Paramount Global recently announced that it will be cutting 15% of its workforce in the U.S., amounting to approximately 2,000 jobs. This decision is part of a more extensive cost-cutting plan in anticipation of its upcoming merger with Skydance Media. The company has identified $500 million in cost savings, which includes the reduction in the number of employees, as part of a $2 billion synergy associated with the merger. The layoffs are expected to commence in the coming weeks and should be mostly completed by the end of the year. The job cuts will predominantly affect the company’s marketing and communications department, as well as employees working in finance, legal, technology, and other support functions.
The merger agreement between Paramount Global and Skydance Media was finalized last month. As part of the deal, there is a 45-day go-shop period, during which a special committee of Paramount’s board can seek out another potential buyer. This period is set to conclude later this month. Meanwhile, Paramount’s earnings saw a significant increase, with the company’s streaming division unexpectedly turning a profit for the first time. As a result, the company’s shares rose by more than 5% in after-hours trading.
In the second quarter, Paramount’s revenue dropped by 11%, falling short of analyst expectations. This decline can be attributed to a drop in revenue from licensing, TV advertising, and cable subscriptions. The company reported the largest revenue miss compared to analyst estimates since February 2020. Despite the overall revenue decrease, Paramount+ revenue experienced a 46% growth due to an increase in subscribers and higher pricing. However, the number of Paramount+ customers decreased by 2.8 million compared to the previous quarter following the termination of a partnership with a Korean entertainment company’s streaming platform.
Paramount’s streaming division reported a profit of $26 million for the quarter, a significant improvement from the $424 million loss incurred the previous year. The company remains on track to achieve profitability for Paramount+ in the U.S. by 2025. To reach this goal, Paramount has initiated price increases and reduced content spending. Furthermore, the absence of an NFL licensing charge contributed to the company’s quarterly profit, though this charge is expected to materialize later in the year. Despite these positive developments, Paramount’s shares have notably declined by 31% this year as a result of decreasing cable subscribers and a weaker linear TV advertising market.
Paramount also disclosed taking a $6 billion one-time impairment charge due to the decline in its cable networks. This impairment charge comes shortly after Warner Bros. Discovery incurred a $9.1 billion write-down. The adjustment was necessitated by the company’s transaction with Skydance and has impacted Paramount’s financial outlook.
Paramount Global’s decision to reduce its workforce and implement significant cost-saving measures reflects the company’s efforts to streamline operations and prepare for its merger with Skydance Media. While the company’s streaming division has shown promising signs of profitability, challenges in revenue generation and impairment charges have impacted Paramount’s overall financial performance. Moving forward, Paramount will need to navigate these challenges effectively to sustain growth and profitability in an increasingly competitive market.
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