03/03/97 PARAMOUNT PUTS A GLINT IN REDSTONE'S EYE

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PARAMOUNT PUTS A GLINT IN REDSTONE'S EYE

It didn't sound like a winning script. Going into 1996, Viacom Inc.'s Paramount Pictures Corp. movie studio was headed for trouble. Most alarming for Viacom CEO Sumner M. Redstone, who got his start as the operator of movie theaters, was the glut of films scheduled for release by Paramount and other big studios. Even promising films, he figured, would fail as they were bounced from screens after one weekend to make way for new releases.
He began spending one week a month in Los Angeles, putting pressure on the studio's top executives, Chairman Jonathan L. Dolgen and studio chief Sherry Lansing, to turn the studio around. Dolgen, a hard-nosed cost-cutter who had already slashed $50 million from the studio's overhead, and Lansing, a seasoned creative executive who can deftly handle the talent, managed to hand in a winning performance, pulling off an upturn in the studio's fortunes capped by an estimated 19% jump in 1996 cash flow, to $390 million.
CLEAR PATH. Thanks to a strict diet of risk avoidance, a slashed production slate, improved marketing, and a healthy dose of luck, Paramount ''is in the midst of a major turnaround,'' says Redstone. Analyst John Tinker of Montgomery Securities Inc. agrees that the picture for Paramount is looking clearer: ''After a tough start, the studio has really begun to find its way.''
Now, about 75% of Paramount's films are financed jointly with other studios, Lansing says. ''The idea is to sleep better at night,'' says Dolgen. ''Sure, we may not get as much of the upside. But the costs of films today and the mortality rate are such that we have to look for someone to share the risk.'' Take Titanic, a Paramount/Twentieth Century Fox Film Corp. joint venture. Both share the film's upside, but Paramount's investment is capped. Fox is on the hook for cost overruns. Titanic is ''way over budget,'' Redstone says. ''Fox pays more, tens of millions more.''
And the studio hit a solid hot streak in the second half of 1996, with Mission: Impossible, The First Wives Club, Star Trek: First Contact, and Beavis and Butt-head Do America. These hits more than covered losses from The Phantom and The Evening Star. The movies get a big assist from an area that Dolgen has been careful not to cut: Paramount's traditionally strong marketing department. Through clever promotion, Paramount has been able to score hits on even mediocre films. Take The First Wives Club, just a ''cute picture,'' notes Michael Patrick, president of Carmike Cinemas Inc., the largest theater chain in the U.S. Paramount provided a smart release date and a savvy promotion campaign that landed it on the cover of Time. That made it ''a great picture,'' says Patrick. ''Quite a few times, Paramount's marketing and distribution is better than the picture.''
Redstone plays a role in reviewing a film's marketing strategy. He goes over promotion plans with the studio's staff, and he is quick to draw on his experience as an exhibitor to suggest tactics. Lansing says Redstone suggested that stars of Paramount films routinely call theater chain owners, asking them to run trailers for their upcoming films, because that tactic worked on Redstone years ago.
But the real sleeper attraction at Paramount is its lucrative TV operation. Paramount has long been a leading TV producer, and it has a big-ticket series, Frasier, coming up for syndication in the fall. That show alone should bring approximately $100 million straight to Viacom's bottom line in 1997.
Even though 1996 wasn't the disaster Redstone originally feared, Paramount looks like it will have an even better 1997. With the TV operation humming and upcoming films such as Private Parts, starring shock-jock Howard Stern, Paramount is likely to keep Redstone in good humor for some time.
By Elizabeth Lesly in New York and Ronald Grover in Los Angeles

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