Paramount Global is currently in the process of cutting 15% of its U.S. workforce, equating to around 2,000 jobs. These job cuts are part of a broader cost-cutting plan that the company is implementing as it prepares for a merger with Skydance Media. In order to achieve cost savings, Paramount has identified $500 million in savings, with part of this amount being attributed to the headcount reductions. The overall goal is to achieve $2 billion in synergies related to the upcoming transaction with Skydance.
The job cuts will primarily affect employees in the marketing and communications department, as well as those working in finance, legal, technology, and other support functions within the company. According to statements made during the company’s recent earnings conference call, these reductions will begin in the coming weeks and are expected to largely conclude by the end of the year.
Last month, Paramount Global announced its merger agreement with Skydance Media. As part of this deal, there is a 45-day go-shop period in place, allowing a special committee of Paramount’s board to seek out another potential buyer. This period is set to conclude later this month. Following the announcement of the merger, Paramount’s earnings showed a significant surge, particularly within the company’s streaming division, which unexpectedly turned a profit – marking the first profitable quarter for Paramount’s direct-to-consumer business.
When comparing Paramount’s performance in the quarter with Wall Street expectations, earnings per share were reported at 54 cents adjusted, significantly surpassing the anticipated 12 cents. However, revenue fell short of estimates, coming in at $6.81 billion versus the expected $7.21 billion. The decline in second-quarter revenue, which dropped by 11%, is largely attributed to decreases in licensing, TV advertising, and cable subscription sales. This drop in revenue marked the biggest miss in comparison to analyst estimates since February 2020.
One area of growth for Paramount has been its streaming division, particularly its Paramount+ platform. Revenue from Paramount+ saw a significant increase of 46% year-over-year due to subscriber growth and higher prices. Despite this growth, the number of Paramount+ customers decreased by 2.8 million from the previous quarter to a total of 68 million, following the dissolution of a partnership deal with CJ ENM’s Tving streaming platform. The streaming division turned a profit of $26 million for the quarter, a stark contrast to the $424 million loss reported a year ago.
Future Projections
Looking ahead, Paramount reaffirmed its commitment to achieving U.S. profitability for Paramount+ by 2025. To reach this goal, the streaming service has enacted price increases and reduced its content spend. Additionally, the company noted that the absence of an NFL licensing charge for the period helped contribute to its quarterly profit. However, shares of Paramount have seen a 31% decline this year, largely attributed to decreases in cable subscribers and a soft linear TV advertising market.
In the midst of these financial dynamics, Paramount also disclosed a $6 billion one-time impairment charge linked to the decline of its cable networks. This impairment charge comes shortly after a $9.1 billion write-down made by Warner Bros. Discovery, signaling broader challenges within the industry. Paramount emphasized that this charge was necessary as part of an adjustment related to its impending transaction with Skydance Media.