Paramount Global has recently announced plans to reduce its U.S. workforce by 15%, equating to approximately 2,000 jobs being cut. This move is part of a broader cost-cutting strategy in preparation for its impending merger with Skydance Media. Paramount has identified $500 million in cost savings, which includes the job cuts, as part of a total of $2 billion in synergies related to its upcoming transaction with Skydance.
The job cuts, which are set to commence in the following weeks and are expected to be largely completed by the end of the year, will primarily target the company’s marketing and communications department. Additionally, employees working in finance, legal, technology, and other support functions will also be impacted by these reductions. The announcement was made during Paramount’s recent earnings conference call.
Paramount recently entered into a merger agreement with Skydance Media, with the deal including a 45-day go-shop period, allowing a special committee of Paramount’s board to seek out alternative buyers. The go-shop period is set to conclude later this month. Amidst these developments, Paramount’s earnings saw a significant increase, with the company’s streaming division unexpectedly turning a profit for the first time. Following this news, shares rose by more than 5% in after-hours trading.
Financial Performance and Outlook
In the second quarter, Paramount’s revenue dropped by 11%, falling short of analyst estimates. Factors contributing to this decline included decreased licensing, TV advertising, and cable subscription sales. The company attributed the revenue miss to a drop in TV licensing revenue, which can be challenging for analysts to predict due to the variability in start and end dates of contracts.
Paramount’s streaming service, Paramount+, experienced a 46% increase in revenue attributed to year-over-year subscriber growth and increased pricing. Despite a slight decrease in the number of Paramount+ customers from the previous quarter, the streaming division managed to achieve a profit of $26 million, a notable improvement from the $424 million loss reported a year ago.
Looking ahead, Paramount reiterated its commitment to achieving U.S. profitability for Paramount+ by 2025. To support this goal, the company has implemented price increases and reduced content spending. Additionally, Paramount’s quarterly profit was bolstered by the absence of an NFL licensing charge for the period, although this cost is expected to be incurred later in the year.
Despite these positive developments, Paramount’s shares have experienced a 31% decline so far this year, largely due to decreases in cable subscribers and a softening linear TV advertising market. Furthermore, the company recently took a $6 billion one-time impairment charge related to the decline in its cable networks. This charge was necessitated by adjustments stemming from the impending merger with Skydance.
Paramount Global’s workforce reduction plans and merger with Skydance Media represent significant changes for the company as it navigates the evolving media landscape. The success of these initiatives will depend on Paramount’s ability to realize cost-saving synergies, drive profitability in its streaming division, and adapt to shifting consumer preferences in the digital entertainment space.
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