and domestic box office suggest that Skydance and Paramount haven’t quite been able to pull-off a Terminator reboot. The box office for “Dark Fate,” however, was especially poor. The film grossed $261.1 million worldwide, on a production budget of $185 million — that’s before prints and advertising. “Dark Fate” ended up posting a loss of more than $70 million.
“Gemini Man” fared worse, pulling in $173.5 million on a $138 million budget.
Skydance doesn’t distribute the films itself, and instead partners with of Paramount, Tencent, and now CJ Entertainment in order to mitigate risk and soften the blow of box office under performers.
Skydance also doesn’t own the properties it helps produce. Without knowing the nitty gritty of the deals the studio does for films with Paramount, in this town, the power resides with the distributor.
“I don’t think the revenue streams of renting out the catalog is enough to offset the costs,” Gerber said.
The son of tech billionaire Larry Ellison — the co-founder and current chief technology officer of software company Oracle — David Ellison founded Skydance in 2006. The studio had a tepid beginning, releasing “Flyboys” in 2006 starring James Franco, as well as Ellison, until landing a production partnership with Paramount Pictures.
With Paramount Pictures in its corner, Skydance was able to get its hands on brands such as “Mission: Impossible,” “Star Trek” and “Terminator.” Not to mention, the backing of a major studio, plus Ellison’s father, helped Skydance raise $350 million in equity to get the ball rolling.
From then on, Skydance began focusing on event-level blockbusters for global audiences. Since 2010, Skydance has co-produced upwards of 20 films, including box office gold, such as “Mission: Impossible — Fallout.”
The big boon for Skydance, more than the gravitational pull that big Hollywood films bring, is the studio’s TV division, which was launched in 2013 and continues to be a growth arm for the production company. Skydance produces some of streaming’s most popular shows in Netflix’s “Grace and Frankie,” as well as “Tom Clancy’s Jack Ryan” and “Jack Reacher” on Amazon.
As more streamers come on line — Apple TV+, Peacock and HBO Max — Skydance seems to be all-in on the prospects of more TV opportunities, especially with streaming’s ability to reach global audiences.
In a lot of ways, however, the same problem exists as with its film projects, Skydance doesn’t own its shows.
That aside, a $275 million injection of cash and a partnership with one of Asia’s premier film and TV producers is a big get.
Moore told it to TheWrap best: “More money is always a good thing.”
And this level of commitment from CJ Entertainment coming off of its monumental, possibly game changing win at the Oscars, might say a lot about the future of foreign films and investment in the U.S. as well as Hollywood productions around the world.
Or it’s possible CJ and Skydance benefit for a few years before CJ Entertainment retreats back to South Korea and David Ellison is out raising more capital to fuel the company and its growth.
“There’s a lot of things in Hollywood that don’t make economic sense,” Gerber said. “Hollywood has always worked because of the glamour and glitz, and people buy into that stuff.”
Only time will tell.