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Viacom Board Tightening Oversight of Paramount

When your studio management greenlights Ben-Hur, one of the biggest bombs of 2016, it’s reasonable to think your parent company may have some questions to ask.

That’s exactly what’s happening with Paramount, which released a remake of the classic picture that failed to click with audiences on an epic level. Though Viacom (NASDAQ: VIA) (NASDAQ: VIAB) is going through its own problems, the parent company will be exerting more control over the movie studio, according to a regulatory filing detailing the settlement agreement between controlling shareholder Sumner Redstone and departing CEO Philippe Dauman.

After a protracted struggle, Dauman agreed to leave the company and drop his legal fight regarding Redstone’s mental capacity in exchange for a payout which should reach around $72 million. That will leave interim CEO Tom Dooley to sort out what to do with Paramount in light of not only its latest failure, but also its ongoing struggles.

What happens next for Paramount?

Essentially, the movie studio’s management is being summoned to the principal’s office. Dooley, working with the Viacom board of directors, has been tasked with scheduling a meeting “as soon as reasonably practicable for the management of Paramount to meet with the Viacom board for an information session and status update, including a Q&A session as may be requested by members of the Viacom board, regarding the Paramount business,” according to the filing.

That meeting will include a look at revenue sources, a review of the studio’s 2016 and 2017 budgets, and a performance review of the the year-to-date. In addition the board and Dooley will examine “current and planned business activities in such level of detail as the Viacom board may request,” the filing said.

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What does this mean for Paramount?

This move puts the attention on Paramount management, led by CEO Brad Grey, and deflects it away from Dooley and the parent company.

It’s hard to see any outcome where heads don’t roll at the studio, given the debacle with Ben-Hur. Going forward, Paramount simply needs more and bigger hit franchises instead of risky remakes and middling successes like its latest Star Trek film.

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Daniel Kline has no position in any stocks mentioned.

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