Spyglass - How to Scale Paramount

"And so I just would caution people that think they’re going to walk in here and just and do these. We’ve struggled for a few years here, figuring out how to make a decent phone. The PC guys are not going to just, you know, knock this out. I guarantee it."

That was then-Palm CEO Ed Colligan when asked about the prospect of the tech companies potentially entering the mobile phone arena.¹ The year was 2006. The iPhone was not yet even announced, let alone launched. But rumors were swirling about Apple working on an "iPod Phone"...

As it turned out, they knocked it out. Of the park.

For some reason my mind went to this quote while listening to an interview Skydance CEO David Ellison did with Matt Belloni earlier this week for his podcast, The Town, which covers Hollywood. Ellison and RedBird Capital head Gerry Cardinale were guests on the show to talk about their deal to acquire National Amusements, and in turn, Paramount. The interview was interesting, but less so in what they explicitly said – as it turns out, when you're in the midst of acquiring a company, especially one likely to draw regulatory scrutiny, you can't say much outside of some very specific guardrails – and more in the way they responded to the questions and the overall vibe of the chat.

That is to say, they sounded fairly defensive. And you might expect that given that this deal became sort of a laughing stock after failing to get done multiple times and playing out in the press over many months. But Belloni also gave a lot of pushback against the canned answers for why this deal makes sense. And only then did we start to get somewhere. Notably, Ellison name-dropped both Pixar and NeXT as a way to frame how they're thinking about the deal. Those are two famous examples of a situation where a company was acquired and was able to rewire the DNA of the larger entity. In the case of Pixar, they were brought under Disney's wing and helped revitalize an ailing animation studio. In the case of NeXT, Apple acquired the company and was able to use the technology brought over to build what would become OS X (now called macOS) and that, in turn, would become iOS. The foundation of the iPhone.

Oh, and both acquired companies happened to be run by Steve Jobs.