Paramount continued to push forward on its $500 million cost-savings plan and goal of reaching sustained profitability in streaming by 2025, in the company’s first earnings report since the Skydance deal was announced.
On Thursday, the company said its cost-savings plan will include reducing its U.S.-based workforce by approximately 15 percent. The areas hit will be redundant functions within marketing and communications and in finance, legal, technology and other support functions. These actions will take place in the coming weeks and will largely be completed by the end of the year, according to management.
Paramount Global had 21,900 employees worldwide as of the end of 2023, but eliminated an estimated 800 positions in February.
The company is also exploring “potential strategic partnerships” for Paramount+ and is in active discussion with “multiple parties” in an effort to reach sustained profitability on the service. Management said this could include licensing as well as joint ventures or partnerships. Paramount is also reevaluating its portfolio with an eye to improving its balance sheet.
“The set of assets that make up Paramount Global today were built up through the rise of linear and while we have strong brands and businesses, we must reshape our portfolio to best compete in the future,” said Paramount co-CEO Chris McCarthy. “The assets under consideration are undeniably strong with exciting futures ahead, but will be better served on their own or as the centerpiece of another business.”
The $500 million is included in the $2 billion of cost efficiencies identified by Skydance. In connection with these actions, Paramount expects to incur a restructuring charge of approximately $300 million to $400 million in the third quarter, with the cash impact occurring over the next several quarters.
In the company’s second-quarter earnings report, Paramount reported direct-to-consumer revenue up 13 percent year-over-year to reach $1.8 billion and an adjusted profit figure of $26 million, after a loss of $424 million a year ago. The change in income was attributed to the revenue growth and lower costs for marketing and content.
However, the number of Paramount+ subscribers decreased 2.8 million in the quarter, to 68 million, which the company said largely reflects the planned exit from a hard bundle agreement in South Korea. The company expects Paramount+ to return to net subscriber growth in the second half of the year, and revert back to net losses in the third and fourth quarter due to the timing of content releases.
Overall, Paramount reported an operating loss of $5.3 billion, after a loss of $250 million a year ago. The company attributed the change to a “goodwill impairment” charge of $5.98 billion for its cable networks reporting unit, which comes amid the estimated company market value for Paramount amid the Skydance offer and a decline in pay TV.
Revenue fell 11 percent year-over-year to $6.8 billion, with a 17 percent drop in revenue in the company’s TV Media division and an 18 percent drop in filmed entertainment. The drop in TV revenue was largely attributed to fluctuations in licensing revenues, which dropped 48 percent, as well as declines in the linear advertising market.
While helped by the releases of IF and A Quiet Place: Day One, theatrical revenues suffered by comparison to the release of Transformers: Rise of the Beasts in the prior year.
Within the company’s streaming segment, subscription revenue grew 12 percent, which the company said was driven by year-over-year subscriber growth and pricing increases for Paramount+, while advertising revenue rose 16 percent, due to growth in Paramount+ and Pluto TV. Paramount+ revenue is up 46 percent year-over-year.
On July 7, Shari Redstone agreed to sell control of Paramount Global to a consortium led by Skydance, the production company helmed by David Ellison, and Gerry Cardinale’s RedBird Capital.
The company is still in the midst of its 45-day go-shop window, which allows the special committee of Paramount’s Board of Directors to evaluate or seek out better offers. In the earnings release, Paramount said it “does not intend to disclose developments with respect to the go-shop process unless and until it determines such disclosure is appropriate or is otherwise required.”
If a serious bidder emerges, the go-shop period can be extended to Sept. 5, per the filing. However, if Paramount does not choose to go with the Skydance offer, it will be forced to pay a $400 million breakup fee. If the transaction is approved, it is expected to be completed in the first half of 2025.
In the interim, Paramount co-CEO Brian Robbins said the company is consulting with Skydance on “very specific, limited things,” but that the company has been supportive of their strategic plan.
“Our strong performance in Q2 demonstrates that we are delivering on our strategic priorities. We are proud of our results, including significant earnings growth largely driven by our DTC segment. In fact, for the fourth year in a row, Paramount+ is leading the industry in domestic sign-ups driven by our big broad hit TV series and blockbuster films. DTC profit growth for the past four quarters has totaled nearly $900 million and we are on track to reach domestic profitability for Paramount+ in 2025,” the company’s co-CEOs, George Cheeks, Chris McCarthy and Brian Robbins, said in a statement.
“Looking ahead, we will continue to aggressively execute on our Strategic Plan which focuses on transforming streaming to accelerate profitability, streamlining our organization — including at least $500 million in annualized cost savings — and improving the balance sheet by growing free cash flow and optimizing our asset mix. We are confident that our Plan will drive long-term value by leveraging our broad hit content as we continue to transform Paramount for the future,” the statement continued.