How David Ellison Built Skydance Into Hollywood's Smart Bet

LOS ANGELES — Fifteen years ago, when a 23-year-old David Ellison rolled into Hollywood with oodles of trust-fund cash, entertainment insiders licked their jackal lips: Oh, the fleecing we will do!

Mr. Ellison, the son of Larry Ellison, a co-founder of Oracle, sure looked like “dumb money.” That is the Hollywood term for a gullible, affluent outsider bitten by the movie bug, the type of investor that studios have long counted on to keep their assembly lines running, despite it almost always ending poorly (for the newcomer). The young Mr. Ellison couldn’t stop talking about his love of cinema, in particular big-budget spectacles. He had just dropped out of the University of Southern California to act in a $60 million movie called “Flyboys,” a World War I aerial combat tale.

Partly financed with Ellison money, “Flyboys” arrived to a disastrous $6 million in ticket sales. But no matter: The scion was on Hollywood’s radar.

Along with his wallet.

Soon enough Mr. Ellison had given up acting and by 2010 had become a financier and producer for Paramount Pictures, pouring $350 million of equity and debt into movies like “Star Trek Into Darkness” and “Mission: Impossible — Ghost Protocol.” But Hollywood snickered at his effort to be taken seriously as a creative force, as did the news media. “The Kid Pays for the Picture” was the headline of a 2015 profile in GQ, which included a photo of Mr. Ellison posing on the Paramount lot with a billowing parachute strapped to his back — part invader, part lifesaver, all wealthy white guy entitlement.

By 2019, Mr. Ellison’s fledgling company, Skydance Media, had some homegrown hits, notably the comedy “Grace and Frankie” on Netflix. But critical and commercial humiliations at the box office were adding up, including “Gemini Man,” starring Will Smith and his computer-generated doppelgänger, and “Geostorm,” about weather satellites that attack Earth. Mr. Ellison botched a personal quest to resuscitate the “Terminator” franchise, a favorite from his Silicon Valley childhood. Predictably, his relationship with certain Paramount executives curdled amid arguments, petty and otherwise.

Mr. Ellison also enraged half of Hollywood by abruptly announcing in January 2019 that John Lasseter, co-founder of Pixar, would join Skydance as animation chief. Mr. Lasseter (“Toy Story,” “Cars”) was radioactive at the time, having resigned seven months earlier as Disney’s chief creative officer amid #MeToo complaints about unwanted workplace hugging and imperious behavior. (Mr. Lasseter had apologized for “missteps” that made some Disney-Pixar staff members feel “disrespected or uncomfortable.”)

People like Mr. Ellison typically sulk off to some luxury hideaway at this point in the script to nurse their wounds. (Lanai, the Hawaiian island owned by his father, would do nicely.) Accustomed to floating through life, they seem unable to cope with anything less, especially if it means admitting missteps.

Instead, Mr. Ellison served up a major plot twist.

He raised $275 million by selling 10 percent of Skydance to investors like RedBird Capital, a private investment firm, and CJ Entertainment, the Korean company behind the Oscar-winning “Parasite.” He lined up $1 billion in revolving credit through JPMorgan Chase. And Skydance made a sharp turn toward streaming, selling attention-getting content to whichever service wanted to pay the most.

So far, the result has been nothing short of remarkable, in part because Mr. Ellison’s timing was fortuitous. The pandemic supercharged home entertainment.

Skydance has sold 29 movies and television shows to online platforms over the past two years. Coming films include “The Tomorrow War” (Amazon), a $200 million science-fiction spectacle starring Chris Pratt, and “Heart of Stone” (Netflix), a $200 million action thriller starring Gal Gadot. (Think “Mission: Impossible,” except with a female superspy.) Series in the works include a Netflix drama starring Arnold Schwarzenegger; an adaptation of James Patterson’s “Alex Cross” crime novels for Amazon; and an Apple TV+ comedy about residents of a small town who discover a destiny-predicting machine.

“There was a period of time where people just looked at us as money, and we knew that,” Mr. Ellison said via Zoom. “But there has been a shift. Our content — the ideas, the execution — has become more important than our capital.”

He pointed to Skydance-made movies like “The Old Guard,” a well-reviewed action fantasy that became a major hit for Netflix during the pandemic, drawing interest from 78 million accounts in its first month. A sequel is en route.

“David had final cut,” said Gina Prince-Bythewood, who directed the film. “That’s very hard for a filmmaker to concede. But he fought for my vision through a contentious process. He stayed fighting for me until the very end.”

Under Mr. Lasseter and Holly Edwards, president of animation, Skydance Animation has expanded at a breakneck pace. The division now has 712 employees at work on four films and four series, all of which are expected to be distributed by Apple under a deal that runs to November 2024. “This is all exciting in a fresh way,” Mr. Lasseter said in an email. “I liken it to Pixar at the beginning, but better in that we know more, can push boundaries around creativity and 3-D animation, and aim higher.” (Skydance made Mr. Lasseter available for a photo and a background screening of “Blush,” a coming short animated film, but it declined a request for an on-the-record interview.)

At the same time, Skydance continues to have a producing and financing deal with Paramount. (It expires next June.) That means Skydance has the opportunity to invest in Paramount productions and help shape the creative outcome. Coming collaborations include “Snake Eyes,” an action film based on a G.I. Joe character and set for release on July 23, and the much-anticipated sequel “Top Gun: Maverick,” which will arrive on Nov. 19. Mr. Ellison is also a financier and producer of two more “Mission: Impossible” movies.

The upshot: At a time of entertainment industry upheaval, Mr. Ellison has transformed Skydance into the rarest of Hollywood businesses — a thriving, built-from-scratch, all-audiences, independent studio. Nobody (insider or outsider) has accomplished that feat in decades, certainly not on the scale Mr. Ellison is attempting. He wants to be Legendary, the “Godzilla vs. Kong” studio that was founded in 2000 and sold for $3.5 billion in 2016. And he also wants to be Pixar, which was started in 1986 and sold for $7.4 billion in 2006.

The last Hollywood start-up with this much ambition may have been DreamWorks SKG, which was founded in 1994 by Steven Spielberg, Jeffrey Katzenberg and David Geffen.

“David Ellison is not some rich guy’s son who is a dilettante in all of this — not at all,” Mr. Geffen said. “He’s a very serious, hard-working, committed guy who keeps getting better at what he’s doing. He is succeeding in a tough, tough businesses that is changing dramatically and fraught with danger.”

The question is whether Skydance can maintain its momentum. Even the DreamWorks dream team found it difficult to navigate Hollywood’s fast-changing currents.

And what is Mr. Ellison’s end game?

A brother and sister arrive in Hollywood

In some ways, Skydance is an instruction manual for understanding Hollywood — where it’s been, where it is now, where it’s going.

Studios like Paramount used to control everything. Costs remained relatively stable, and film companies mostly bankrolled their own productions (with occasional money laundering from the mob). As Hollywood grew, star-struck outsiders with too much money and too much ego arrived to finance pictures. “The smart ones usually got out as quickly as they could,” said Jason E. Squire, the editor of “The Movie Business Book.”

Outside cash washed into the film capital in a major way in the 1980s, when Wall Street became enamored by video rentals and movie resales to cable channels, noted Harold L. Vogel, a media analyst and author of the textbook “Entertainment Industry Economics.” In the 1990s, Germany became a player. Because of a legislative fluke, studios realized they could reap tax deductions up front if they set up film companies in Berlin, and German financiers also started their own production companies (explaining the comedy “Slap Her, She’s French”).

The 2000s brought “slate” financing to the movie capital. Looking for places to park money, hedge funds and banks like Goldman Sachs poured more than $15 billion into production. At one point, as costs climbed, a risk-averse Universal relied on slate financing for 75 percent of its annual film output.

Then came a panic: The financial downturn in the late 2000s dried up some of the slate money. Tightening credit markets and the collapse of the DVD also prompted studios to cut back.

For Hollywood financing, however, the sky doesn’t fall, so much as it changes color. Stepping in to keep the movie assembly lines spinning were investors with family money: Gigi Pritzker, a Hyatt heiress; Tyler Thompson, whose family has oil and gas interests; Mr. Ellison.

“Credit where it’s due,” said Jim Gianopulos, chief executive and chairman of Paramount. “David has built something substantial in a relatively short amount of time.” Mr. Gianopulos called Mr. Ellison “data-driven and methodical, as well as creatively insightful.”

Mr. Ellison, of course, came with all-important connections. Mr. Geffen, for instance, has known Larry Ellison for decades and helped guide his son toward Skip Brittenham, a lawyer and power broker. Mr. Brittenham is the definition of Hollywood establishment; he worked on Disney’s first deal to finance and distribute Pixar films in 1991. Mr. Brittenham’s son-in-law Jesse Sisgold became Skydance’s president and chief operating officer.

But money and rarefied relationships go only so far — just ask Mr. Ellison’s younger sister, Megan, who came to Hollywood around the same time that he did and had the same resources available to her.

Ms. Ellison used her Oracle inheritance to start a finance and production company, Annapurna, which focused on prestige films like “American Hustle” and “Zero Dark Thirty.” It took off hot, and Ms. Ellison personally racked up four Oscar nominations. By 2019, however, Annapurna was on the verge of collapse, the result of an ill-considered expansion, unprofessional workplace antics and movie bets that didn’t pay off, including “The Sisters Brothers,” “Where’d You Go, Bernadette” and “Detroit.” Ms. Ellison’s father eventually stepped in to help the company avert bankruptcy.

Annapurna, which further downsized during the pandemic, could mount a comeback, in particular as a maker of television shows. Coming projects include “Pam & Tommy,” a scripted Hulu mini-series about Pamela Anderson, Tommy Lee and their infamous sex tape.

Or it could become another example of a once-promising Hollywood start-up that got swamped, joining efforts like Relativity, Studio 8, Broad Green and Open Road.

An earthshaking hire

Skydance nearly had a meltdown of its own, albeit of a different kind, when Mr. Ellison blew the trumpets to announce Mr. Lasseter’s hiring. The Skydance chief did not seem to grasp the gravity of the #MeToo movement and the ultra-raw emotions still surrounding it.

Mr. Ellison was making Mr. Lasseter the poster example of an executive returning to prominence after #MeToo allegations. Suddenly, or so it seemed to many, the Hollywood patriarchy was reconstituting itself. Many people were not ready to consider second chances for these men. Some still aren’t.

Mr. Ellison had been warned about blowback.

“I agreed with David’s decision to hire him,” Mr. Geffen said. “John Lasseter is a category of one. There isn’t someone else who can do what he can do. But I told him it would be controversial.”

Mr. Ellison had hired lawyers to scrutinize the allegations against Mr. Lasseter and had privately concluded there was nothing egregious.

But for women in Hollywood who had fought hard for long-overdue gains, his hiring prompted outrage. Some women at Skydance headquarters broke into tears when they learned about Mr. Lasseter’s arrival. The animation guild predicted that Skydance would have a difficult time attracting talent. An angry Mireille Soria, the president of animation at Paramount, which was then supposed to distribute Skydance’s animated movies, told her upset staff members that no one would be forced to interact with Mr. Lasseter. Emma Thompson quit a role in a previously planned Skydance Animation film.

Mr. Ellison said the experience made him a better leader.

“I have zero regret about hiring John, who has been transformative for the studio, not just in the stories we are telling but in the filmmakers we are empowering and in the culture we are building,” he said. “But I mishandled how he came onboard, and I take responsibility for that. There should have been greater transparency, and I should have taken more time to listen and learn from our team and our talent partners.”

For the most part, the storm seems to have passed. Women are directing the first two feature films from Skydance Animation, the first of which, “Luck,” about secret organizations that control good fortune and bad, will arrive on Apple TV+ next year. Apple’s willingness to align its meticulously polished brand with Mr. Lasseter sent a powerful message — not a pariah here. (Apple declined to comment.)

A Skydance spokeswoman said that more than 50 people had followed Mr. Lasseter to Skydance Animation from Disney and Pixar.

Two of them, Joe Mateo and Heather Schmidt Feng Yanu, directed and produced “Blush,” an 11-minute short about a stranded astronaut who falls in love with an ethereal visitor. It debuted last week at the Tribeca Festival in New York and promptly led to Oscar chatter. Apple TV+ plans to release the film sometime this year. (Its glistening animation, attention to detail and emotional story are pure Pixar; bring tissues.)

Perhaps most importantly, female stars have been embracing Skydance Animation. This month, Whoopi Goldberg agreed to be the voice for a character in a revamped “Luck.” She joined Jane Fonda, who signed onto the film in February. Ms. Fonda said it was an easy decision.

“What is so great about this experience, which is a first for me, is that I’m able to share ideas that will shape how my character, a dragon who can breathe fire and smoke, will be drawn,” Ms. Fonda said by phone. She said she trusted Mr. Ellison and Dana Goldberg, Skydance’s chief creative officer, noting that she had gotten to know them while starring in “Grace and Frankie.”

“David is kind, a little bit shy, soft-spoken,” Ms. Fonda said. “He’s like the anti-Scott Rudin,” she added, referring to the abusive megaproducer who recently stepped aside from Broadway and Hollywood projects.

And what about Mr. Lasseter? Ms. Fonda did not address the former Pixar chief directly. But her position was clear.

“The people David hires,” she said, “you can have absolute confidence in.”

Reaching for the sky

Mr. Ellison got his aviator’s license when he was a teenager. He is an ace aerobatic pilot who can roll a plane 420 degrees in a second.

It’s an apt metaphor for the quick moves that he will undoubtedly need to make as a Hollywood mini-mogul in the years ahead.

The equity deal with RedBird and CJ Entertainment valued Skydance at about $2.3 billion. At its current pace of growth — revenue is expected to increase more than 40 percent this year compared with last, the company said — Skydance could be worth $5 billion or more in a few years. Mr. Ellison would most likely pursue a sale or an initial public offering at that point.

Skydance could quickly become an acquisition target. After Amazon’s $8.45 billion purchase of MGM, content engines with access to established intellectual property, Skydance included, are hot prospects. Even if Skydance parts ways with Paramount next year, the expiring deal gives Skydance an incredible perk: the continuing right to invest in the Paramount franchises with which Skydance is already involved. “Star Trek.” “Mission: Impossible.” “Jack Ryan.” “G.I. Joe.” “Top Gun.”

Comcast, which needs to boost its Peacock streaming service, could be a buyer. So could Apple, which considered picking up MGM. This spring, Skydance received feelers from a special-purpose acquisition corporation, or SPAC, led by Kevin A. Mayer, Disney’s former streaming chief.

“It’s true that we have had some interesting conversations lately, but our growth curve is still significant and if we keep working hard and stay adaptive that should afford us a lot of optionality in the future,” Mr. Ellison said, sounding more like an M.B.A. graduate than a budding entertainment tycoon.

Skydance has wide-ranging expansion plans. Amy Hennig, a former senior creative executive at Electronic Arts, is building a video game division. Another department focuses on virtual-reality content. Mr. Ellison recently hired Luis Fernández, a 20-year Disney veteran, to start a consumer products business. But Skydance’s future rests on scripted content and the degree to which it can create pay-dirt movie and television franchises out of whole cloth, as it appears to have done with “The Old Guard.”

Some people in Hollywood remain skeptical that Skydance has the creative expertise to pull it off. Mr. Ellison and his team have excelled at putting projects together (29 films and television series sold to streaming services in two years). But execution — quality — has been inconsistent. And quality matters: The Skydance-made “6 Underground,” an action comedy directed by Michael Bay, drew views from a blockbuster 83 million Netflix accounts in late 2019. But the movie also received less-than-stellar reviews, lessening Netflix’s interest in a sequel.

A stream of well-reviewed original hits would force Hollywood to finally take Mr. Ellison seriously as a creative power.

There was a time when Mr. Ellison would have bristled at the notion that his artistic instincts remain unproven. But he seems to have matured. Or maybe gained confidence. “We are creatively involved in everything,” he said when asked about the lingering perception that Skydance is mostly a financier, in particular of Paramount-related projects.

He talked about his excitement about “The Tomorrow War,” which was all Skydance. It arrives on Amazon on July 2.

And one of his pet projects, being a pilot and all, can’t come soon enough — the long-gestating “Top Gun” sequel, which again stars Tom Cruise, who attended Mr. Ellison’s 2011 wedding to the country singer Sandra Lynn.

“We were absolutely a driving force creatively in partnership with Tom Cruise, Jerry Bruckheimer and Chris McQuarrie,” Mr. Ellison said of “Top Gun: Maverick,” taking care to not to take too much credit by name-checking senior collaborators.

“In a lot of ways, that movie means everything to me,” Mr. Ellison added. “I worked for 10 years to develop it to a place where Tom said, ‘Let’s go do this.’”