Paramount slashes staff, follows WBD in taking big charge on TV network business

By Bill Peters

Shares rally after hours despite nearly $6 billion goodwill impairment charge

Paramount Global on Thursday said it would slash U.S. staff and booked billions in operating losses in the second quarter, as it tries to cut costs and recalibrate the worth of its cable business following its merger deal with Skydance Media and a flight from traditional TV viewing habits.

The announcements were the latest bad news for the media and entertainment industry, after HBO parent Warner Bros. Discovery Inc. suffered similar losses as it grapples with shrinking value of its TV networks, and a surprise profit in Walt Disney Co.'s (DIS) streaming segment was overshadowed by weaker trends in its amusement-parks business.

Paramount (PARA) - which owns its namesake studios and channels like CBS, Nickelodeon and Comedy Central - said on its earnings call that it would cut its U.S. workforce by around 15% in the weeks ahead as part of a plan to save some $500 million. That $500 million, executives said, was part of $2 billion worth of "cost efficiencies identified by Skydance."

Chris McCarthy, one of Paramount's co-CEOs, said on the call that the cuts would be focused on "redundant functions" around marketing and communications. He also said the company would lay off people in finance, legal, technology and other support functions.

These cuts will largely be done by the end of the year, he said.

That announcement was made shortly after Paramount, in its earnings release on Thursday, also reported an operating loss of around $5.32 billion, and said it booked a $5.98 billion goodwill impairment charge for its cable networks business.

That came a day after rival Warner Bros. Discovery (WBD) recorded a $9.1 billion noncash goodwill impairment charge, as it revalues its TV networks segment against "continued softness in the U.S. linear advertising market, and uncertainty related to affiliate and sports-rights renewals, including the NBA."

The NBA's new broadcasting deal does not include Warner Bros. Discovery, which owns TNT, a channel that has broadcast the basketball league's games for decades. Warner is suing the NBA in response.

For its second quarter overall, Paramount reported a loss of $8.12 a share, compared with a loss of 48 cents in the prior-year quarter. Its overall revenue fell around 11% year over year to $6.81 billion.

Factoring out the impairment charges, and matters related to restructuring and taxes, Paramount earned 54 cents a share, well above FactSet estimates for 12 cents a share.

Wall Street, either way, didn't mind the news from Paramount on Thursday. Shares were up 5.4% after hours.

Still, the stock is still down 30.1% this year, as investors await sturdier profits for many of the entertainment industry's streaming ventures.

The entertainment industry has cut costs and staff over recent years, and approached the development of new shows and films cautiously after last year's writers and actors strikes. Some analysts have said Netflix Inc. (NFLX) has already won the streaming wars. Meanwhile, streaming platforms have increased prices. Disney announced such increases earlier this week.

The industry has also consolidated in an effort to bulk up and meet Wall Street's expectations. Paramount, after months of back and forth, last month agreed to merge with Skydance.

For Paramount, adjusted profits in its streaming segment, the kind the company prefers to measure the business by, came in at $26 million during the second quarter, compared to a $424 loss in the prior-year quarter, helped by lower marketing and content costs. Revenue in that segment - which includes Paramount+, Pluto TV and BET+ - rose 13% year over year.

However, Paramount+ lost 2.8 million subscribers during the period, as it exited a bundle agreement in South Korea. The company said it was "on track to reach domestic profitability for Paramount+ in 2025."

-Bill Peters

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

08-08-24 2014ET

Copyright (c) 2024 Dow Jones & Company, Inc.