The fight for Viacom (VIAB - Get Report) may be over, with majority owner Sumner Redstone and his daughter, Shari, reportedly succeeding in their months-long battle to oust chief executive Philippe Dauman. Viacom executives who had been negotiating with potential buyers to sell a 49% stake in its Paramount studio, however, suddenly have a much shakier asset to peddle.
The studio, which some analysts said could fetch as much as $5 billion, is having one of the worst summers in recent Hollywood history and could lose as much as $560 million through 2017, according to one analyst.
The company's Paramount studio began the summer with the June release of the big-budget Teenage Mutant Ninja Turtles: Out of the Shadows, which generated a relatively puny $81.5 million in ticket sales that the company blamed for the studio's $26 million loss in its fiscal second quarter. On Friday Paramount releases another big-budget movie, a remake of the iconic 1959 film Ben-Hur (itself a remake) that Hollywood insiders already forecast will open with a thud.
The biggest disappointment for investors, however, is Paramount's apparent inability to send its flagship Star Trek movie franchise into warp drive. The studio spent $185 million to make the latest installment, Star Trek Beyond, which stars Chris Pine as a younger Captain Kirk, and another $120 million to market it.
Released on July 22, the movie has so far generated $142 million in domestic ticket sales, according to movie site Box Office Mojo, 60% less than the 2013 installment, Star Trek Into Darkness, despite the benefit of higher ticket prices three years later.
"Star Trek was thought to be the one bright spot for Viacom in what's been a disaster year for them," said Michael Nathanson, a media analyst and partner at MoffettNathanson, who is neutral on the stock. "And Ben-Hur won't help."
Nathanson cut his fiscal 2016 and 2017 estimates for Viacom following its second-quarter earnings report in part from what he wrote were "unbelievable Paramount losses." He estimated that Paramount will have operating losses of $50 million in the coming quarter and what he calls a "mind numbing" $360 million for the year. In fiscal 2017, he estimated the studio's losses at $200 million.
Studio executives, who declined comment, have said they anticipate foreign ticket sales, which in 2013 accounted for 51% of the ticket sales for Star Trek Into Darkness, to boost the take for this year's edition. The film opens on Sept. 2 in China, which in 2013 alone accounted for $57 million of that film's $467 million worldwide total, according to Box Office Mojo.
"We're showing that Star Trek is a brand that is strong around the world," Paramount vice chairman Rob Moore told Variety.
But foreign markets haven't lifted the Starship Enterprise and crew to the same altitude so far this year as in 2013. Star Trek Beyond has generated smaller box office sales in territories where it has already opened, including such major film markets as Germany, Russia and the U.K.
Viacom investors, at least in the short term, are upbeat on the settlement news, sending shares up 2.4% Friday morning to $43.88. It remains to be seen if Paramount's struggles will drag the stock down in the future.