Paramount Global takes $6-billion write-down. Layoffs to hit 15% of staff
Paramount Global on Thursday reported it took a $6-billion write-down on its cable television networks business, in yet another sign that Hollywood is reckoning with the ongoing deterioration of the traditional television business.
Executives also announced another steep round of layoffs to shrink the Paramount workforce by 15%.
The disclosures, part of Paramount’s second-quarter earnings filing, come as the company prepares to be taken over by David Ellison’s Skydance Media in the first half of next year. Paramount has for years been grappling with the erosion of its media network portfolio, which includes Comedy Central, MTV and Nickelodeon.
The once hugely profitable cable business has suffered from declining relevancy and an acceleration of cord-cutting as audiences increasingly gravitate toward streaming services.
Analysts point to the David Zaslav-led company’s expected loss of the NBA contract and underperformance in key business units during the last two years.
During a conference call with analysts, co-Chief Executive Chris McCarthy said the planned job cuts — which total about 2,000 positions — was part of a previously announced effort to achieve $500 million in annualized cost savings.
The reductions, which will take place over the next few weeks, will be concentrated in marketing and communications, finance, legal technology and the corporate office.
“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 are necessary to transform our organization for the future.”
Paramount is trying to transition from cable channels to streaming through its Paramount+ service, which is growing but has lost money for years. During the second quarter, Paramount’s streaming business, which includes the free ad-supported service Pluto TV and Paramount+, reported a narrow profit, with operating income of $26 million.
It was the streaming unit’s first profit since the launch of Paramount+ more than three years ago. Paramount+ now has 68 million subscribers globally.
The company plans to roll out Paramount+ price increases to boost profitability.
The ad-supported version of Paramount+ will increase $2 a month to $7.99 for new customers. Executives also are hiking fees for Paramount+ with Showtime. Those rates will climb $1 a month to $12.99 for all customers, the company said. The new fees take effect this month.
This week has been bruising one for traditional media companies.
On Wednesday, Walt Disney Co. stock tumbled after executives released earnings that showed it had mustered a small profit in its streaming division, but that it was experiencing softness in its typically reliable theme park business.
Rival Warner Bros. Discovery made a dire admission during its earnings call on Wednesday, telling investors that its cable assets, including HGTV, Cartoon Network, CNN and Food Network, are now worth $9 billion less than they were two years ago.
Companies periodically take write-downs to reflect when their assets shrink in value for a variety of reasons.
Paramount Chief Financial Officer Naveen Chopra told analysts that his company’s huge write-down was due in part to the continued ravages of cord-cutting. But the larger issue, Chopra said, was that the company needed to align the value of its assets with the valuations that were contained as part of the $8-billion Skydance deal.
Tech scion David Ellison’s Skydance Media will gain control of Paramount, marking the end of the Redstone family’s reign over the storied studio.
Paramount’s stock fell 3% to $10.18 on Thursday. The shares have declined nearly 30% on Wall Street so far this year.
The company reported second-quarter revenue of $6.8 billion, down 11% from the same period a year ago. Its unadjusted operating loss was $5.3 billion, compared to a loss of $250 million during the prior-year quarter.
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