Paramount Global has announced a significant reduction in its U.S. workforce, cutting 15% of its employees, or approximately 2,000 jobs. This move is part of a broader cost-cutting strategy as the company prepares for its merger with Skydance Media.
Key Points:
- Workforce Reduction: The job cuts will primarily affect Paramount’s marketing and communications departments, as well as employees in finance, legal, technology, and other support roles. The layoffs are expected to begin in the coming weeks and conclude by the end of the year.
- Cost Savings: Paramount has identified $500 million in cost savings, contributing to $2 billion in synergies related to the merger with Skydance.
- Merger Details: The merger includes a 45-day go-shop period, allowing Paramount’s board to seek other potential buyers, which ends later this month.
Financial Performance:
- Earnings Beat Expectations: Paramount’s second-quarter earnings per share came in at 54 cents, significantly higher than the 12 cents expected by analysts.
- Revenue Decline: The company reported revenue of $6.81 billion, falling short of the $7.21 billion expected by analysts, marking an 11% drop from the previous quarter.
- Streaming Success: Paramount’s streaming division posted a profit of $26 million for the quarter, a sharp turnaround from a $424 million loss a year ago. Paramount+ revenue grew by 46%, although the service lost 2.8 million subscribers due to the termination of a partnership deal with CJ ENM’s Tving platform in Korea.
Market Reaction:
- Stock Surge: Following the announcement of the job cuts and positive earnings, Paramount’s shares rose more than 5% in after-hours trading on Thursday.
- Impairment Charge: The company also took a $6 billion one-time impairment charge related to the decline in its cable networks, following a similar move by Warner Bros. Discovery.
Future Outlook:
- Profitability Goals: Paramount remains on track to reach profitability for Paramount+ in the U.S. by 2025, driven by increased subscription prices and reduced content spending.
- Industry Challenges: Despite the positive earnings, Paramount has faced challenges, including a decline in cable subscribers and a soft linear TV advertising market, contributing to a 31% drop in its stock value so far this year.