Skydance Targets $6 Billion in Savings Over Three Years After Warner Bros. Discovery Merger
Skydance, the company formed when Paramount Skydance absorbed Warner Bros. Discovery, said Monday that it expects at least $6 billion in cost savings over three years.
CNBC reported that the figure and its breakdown came in a shareholder letter published with the third-quarter earnings release.
The company is led by CEO David Ellison and Co-CEO Ynon Kreiz, Reuters reported. It expects to capture about 30% of the savings in the first year.
Where the $6 Billion Is Expected to Come From
The largest piece is at least $2.2 billion from eliminating what Skydance described in its letter as unneeded back-office and corporate functions, CNBC reported.
CNBC said that bucket includes removing management layers, using more artificial intelligence and "rationalizing" the office footprint.
Marketing and promotion should yield at least $1 billion, a cut Reuters put at 20% of marketing costs. Another $1.4 billion is tied to merging the two streaming businesses and broadcast architecture, and to integrating back-end technology.
Reuters described that portion as technology savings.
The last $1.4 billion comes from what the company described as optimizing its third-party spending, CNBC reported. That means removing overlapping expenses and moving purchasing decisions to one central group.
Skydance said the savings apply to an expense base of more than $50 billion. It also pointed to its Paramount program, which it said is on track for more than $2.7 billion in run-rate efficiencies (savings measured at an annualized pace) by the end of 2026.
Cuts Already Under Way
Last month Skydance began offering voluntary buyouts ahead of formal layoffs and adopted a five-day-a-week in-office policy, CNBC reported. Eight executives left last week, four from Warner Bros. and four from Paramount.
On Monday, Reuters reported, James Gunn and Peter Safran stepped down as heads of DC Studios. Marvel veteran Jeremy Latcham replaces them as president and chief creative officer, and Gunn and Safran return to creative work at the company.
Quarterly Results and the Streaming Bundle
The quarter ended in September, before the Warner Bros. Discovery purchase closed, so the results cover only legacy Paramount.
Revenue was $7.03 billion, roughly in line with the $7.04 billion StreetAccount estimate, and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $1 billion against an estimate of $913.5 million.
Adjusted earnings per share were 45 cents, which CNBC said was not directly comparable with analyst estimates.
Reuters said revenue rose 5% and Paramount+ revenue climbed 21%. Skydance will offer full-year guidance for the combined company when it reports December-quarter results.
Early next year, the company plans to launch a bundle of Paramount+ and HBO Max, a first step toward merging them into one platform. Together with the HBO premium cable channel, the services reach 203 million subscribers worldwide.
Skydance will stop reporting quarterly subscriber counts, following Netflix.
Debt and a Film Slate Drag
The acquisition left Skydance with $87 billion of gross debt and about $10 billion in cash. That debt load is also visible in the bond market, where Paramount's 10-year bonds carry a yield.
Skydance said the weak performance of the Warner Bros. film slate will reduce fourth-quarter profit by up to $200 million. Reuters pointed to Tom Cruise's dark comedy "Digger," which opened in fifth place at the US and Canadian box office in October.