Viacom May Tighten Reins on Paramount

LOS ANGELES�Paramount Pictures Chief Executive Brad Grey is facing the pitch meeting of his life.

As head of one of Hollywood's oldest and most iconic movie studios, Mr. Grey has overseen many duds of late, most recently a remake of "Ben-Hur" that grossed only $11.2 million in its debut weekend.

Now Paramount Pictures parent Viacom Inc. is getting ready to crack the whip on Mr. Grey. In a Securities and Exchange Commission filing this week outlining its corporate restructuring, Viacom said new interim CEO Tom Dooley and the board will call on the Paramount team to defend their film record and present a turnaround plan.

They need to win over a key skeptic. While Mr. Grey has long enjoyed the support of Viacom management, Shari Redstone�the daughter of controlling shareholder Sumner Redstone and herself a Viacom board member�has expressed concerns about the current leadership at Paramount, according to people close to her.

Mr. Grey has run Paramount for 11 years, and his contract was renewed last year through 2020. He didn't respond to requests for comment.

"There is no consideration of replacing him," said Mr. Dooley on Wednesday. "Paramount employees and the board are enthusiastic about discussing Paramount's plans for the future."

Ms. Redstone declined to comment but a person close to her stressed her desire to have the new board determine what is best for Paramount.

Famous for classics like "The Godfather" and "Forrest Gump," Paramount is tied for last place in market share among Hollywood's six largest studios�a ranking it has held annually since 2012. "Star Trek Beyond" is the only one of its movies this year to have grossed more than $100 million, and that was considered a disappointment because it was the lowest gross of the series.

Besides wanting details on Paramount's spending for 2016 and 2017, Viacom in its filing also said it may put the studio under tighter control. It said that could include requiring board approval for matters as basic as talent contracts and production and financing deals.

The scrutiny is overdue, said Wall Street analysts who are tired of Paramount dragging down Viacom results. On its earnings call last month, Viacom said it expected Paramount to generate an operating loss for the full fiscal year.

"The problem at Paramount is truly shocking," said MoffettNathanson Research analyst Michael Nathanson in a report last week. "Short of firing the entire Paramount leadership team, there is little a new CEO could do quickly to improve its film pipeline."

Other recent bombs included "Zoolander 2," "Whiskey Tango Foxtrot" and "Florence Foster Jenkins."

"This summer was a tough one," said Paramount Vice Chairman Rob Moore.

Viacom's outgoing chairman and former CEO, Philippe Dauman, had been looking to lessen the burden of Paramount on its balance sheet by bringing in a partner. Talks have been held with China's Dalian Wanda Group Co. about taking a 49% stake in the studio that would value it at between $8 billion and $10 billion, a person familiar with the matter said.

Mr. Dauman, who will leave Viacom on Sept. 13, is still pursuing a Paramount sale and has until Sept. 7 to provide an update on a possible deal to the board, with a potential vote scheduled for Sept. 10.

While Mr. Dooley supported Mr. Dauman's efforts to sell a chunk of Paramount, Mr. Redstone and his holding company, National Amusements Inc., whose president is Ms. Redstone, have expressed doubts. Earlier this year, National Amusements amended its bylaws to require unanimous board approval of any Paramount deal.

Part of Paramount's problem is Hollywood's problem. Audiences have shunned many sequels and remakes this summer, and the studio's biggest releases so far have fallen into that camp.

But Paramount's struggles are also due to an indecisive corporate strategy over the number of movies it wants to make. The studio is now ramping up its output after several years of cost-cutting that reduced the release schedule by nearly half.

The goal was to find a lean-and-mean way to make more money while producing less. But the cost-cutting soured relationships in Hollywood as agents and producers took hot projects elsewhere.

To impress the board, Paramount brass will have to make the case that it has potential franchises to build on for the future and promising new titles on the calendar.

In its favor, the studio produces the "Transformers" and "Mission: Impossible" series.

"I think we have a good balance of original movies, a couple of our tentpole franchises and attempts to develop new franchises," said Mr. Moore.

The studio is scheduled to release seven more movies this year�two sequels ("Jack Reacher: Never Go Back" and "Rings") and several adult-oriented dramas.

Mr. Moore cited several forthcoming releases that are potential franchises, including "Baywatch," a big-screen take on the campy lifeguard drama, and "Ghost in the Shell," an anime adaptation starring Scarlett Johansson.

In addition, the studio's relatively new television unit has shows in the works for HBO and Netflix and produced last season's hit musical "Grease: Live" for Fox.

Ben Fritz

Write to Joe Flint at joe.flint@wsj.com and Erich Schwartzel at erich.schwartzel@wsj.com