Paramount Writes Down Value of Cable-TV Business by $6 Billion and Cuts 2,000 Jobs
Moves come one day after rival Warner Bros. Discovery lowered the valuation of its own cable networks by $9.1 billion
The slow-motion collapse of the cable-television business is coming into clearer focus.
Paramount Global PARA -2.39%decrease; red down pointing triangle, home of channels including Comedy Central, MTV and Nickelodeon, on Thursday wrote down the value of its cable-TV networks by nearly $6 billion, a day after rival Warner Bros. Discovery WBD -8.95%decrease; red down pointing triangle revised the worth of its own cable business lower by $9.1 billion.
Paramount is also cutting about 2,000 jobs, or 15% of its U.S. workforce, as part of an effort to realize $500 million in cost savings.
The reassessments by two of the country’s largest TV conglomerates come as cable-TV networks are contending with the acceleration of cord-cutting, declining ratings and a weak advertising market. Streaming platforms are taking audiences and subscribers away from what was once the engine powering the media industry.
“The challenges of the linear ecosystem are becoming even more apparent especially given the pressure on linear advertising and the competition for ad budgets with connected TV and streaming players and the increasing pressure with cord-cutting,” said Robert Fishman, an analyst with MoffettNathanson.
During a call with investors to discuss the company’s results, Chief Financial Officer Naveen Chopra said the nearly $6 billion write-down of the cable-TV business was triggered by the decline of the traditional TV business, as well as Paramount’s recently announced deal to merge with Skydance Media.
“We need to reconcile the value of our individual reporting unit with the enterprise value for the entire company that’s implied by the [Skydance] transaction,” Chopra said.
Programmers are also facing pressure from distributors increasingly willing to play hardball when the time comes to renew carriage agreements. Customers of Charter Communications’ Spectrum TV service are getting free access to Paramount’s ad-supported streaming services with their cable packages under a new distribution deal between the two companies. That agreement followed a similar model adopted after a feud between Charter and Disney last year.
Shares of Paramount were up roughly 4.4% in after-hours trading.
Paramount, which also owns the namesake movie studio and the streaming services including Paramount+, said it incurred a loss of $5.41 billion in the second quarter, largely because of the goodwill impairment charge it booked for its cable-networks unit. Revenue fell 11% to $6.81 billion.
The company said its streaming business—which beyond Paramount+ also includes Pluto TV—reported its first quarterly profit. But Paramount+ lost 2.8 million subscribers in the quarter, which the company attributed to the exit from a hard bundle agreement in South Korea. The company reiterated its forecast that Paramount+ would be profitable domestically in 2025.
Disney DIS 0.00%increase; green up pointing triangle, one of Paramount’s rivals, also reported streaming profitability for the first time earlier this week, one quarter ahead of schedule.
Revenue in Paramount’s filmed entertainment business fell 18%, the company said. Theatrical revenue suffered from the comparison with the year-earlier quarter, when “Transformers: Rise of the Beasts” was released.
Paramount is currently being run by “the office of the CEO” made up of its three divisional heads—Chris McCarthy, George Cheeks and Brian Robbins. The CEOs said earlier this year that the company’s goal was to reach $500 million in annual cost savings. On Thursday, they said the company would continue to “aggressively execute” that strategic plan.
To realize these savings, Paramount is reducing its U.S.-based workforce by about 15%.
In July, David Ellison’s Skydance Media agreed to a two-step deal under which it will buy National Amusements, the privately held movie-theater company through which Shari Redstone controls Paramount. In the second step of the deal, Skydance will merge with Paramount.
The deal is subject to a “go-shop period”— where other potential buyers can make bids for both businesses—that ends later this month. The company said it expects the deal to close in the first half of 2025.
On Wednesday, Warner, home of myriad cable networks including CNN, TNT and TBS, posted a nearly $10 billion quarterly loss mostly because of a $9.1 billion noncash impairment charge it booked for its cable-TV business.
The Warner cable-TV write-down was triggered in part by continued softness in the U.S. TV advertising market and uncertainty related to affiliate and sports rights renewals. Warner’s TNT wasn’t able to strike a new deal to keep rights to carry National Basketball Association games beyond next season, which could adversely affect subscriber fees and ad revenue for the channel.