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    Paramount Global Reports Streaming Profit, Announces Workforce Cuts, and Prepares for Skydance Merger

    nephilaBy Business And Money 6 Mins Read

    “Hollywood is no longer the central hub of creativity it once was. The digital revolution has decentralized content creation, empowering new voices and platforms at the expense of the traditional studio system.” – Reed Hastings

    Paramount Global (PARA) saw its stock jump by 6% in premarket trading on Friday after announcing a notable shift in its financial performance.

    On Thursday, Paramount reported its first profit from its streaming division, though its traditional TV business experienced a more significant decline than anticipated. The company also recorded a nearly $6 billion write-down on its cable operations.

    During a conference call, management revealed plans to reduce its U.S. workforce by 15%, with layoffs expected to occur over the next few weeks and largely completed by year-end.

    These developments come as Paramount gears up for its anticipated merger with Skydance Media, projected to finalize in the third quarter of 2025.

    In the second quarter, Paramount’s direct-to-consumer (DTC) segment generated $26 million in operating income, marking a $450 million improvement from the previous year. This is a turnaround from a $286 million loss in the first quarter. Co-CEOs George Cheeks, Chris McCarthy, and Brian Robbins highlighted this as evidence of the company’s successful execution of its strategic priorities.

    The company plans to continue its aggressive strategy, which includes transforming its streaming business to boost profitability, cutting costs by at least $500 million annually, and improving its balance sheet through increased free cash flow and optimized asset management.

    Following these announcements, shares gained about 5% in after-hours trading. Despite this rebound, Paramount’s stock was down roughly 30% for the year before the report. The company posted adjusted earnings of $0.54 per share for Q2, surpassing the $0.13 expected by analysts and higher than the $0.10 reported in the same quarter last year.

    Revenue for the quarter came in at $6.81 billion, falling short of the $7.24 billion forecast and representing an 11% decrease from $7.62 billion in the prior year. Linear advertising revenue dropped by 11% year-over-year, more significant than the 10% decline analysts had anticipated. Despite a 14% rebound in Q1 driven by Super Bowl ad sales, the second quarter highlighted the difficulties faced by traditional media companies amid increasing cord-cutting.

    Similar to its industry peer Warner Bros. Discovery, Paramount took a $5.98 billion goodwill impairment charge related to its cable networks. CFO Naveen Chopra explained that the charge resulted from assessing factors impacting the fair value of the company’s reporting units, including market value indications from the Skydance transactions and recent trends in the linear affiliate marketplace.

    Despite profitability in its streaming segment, Paramount+ saw a decline of 2.8 million subscribers to 68 million, mainly due to exiting a significant deal in South Korea. However, global average revenue per user (ARPU) increased by 26% year-over-year, contributing to a 46% revenue boost for Paramount+ compared to the previous year.

    For the six months ending June 30, the streaming division still faced a $260 million loss, but the company remains on track to achieve domestic profitability for Paramount+ by 2025. The company’s leadership is exploring further strategic partnerships and joint ventures to enhance scale.

    Meanwhile, the film division reported an 18% decline in revenue, attributed to the timing of releases and tough comparisons with last year’s “Transformers: Rise of the Beasts.”

    As Paramount prepares for its merger with Skydance, valued at $4.75 billion, Skydance plans to inject $6 billion into Paramount, including $1.5 billion directly into its debt-laden balance sheet. Skydance CEO David Ellison will take on the roles of chairman and CEO of the new entity, while former NBCUniversal executive Jeff Shell, who was ousted last year, will serve as president.

    Shell, who outlined a strategic vision last month, emphasized the need for the company to adapt its operations as the traditional media sector continues to face challenges.

    Major Points:

    • Paramount Global’s stock rose by 6% in premarket trading following its report of a profit in the streaming division.
    • The company announced plans to lay off 15% of its U.S. workforce and recorded a nearly $6 billion write-down on its cable business.
    • Paramount is preparing for a merger with Skydance Media, expected to complete in the third quarter of 2025.
    • Paramount’s streaming segment reported $26 million in operating income for Q2, reversing a $286 million loss from Q1, but overall revenue missed expectations and was down 11% year-over-year.
    • The company aims to cut costs by at least $500 million annually, improve profitability in streaming, and explore strategic partnerships and joint ventures.

    Quotes

    • “The decline of Hollywood is not just about box office numbers—it’s about a cultural shift where audiences seek more diverse and authentic stories that traditional studios have been slow to embrace.” – Ava DuVernay
    • “Studios are struggling to keep up with the pace of change. The old business model, built on blockbuster hits, is being challenged by streaming services and the fragmented nature of modern media consumption.” – Jeff Bewkes
    • “The decline of Hollywood reflects a broader trend: audiences are no longer satisfied with formulaic content. They crave innovation, and studios must adapt or risk becoming irrelevant.” – Shonda Rhimes
    • “Hollywood’s golden age is fading, as technology disrupts the industry. Studios are being forced to reinvent themselves in a landscape where the rules are constantly changing.” – Barry Diller

    Lap Fu Ip – Reprinted with permission of Whatfinger News

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