Paramount Global recently announced a significant cost-cutting measure, with a plan to cut 15% of its U.S. workforce, affecting around 2,000 jobs. This move is part of a broader strategy as the company prepares for a merger with Skydance Media. Paramount aims to achieve $500 million in cost savings as part of $2 billion in synergies related to its transaction with Skydance. The job cuts will primarily target the marketing and communications department, as well as employees in finance, legal, technology, and other support functions.
During its earnings conference call, Paramount revealed that its streaming division had unexpectedly turned a profit for the first time, which led to a surge in its earnings. The company also reported that its revenue for the second quarter dropped by 11%, missing analyst estimates. This revenue decline was mainly attributed to reductions in licensing, TV advertising, and cable subscription sales. Paramount’s streaming platform, Paramount+, experienced significant growth, with a 46% increase in revenue driven by higher prices and subscriber growth. However, the company saw a decrease in Paramount+ customers due to the termination of a partnership deal with CJ ENM’s Tving streaming platform.
Despite the workforce reduction and financial challenges, Paramount remains optimistic about the future of its streaming division. The company reaffirmed its commitment to achieving U.S. profitability for Paramount+ by 2025. To reach this goal, Paramount has implemented measures such as raising prices and reducing content spending. Additionally, the company’s quarterly profit was positively impacted by the absence of an NFL licensing charge, which is expected to be incurred later in the year. However, Paramount’s shares have declined by 31% year-to-date, reflecting broader challenges in the cable subscription and linear TV advertising markets.
Impairment Charges and Merger Implications
In addition to the workforce reduction, Paramount also announced a $6 billion one-time impairment charge related to the decline in its cable networks. This charge comes shortly after a $9.1 billion write-down by Warner Bros. Discovery, signaling the challenges faced by traditional media companies in the current landscape. The decision to cut jobs and incur impairment charges is likely aimed at strengthening Paramount’s financial position ahead of its merger with Skydance Media. The merger agreement includes a go-shop period allowing Paramount to explore other potential buyers, which is set to conclude soon.
The workforce reduction at Paramount Global, in conjunction with its financial performance and strategic decisions, highlights the company’s efforts to navigate the evolving media landscape successfully. Despite facing challenges such as revenue declines and impairment charges, Paramount is focused on leveraging its streaming division to drive future growth and profitability. The impending merger with Skydance Media represents a significant opportunity for Paramount to further consolidate its position in the entertainment industry, albeit amidst a backdrop of uncertainty and transformation.