Paramount Global recently announced that it will be cutting 15% of its U.S. workforce, amounting to about 2,000 jobs. This decision comes as part of a broader cost-cutting plan in preparation for the upcoming merger with Skydance Media. The company has identified a massive $500 million in cost savings, which includes the headcount reductions. The overall goal is to achieve $2 billion in synergies related to the transaction with Skydance.
The job cuts are expected to commence in the coming weeks and are projected to mostly conclude by the end of the year. The targeted departments for these cuts include marketing, communications, finance, legal, technology, and other support functions. This move was announced during the company’s earnings conference call on Thursday. It is clear that Paramount is taking definitive steps to streamline its operations and optimize its resources in anticipation of the merger with Skydance Media.
Last month, Paramount Global agreed to a merger with Skydance Media, which also includes a 45-day go-shop period that is set to conclude later this month. During this time, a special committee of Paramount’s board has the opportunity to find another buyer. Despite the impending merger, Paramount’s earnings showed a significant increase as its streaming division unexpectedly turned a profit for the first time. This marked a major milestone for the company’s direct-to-consumer business.
Following the earnings report, shares of Paramount surged by more than 5% in after-hours trading on Thursday. However, the second-quarter revenue experienced an 11% drop compared to analyst estimates. This decline was primarily attributed to decreases in licensing, TV advertising, and cable subscription sales. Paramount conveyed that the miss in revenue was largely due to a decline in TV licensing revenue, which proved challenging for analysts to accurately project due to the variable start and end dates.
Despite the revenue drop, Paramount’s streaming service, Paramount+, witnessed significant growth in revenue by 46% year-over-year. This growth was fueled by an increase in subscribers and higher prices. However, Paramount+ experienced a decrease of 2.8 million customers from the previous quarter, totaling 68 million subscribers. This decline was a result of the termination of a partnership deal with the Korean entertainment company CJ ENM’s Tving streaming platform.
On a positive note, Paramount’s streaming division achieved a profit of $26 million for the quarter, a stark improvement from the $424 million loss incurred a year earlier. Analysts had expected a loss of $265 million for this quarter, making this a substantial turnaround for the company. Paramount remains confident in its trajectory towards U.S. profitability for Paramount+ by 2025, and has taken strategic measures such as raising prices and reducing content expenditure to achieve this goal.
Throughout the year, Paramount Global’s shares have seen a decline of 31% due to challenges within the cable subscription market and a relatively weak linear TV advertising environment. Additionally, the company incurred a significant $6 billion one-time impairment charge related to the decline in its cable networks. This impairment charge came following a $9.1 billion write-down by Warner Bros. Discovery, prompted by adjustments necessitated by their transaction with Skydance.
Paramount Global’s decision to implement job cuts and its merger with Skydance Media represent crucial strategic moves aimed at improving operational efficiency and achieving long-term growth. While the company faces challenges in its traditional revenue streams, particularly in the TV licensing and cable subscription segments, the promising performance of its streaming division signals a potential avenue for future success. As Paramount continues to navigate the evolving media landscape, adapting to changing consumer preferences and market dynamics will be essential in sustaining its competitive edge and driving profitability in the digital age.