As Paramount charts a new strategic course with a pending acquisition by Skydance Media, executives on Thursday disclosed plans to slash 15% of its U.S. workforce as part of a larger cost savings effort.
Speaking on the company’s Q2 earnings call Chris McCarthy, one of three leaders appointed to the Office of the CEO in April, said it would cut 15% of the domestic workforce in an effort to realize $500 million in annualized run rate cost savings across the company.
According to McCarthy, job cuts are primarily focused on reducing redundant roles in marketing and communications, as well as streamlining the corporate structure by reducing headcount in finance, legal, technology and other support functions. Layoffs will take place in the coming weeks and largely be completed by the end of the year, he noted.
“As you can imagine, these are difficult decisions to make,” McCarthy said. “We have incredibly talented people at Paramount and these actions are not a reflection of their contributions, rather they’re necessary to transform our organization for the future.”
As of the end of 2023, Paramount had approximately 22,000 full and part-time employees across 33 countries.
Paramount expects to reach the full $500 million run rate reduction as the company enters 2025, which is included in $2 billion of cost efficiencies previously identified by Skydance.
Going forward, the strategic focus is on streamlining the organization, transforming DTC and optimizing its asset mix.
Executives noted that Skydance Media and RedBird Capital support its strategic vision, and while they are still in the 45-day go-shop period, the deal is expected to close in the first half of 2025.
During the period, Paramount took a $6 billion non-cash goodwill impairment charge related to its linear cable networks business – an accounting change which CFO Naveen Chopra said takes into consideration factors impacting the fair value of its reported business units, including estimated total company market value indicated by the Skydance Media transaction and recent indicators in the linear affiliate marketplace. It follows Warner Bros. Discovery, which yesterday during Q2 earnings reported a $9.1 billion non-cash goodwill impairment charge related to its TV networks unit.
DTC turns a profit, Paramount+ on track for 2025 profitability
Paramount marked growth for its DTC streaming efforts and expects Paramount+ to reach domestic profitability in 2025. The company did post its first profitable quarter for the DTC unit in Q2, but expect the segment to return to losses in Q3 and Q4 related to the timing of content expenses
For DTC, Paramount is focused on increasing scale and engagement, where McCarthy reiterated it’s exploring potential strategic partnerships and is in active discussions with multiple partners.
In Q2 specifically, Paramount’s DTC segment saw profitability improve by $450 million year over year, with adjusted OBIDA of $26 million in the period. DTC ad revenue of $513 million grew 16% over the same quarter a year ago, helped by increased viewing hours across Paramount+ and Pluto TV. DTC subscription revenue was up 12% yoy to $1.36 billion. Gains in subscription and advertising revenue drove total DTC revenue up 13% in the quarter to $1.88 billion. Those gains came despite Paramount+ losing 2.8 million subscribers in the quarter, for a total base of 68.4 million. The subscriber losses were primarily due to a planned exit from a hard bundle agreement in South Korea, where executives noted the relationship brought positive subscriber growth but wasn’t favorable for financial reasons.
The Pluto TV FAST service, meanwhile, has lagged other leading FASTs in terms of TV time share tracked by Nielsen’s The Guage, but the first six months of 2024 marked its “highest consumption ever”, according to McCarthy. On the call he noted Pluto TV is the most widely distributed FAST service and delivered 3.7 billion hours in the first half of the year, up 8% yoy.
Paramount also disclosed securing over $1 billion in Upfront ad commitments across its streaming portfolio.
On the TV networks side, Q2 revenue of $4.3 billion was down 17% year over year, primarily driven by reductions in licensing revenues, which dove 48% yoy to $630 million for the quarter. Advertising revenue and affiliate and subscription revenue also declined for the TV media segment to $1.7 billion and $1.9 billion, respectively.
Brian Robbins, also part of the Office of the CEO, did speak positively about securing a recent carriage renewal with one of its largest affiliates, cable operator Charter. It’s a multi-year agreement that includes linear cable networks, owned and operated CBS broadcast stations, as well as the inclusion of Paramount+ Essentials with ads and BET+ in linear packages for Charter Spectrum pay TV customers starting around Labor Day. And it’s an arrangement Paramount plans to pursue with others.
“For us, it has the potential to expand reach and engagement, lower customer acquisition costs and yield much lower churn,” Robbins said on the earnings call. “And we view this as one potential partnership roadmap for future distributor renewals.”
Paramount reported total Q2 revenue of $6.8 billion, down 11% yoy, with an operating loss of $5.3 billion. Total company adjusted OBIDA of $867 million was up 43%.