Paramount Streaming posts $26 million in second-quarter adjusted profit

Paramount continued to execute on its $500 million cost-saving plan and goal of achieving sustained profitability in streaming by 2025 in the company’s first earnings report since the Skydance deal was announced.

The company said Thursday that its cost-saving plan will include cutting its U.S. workforce by about 15 percent. The areas that will be affected will be non-essential functions in marketing and communications, and in finance, legal, technology and other support functions. The actions will be rolled out in the coming weeks and will be largely completed by the end of the year, according to management.

Paramount Global employed 21,900 people worldwide at the end of 2023, but cut about 800 positions in February.

The company is also exploring “potential strategic partnerships” for Paramount+ and is in active talks with “multiple parties” to achieve sustained profitability for the service. Management said this could include licensing as well as joint ventures or partnerships. Paramount is also reassessing its portfolio with a view to improving its balance sheet.

“The set of assets that make up Paramount Global today has been built through linear growth, and while we have strong brands and businesses, we need to transform our portfolio to best compete in the future,” said Paramount Co-CEO Chris McCarthy. “The assets under consideration are undoubtedly strong and have exciting futures, but they would be better served on their own or as the centerpiece of another company.”

The $500 million is included in $2 billion of cost savings identified by Skydance. Paramount expects to incur a restructuring charge of approximately $300 million to $400 million in the third quarter as a result of these actions, with the cash inflow expected to occur over the next several quarters.

In the company’s second-quarter earnings report, Paramount reported direct-to-consumer revenue growth of 13 percent year over year, reaching $1.8 billion and an adjusted profit of $26 million, after a loss of $424 million a year earlier. The change in revenue was attributed to revenue growth and lower marketing and content costs.

However, Paramount+ subscriber numbers fell by 2.8 million in the quarter to 68 million, which the company said largely reflected the planned exit from its hard bundle agreement in South Korea. The company expects Paramount+ to return to net subscriber growth in the second half of the year and return to net losses in the third and fourth quarters due to content release timing.

Overall, Paramount reported an operating loss of $5.3 billion, after losing $250 million a year earlier. The company attributed the change to a $5.98 billion “goodwill write-off” for its cable networks reporting unit, a result of Paramount’s estimated market value related to the Skydance bid and the decline in pay television.

Revenue fell 11 percent year over year to $6.8 billion, with a 17 percent drop in revenue from the company’s TV Media division and an 18 percent decline in filmed entertainment. The decline in TV revenue was largely attributed to fluctuations in licensing revenue, which fell 48 percent, as well as declines in linear advertising.

Although the editions helped in this IF AND A Quiet Place: Day Onecinema revenues incurred compared to release Transformers: Rise of the Beast in the previous year.

In the company’s streaming segment, subscription revenue rose 12 percent, which the company said was due to year-over-year subscriber growth and price increases for Paramount+, while advertising revenue rose 16 percent, thanks to growth in Paramount+ and Pluto TV. Paramount+ revenue rose 46 percent year-over-year.

On July 7, Shari Redstone agreed to sell control of Paramount Global to a consortium led by Skydance, a production company headed by David Ellison, and Gerry Cardinale’s RedBird Capital.

The company is still in the midst of a 45-day go-shop window, which allows a special committee of Paramount’s board of directors to evaluate or seek better offers. In its earnings release, Paramount said it “does not intend to disclose information about the progress of the go-shop process unless it deems such disclosure appropriate or otherwise required.”

If a serious bidder emerges, the go-shop period could be extended to Sept. 5, according to the filing. However, if Paramount doesn’t take Skydance’s offer, it would be forced to pay a $400 million breakup fee. If approved, the deal is expected to close in the first half of 2025.

Meanwhile, Paramount CEO Brian Robbins said the company is consulting with Skydance on “very specific, limited issues” but that the company supports their strategic plan.

“Our strong Q2 results demonstrate that we are executing on our strategic priorities. We are proud of our performance, including significant earnings growth, largely driven by our DTC segment. In fact, for the fourth consecutive year, Paramount+ led the industry in domestic sign-ups driven by our popular television series and hit movies. DTC earnings growth over the past four quarters has totaled nearly $900 million, and we remain on track to achieve domestic profitability for Paramount+ in 2025,” said co-CEOs George Cheeks, Chris McCarthy and Brian Robbins in a statement.

“As we look ahead, we will continue to aggressively execute our Strategic Plan, which is focused on transforming streaming to accelerate profitability, streamline our organization — including at least $500 million in annual cost savings — and strengthen our balance sheet by increasing free cash flow and optimizing our asset mix. We are confident that our Plan will drive long-term value by leveraging our widely popular content as we continue to transform Paramount for the future,” the statement continued.