Paramount Skydance merger: Is David Ellison’s $110 billion hollywood gamble now about tech?

Hollywood has a new giant. Paramount Skydance has finished its $110 billion deal to take over Warner Bros. Discovery. This move brings together movie studios, television networks and streaming services under one single company. David Ellison is now, in charge of the combined business. The company will trade on the New York Stock Exchange with the ticker "SKYD.”

The merger brings together names such as Paramount, Warner Bros., CBS, CNN, HBO Max and Paramount+. But the bigger story may be what Ellison wants to do next. He is pushing Skydance toward a technology-driven future, as per a report by CNN and Detroit News.

What does the new Skydance look like?

The deal combines the studios behind “Mission: Impossible,” “Harry Potter” and DC Studios with major TV and streaming operations.

The merger faced legal challenges before closing, but settlements with a group of U.S. states and a Hollywood writers union cleared the main barriers.

Ellison has stated clearly the company is not simply trying to become a larger version of the old Hollywood studios.

He has brought in Mattel's former CEO Ynon Kreiz as co-CEO. Kreiz will handle day-to-day operations and help lead the integration. While Ellison will focus on creative direction and overall strategy.

The company plans to find $6 billion in savings. Much of that is expected to come from technology, integration, procurement, marketing and real estate. The combined company is also expected to carry about $80 billion in debt.

Skydance plans to bring HBO Max and Paramount+ together into a single streaming service over time. It also plans to release at least 30 films each year during the first two years after the merger, rising to 32 annually for the following three years.

CNN chief Mark Thompson and CBS News Editor-in-Chief Bari Weiss will remain in their roles.

Why is Ellison trying to turn Skydance into a tech company?

The answer is that Hollywood is no longer competing only with Hollywood. YouTube, streaming platforms and short-form video have changed the viewership paradigm. Artificial intelligence is also beginning to affect how content is created, edited and discovered.

Ellison has repeatedly pointed to technology as a major part of Skydance's future.

On Monday, Kreiz said Skydance will “build the most technologically capable media company through a modern tech platform to enhance the user experience, improve how we work and achieve operating efficiencies.”

Ellison has also said, “Unless you can build a tech product that is truly competitive with what’s coming out of Silicon Valley, you can’t compete.”

The company has already hired executives with backgrounds at Google, Meta, Microsoft and other technology companies. It has also added people focused on artificial intelligence and consumer technology.

Ellison has described AI as a “force multiplier.” Speaking to CNBC earlier this year, he said, “I do not believe that AI is a replacement for human creativity. I really view it as a force multiplier for basically filmmakers in the creative communities to be able to realize their visions more fully, and think it’s going to be an incredibly powerful tool for this industry.”

That approach could also change how viewers find and watch content across Skydance's streaming services.

Can the Hollywood giant make the tech shift work?

That is the difficult part. Skydance will have to combine two large companies while cutting costs and dealing with a heavy debt load. The streaming platforms also need technology upgrades.

eMarketer Senior Analyst Ross Benes told CNN, “When Skydance executives promise to tech-ify the company, ‘I hear layoffs.’”

Benes also said the two streaming services likely need investment to make them simpler and easier to use.

There is skepticism about the size of the new company, too. Merger opponents have warned that putting so many studios and platforms under one roof could reduce competition.

Janet Grillo, a professor at New York University's Tisch School of the Arts and former New Line Cinema executive, said, “How are monopolies ever good for any industry? They squeeze out competition. They squeeze out innovation. They limit growth.”

For Ellison, the merger is the biggest step yet in a career that began with Skydance as an independent studio in 2010.

Now the company has the scale of a Hollywood heavyweight. The challenge is making that size work while building the kind of technology business Ellison believes Hollywood needs.