Paramount Global recently announced plans to cut 15% of its U.S. workforce, amounting to approximately 2,000 jobs. This decision is part of a larger cost-cutting strategy in preparation for its upcoming merger with Skydance Media. The company has identified $500 million in cost savings, including the reduction in headcount, as part of a $2 billion synergy related to the Skydance transaction.
The job cuts are set to begin in the coming weeks and are expected to largely conclude by the end of the year. Most of the layoffs will affect employees in the marketing, communications, finance, legal, technology, and other support departments. Paramount made this announcement during its recent earnings conference call, shedding light on the restructuring plan before the merger with Skydance is finalized.
Despite the workforce reduction news, Paramount reported a surge in earnings, with its streaming division turning a profit – marking the first profitable quarter for its direct-to-consumer business. This unexpected success led to a significant increase in share prices, rising over 5% in after-hours trading following the earnings call. The company’s performance in the quarter exceeded Wall Street’s expectations, with adjusted earnings per share at 54 cents compared to the anticipated 12 cents and revenue at $6.81 billion against the projected $7.21 billion.
Challenges and Opportunities
However, Paramount faced challenges in its second-quarter revenue, which dropped by 11% and missed analyst estimates due to declines in licensing, TV advertising, and cable subscription sales. The revenue decline was the most significant miss since February 2020, attributed to a drop in TV licensing revenue. Nonetheless, Paramount’s streaming service, Paramount+, showed promising growth with a 46% increase in revenue attributed to subscriber growth and price hikes.
Future Projection
Looking ahead, Paramount reaffirmed its goal to achieve U.S. profitability for Paramount+ by 2025, despite the recent setbacks. The company has implemented strategies such as raising prices and reducing content spending to boost profitability. Additionally, upcoming charges, such as the NFL licensing fee, are expected to impact future earnings. Shares of Paramount have declined by 31% this year, primarily due to a decrease in cable subscribers and a soft linear TV advertising market.
Financial Adjustments
Paramount also faced a one-time impairment charge of $6 billion associated with the decline in its cable networks, following Warner Bros. Discovery’s write-down of $9.1 billion the day before. These adjustments were necessary as part of the process leading up to the Skydance merger, reflecting the shifting landscape of the entertainment industry. Despite these challenges, Paramount remains focused on streamlining its operations and maximizing the potential of its streaming services to drive future growth and profitability.