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Paramount Global takes $6-billion write-down. Layoffs to hit 15% of staff

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Paramount Global takes $6-billion write-down. Layoffs to hit 15% of staff

As a lifelong follower of media and entertainment, I’ve seen the industry evolve from black-and-white TV to high-definition streaming. The latest news about Paramount Global’s $6-billion write-down and impending layoffs is yet another reminder of the tectonic shifts happening in Hollywood.

On Thursday, Paramount Global acknowledged a loss of approximately $6 billion in their cable television networks division, marking another indication that the conventional TV industry is grappling with the persistent decline of its established operations, as Hollywood adjusts to changing times.

Leadership has additionally decided on another significant reduction in staff, which equates to a 15% downsize of the workforce at Paramount.

The disclosures, included in Paramount’s quarterly report for Q2, are being made as the company gets ready for a takeover by Skydance Media, led by David Ellison, within the first half of next year. For quite some time, Paramount has been dealing with the decline of its media network assets such as Comedy Central, MTV and Nickelodeon.

In recent times, the lucrative cable industry has faced a decline in significance due to a surge in viewers shifting towards online streaming platforms, leading to a rapid increase in the practice known as ‘cord-cutting’.

On a recent conference call with financial analysts, Co-CEO Chris McCarthy stated that the upcoming layoffs affecting approximately 2,000 jobs were an element of a previously declared initiative aimed at achieving a yearly saving of $500 million.

Over the coming weeks, most of the cuts (or reductions) will occur in marketing and communication departments, financial divisions, legal tech sectors, and our central corporate headquarters.

“You understand, I’m sure, that these choices are challenging ones,” McCarthy expressed. “We’re blessed with an exceptional team at Paramount, and the steps we’re taking aren’t a judgment on their work. Instead, they’re essential moves to revamp our company for what lies ahead.”

Essentially, Paramount is making an effort to shift from traditional cable channels towards their streaming platform, Paramount+, which has been expanding but has been incurring losses for quite some time. In the latest quarter, however, Paramount’s streaming sector (encompassing the free ad-supported service Pluto TV and Paramount+) managed to record a small profit, generating an operating income of approximately $26 million.

For the first time since Paramount+ debuted over three years ago, the streaming service managed to turn a profit in its operations. Currently, Paramount+ boasts a global subscriber base of approximately 68 million users.

The company plans to roll out Paramount+ price increases to boost profitability.

As someone who has been subscribing to Paramount+ for a while now, I have to say that I was taken aback by the recent announcement of price increases for both the ad-supported version and the bundle with Showtime. Having grown accustomed to the current rates, I found myself questioning whether it would still be worth continuing my subscription at these new prices.

This week has been bruising one for traditional media companies.

On Wednesday, a decline in Walt Disney Co.’s shares occurred following the disclosure of earnings, which indicated a minimal profit in their streaming sector, and a weakening in their usual robust theme park operations.

During its earnings discussion on Wednesday, the competitor Warner Bros. Discovery conceded a grim reality: The value of their cable properties, which encompass networks like HGTV, Cartoon Network, CNN, and Food Network, has dropped by an estimated $9 billion compared to two years ago.

Companies occasionally make adjustments, known as write-offs, to reflect situations where the value of their assets decreases due to various causes.

The CFO of a significant company, Naveen Chopra, explained to financial experts that a substantial reduction in their records was partially because of the ongoing impact of cord-cutting. However, he emphasized that the main challenge was adjusting the worth of their assets to match the appraisals included in the $8-billion Skydance transaction. In everyday language: The CFO said a big loss was partly due to people cancelling cable (cord-cutting), but the bigger problem is making sure our asset values fit with what was agreed upon in the Skydance deal.

On Thursdays trading, Paramount’s stock dropped by 3%, reaching $10.18 per share. This year, the stocks value on Wall Street has decreased by almost 30%.

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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2024-08-10 01:25

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