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

By Billy Duberstein Markets Fool.com

Two Hollywood studios -- Sony (NYSE: SNE) and Paramount, which is owned by Viacom (NASDAQ: VIA) (NASDAQ: 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.

Continue Reading Below

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.

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.

Continue Reading Below

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.

10 stocks we like better than Viacom
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Viacom wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 6, 2017

Billy Duberstein owns shares of, and The Motley Fool owns shares of and recommends, Walt Disney. The Motley Fool has a disclosure policy.