Against the backdrop of a looming deadline for the sale of the former traditional studio Paramount Global a staggering net loss of $ 5.4 billion in the second quarter of 2024, a dramatic deterioration compared to the previous year.
This massive loss was primarily caused by a $5.98 billion impairment charge related to the company's cable networks. The impairment reflects the grim reality that traditional television is facing an irreversible decline due to the collapse of cash flows from its linear TV subsidiaries.
However, a glimmer of hope for delusional stockbrokers and executives remains the company's Direct-to-Consumer (DTC) division, which posted a profit of $ 26 million for the first time, in stark contrast to the loss of $ 424 million in the same quarter last year.
Strategic restructuring: staff reductions, cost-cutting measures and asset disposals
In the midst of these financial challenges, Paramount's absurd management structure, which includes three co-CEOs, announced a series of cuts to put a band-aid on the mortal wound. The plan calls for $500 million in cost cuts that will result in a reduction of 15 % of the workforce, affecting marketing, communications, finance, legal and technology. This reduction is part of a broader $2bn cost savings initiative related to the upcoming $8bn merger with Skydance, which is expected to be completed by the end of 2025.
The money saved from these cuts will be spent on bankers who will be tasked with selling assets, hinting at a possible restructuring of the portfolio to better compete in the changing entertainment landscape. The asset sale could include the Paramount property itself, Pluto TV, BET and VH1.
Paramount will carry out a further restructuring in the amount of 300 to 400 million dollars in the third quarter, the financial effects of which will also extend to the following quarters.
Grasping at straws: streaming hopes amid subscriber declines
While Paramount's traditional television segments, the company's only revenue drivers, have been decimated, streaming services have finally stopped losing money after many years.
The DTC division's revenue increased by 13 % year-on-year to US$1.88bn, driven by a 12 % increase in subscription revenue and a 16 % increase in advertising revenue. While Paramount+ contributed significantly to this growth, the streamer lost 2.8 million subscribers during the quarter, an ominous development just as it was breaking even. In total, Paramount has 68.4 million streaming subscribers.
Despite these subscriber losses, the company remains irrationally optimistic about the future of its streaming services. Paramount expects a return to net subscriber growth in the second half of the year, supported by new content and a consistent release schedule.
In addition, the company has announced a price increase for Paramount+ with Showtime, which is expected to contribute to revenue growth in the fourth quarter. From 20 August, the cost of Paramount+ with Showtime will increase by $1 to $12.99 per month, while the Paramount+ Essential plan will increase by $2 to $7.99 per month for new subscribers.
Beginning in the third quarter, Charter Communications will offer the ad-supported tier of Paramount+ at no additional cost to Basic Cable subscribers. Although these users will be counted as Paramount+ subscribers, this partnership will clearly generate less revenue per subscriber. Revenue from this and future distribution agreements that bundle Paramount+ will be split between Paramount's TV/Media and DTC segments.
