Paramount Global, the renowned film and television production company, is set to cut 15% of its U.S. workforce, amounting to approximately 2,000 jobs. This move is part of a broader cost-cutting plan in preparation for its impending merger with Skydance Media. Paramount has identified $500 million in cost savings, which includes the reduction in headcount, as part of the $2 billion in synergies expected from the merger.
The job cuts will primarily affect the marketing and communications department, as well as employees in finance, legal, technology, and other support functions. These reductions will commence in the coming weeks and are expected to be largely completed by the end of the year. The decision to streamline these areas reflects Paramount’s strategic focus on optimizing its operations and aligning them with the post-merger business structure.
The merger with Skydance Media, which was agreed upon last month, is currently in the go-shop period. This period allows a special committee of Paramount’s board to explore alternative buyers, although it is set to conclude later this month. The merger represents a significant milestone for Paramount, as it aims to expand its capabilities and strengthen its position in the highly competitive entertainment industry.
In a surprising turn of events, Paramount’s streaming division reported a profit for the quarter, marking the first time the company has achieved a profitable quarter for its direct-to-consumer business. This unexpected success can be attributed to year-over-year subscriber growth and higher prices for its streaming service, Paramount+. However, the number of Paramount+ customers decreased by 2.8 million from the previous quarter, largely due to the termination of a partnership deal with CJ ENM’s Tving streaming platform.
The streaming division’s profitability demonstrates Paramount’s commitment to its digital transformation strategy. The company has made strategic moves such as raising prices and reducing content spending to improve its financial performance. Paramount has reaffirmed its goal of achieving U.S. profitability for Paramount+ by 2025, a target that seems feasible considering the positive trajectory of its streaming division.
On the financial front, Paramount’s second-quarter revenue experienced an 11% drop, falling short of analyst expectations. This decline can be attributed to a decrease in TV licensing revenue, which is challenging to predict accurately due to the variability in start and end dates. Additionally, licensing, TV advertising, and cable subscription sales have all declined, contributing to the revenue shortfall. However, Paramount+ revenue showed promising growth, increasing by 46% due to subscriber growth and higher prices.
It is important to note that Paramount’s quarterly profit was positively impacted by the absence of an NFL licensing charge during the period. This charge will be incurred later in the year. Despite the challenges faced by the company, shares of Paramount rose over 5% in after-hours trading, indicating investor confidence in its long-term prospects.
However, Paramount has faced its fair share of difficulties, with shares declining by 31% since the beginning of the year. This decline can be attributed to the ongoing decline in cable subscribers and a soft linear TV advertising market. To add to its challenges, Paramount also had to take a significant one-time impairment charge of $6 billion related to the decline in its cable networks. This charge was necessitated by the company’s transaction with Skydance.
In conclusion, Paramount Global’s decision to cut 15% of its U.S. workforce is part of its broader cost-cutting plan as it prepares for its merger with Skydance Media. Despite the challenges faced by the company, its streaming division has shown promising growth and achieved profitability for the quarter. Paramount remains committed to its digital transformation strategy and aims to achieve U.S. profitability for its streaming service by 2025. While the company faces headwinds in the form of declining revenue and an impairment charge, investor confidence remains intact, as evidenced by the recent increase in its share price.
