With Paramount less than a week away from closing its merger with Skydance, ending a chaotic stretch that involved everything from lawsuits to a naked President Donald Trump running through the desert, Wall Street had hoped to get a glimmer of the media giant’s future on its second-quarter conference call.
Instead, analysts and investors on the investor call heard Shari Redstone’s final words as the owner of National Amusements, the parent company of Paramount, where she thanked the shareholders and the executive leadership team, and said she was “confident” that Skydance’s vision paired with the company’s technology and resources will allow it to “build on Paramount’s legacy and position.”
FCC Clears Paramount-Skydance Merger
Just how Skydance will carry the torch remains a question, with Paramount posting second-quarter per-share earnings and revenue that fell short of Wall Street expectations. One bright spot was revenue growth at Paramount+ the company’s streaming arm, although subs were down by 1.3 million. The results underscore the challenges facing Skydance CEO David Ellison as he takes the reins.
Overall, the company posted a profit of $57 million on revenue of $6.85 billion in the second quarter.
But there was little revealed about what Ellison’s plans will be for the newly formed company. Or what the role David’s father, Larry, the billionaire co-founder of Oracle who largely financed the Paramount bid, will play at the company.
Paramount’s results came on a busy day of earnings that also provided scale for how far the media giant has fallen. On the same afternoon, Apple posted a quarterly net profit of $23.4 billion, while Amazon saw a net profit of $18.2 billion in the same period. Comcast earlier in the day reported net income of $11.1 billion, but it was helped by the $9.4 billion sale of its stake in Hulu to Disney.
Shakeup coming
Redstone spoke at length about the legacy of Paramount and her family’s ties to the company.
“Many on this call understand the enormous importance of this business to my family and to me,” Shari Redstone, non-executive chair of Paramount’s board of directors, said during Thursday’s earnings call. “Beginning nearly 40 years ago, my father, Sumner Redstone, built Viacom and CBS by bringing together a group of the best assets in media, news and entertainment. While people often debated whether content or distribution ruled the day, my father’s steadfast belief was that content was king, even against the backdrop of enormous change. That core business philosophy remains the reality for our business and industry.”
While the focus on content remains, virtually everything else is up for change. The existing leadership team isn’t expected stick around, with co-CEO Chris McCarthy already set to leave. Earlier Thursday, Dan Cohen said he was stepping down as the company’s chief content licensing officer and president of its revived acquisition arm, Republic Pictures.
Then there’s the state of CBS News, which is set for a big shake-up thanks to the concessions made to get the Federal Communications Commission to greenlight the merger. They include Paramount putting an ombudsman in place to review “any complaints of bias or other concerns” involving CBS News, a move that journalism watchdogs and critics say could create a chill effect on the newsroom’s ability to report. The staff of “60 Minutes” was already enraged by Paramount’s decision to settle Trump’s lawsuit over its interview with then-presidential candidate Kamala Harris for $16 million.
Skydance on Thursday said in a letter to Senate democrats that it has fully complied with all laws, a response to questions raised by Sens. Elizabeth Warren, Bernie Sanders and Ron Wyden about Paramount’s settlement with Trump and his claim that he will get additional ads for his causes.
But those are concerns for Ellison and the Skydance leadership team. On Thursday, Redstone was all about thanking the executives for their part in shaping up the company for its takeover.
“I am proud that when the transaction closes, we will be turning over a healthy business with a strong foundation for success,” Redstone said. “One year ago, that was not a foregone conclusion against the backdrop of tough industry conditions in the linear business and a pending transaction. The progress we have made is a testament to the talent, focus and dedication of the people of Paramount under the leadership of George Cheeks, Chris McCarthy and Brian Robbins.”
Here are the key takeaways:
[Note: Last year during the second quarter of 2024, Paramount recorded a goodwill impairment charge for its cable networks unit, which totaled $5.98 billion. That’s why some of the year-over-year comparative numbers may look odd.]
Net income: A profit of $57 million, compared to the loss of $5.4 billion a year ago.
Earnings Per Share: $0.08, compared to $0.37 per share expected by analysts surveyed by Yahoo Finance.
Revenue: $6.85 billion, a 1% year-over-year increase compared to $7.19 billion expected by analysts surveyed by Yahoo Finance.
Operating income: $399 million, compared to a loss of $5.32 billion a year ago. On an adjusted basis, it fell 5% to $824 million.
Streaming subscribers: Lost 1.3 million subscribers for a total of 77.7 million.
Positioned for streaming
McCarthy, who spoke on behalf of the three co-CEOs, talked up the company’s future in streaming.
“Today, we are substantially better positioned to thrive in the streaming future,” McCarthy said. “At Paramount+, we made a content strategy choice to go against the conventional wisdom of more originals is better. Our strategy isn’t about the volume of originals. Rather, it’s about the volume of original hits.”
Though revenue brought in by Paramount+ was up 23%, the streamer lost 1.3 million subscribers during the quarter. The disparity was because of pricing increases for the streamer as well as improvements in its churn rate. As for what caused that million-plus drop, that was due to the expiration of an international hard bundle deal. As for viewing hours, those were up 29% year-over-year across Paramount+ and Pluto TV.
Streaming revenue growth outpaced linear declines during the quarter. The TV and Media segment saw a 6% decrease, hitting $4 billion, and affiliate and subscription revenue decreased 7% due to declines when it came to linear subscribers. However, the DTC division generated $157 million in adjusted operating income before interest, depreciation and amortization, a year-over-year improvement of $131 million.
Despite all the talk about streaming, it’s the legacy businesses that make the lion’s share of the income. CBS remains the primetime leader in broadcast for its 17th consecutive season, while the division brought in $863 million in adjust OBIDA, down 15% from a year ago due to a decline in ad revenue.
Finally, the film side added more installments from profitable franchises like “Sonic the Hedgehog,” “Smile,” “A Quiet Place” and “Mission: Impossible.” But the company saw an adjusted OBIDA loss of $84 million due to lower profits from its licensing business.
Under the two-step deal, Skydance is set to acquire controlling shareholder Shari Redstone’s holding company National Amusements in August, which controls 77.4% of the Paramount Class A common stock outstanding and approximately 9.5% of the overall equity of the company, before merging with the Hollywood studio. The deal provides $2.4 billion for Redstone, $4.5 billion to non-NAI Paramount shareholders and an additional $1.5 billion in new capital to help pay down debt and recapitalize the company’s balance sheet.
Ellison will serve as New Paramount’s CEO, while NBCU alum Jeff Shell will serve as president. Other additions to the leadership team include Cindy Holland, a former Netflix executive who has been serving as a senior advisor to Ellison since October, and Skydance chief creative officer Dana Goldberg, who is set to lead the motion picture side of the studio. Sony’s Josh Greenstein is also in talks to join the company in an undefined role.
Redstone will exit Paramount’s board of directors and Paramount co-CEO Chris McCarthy will exit the company following the deal’s closing.
Upon closing, shares will begin trading on the Nasdaq under a new ticker symbol: PSKY.
