Paramount Global has taken a massive hit to earnings, booking a nearly $6 billion write-down as part of its second-quarter earnings, a day after Warner Bros. Discovery reported an even bigger charge .
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Both impairment charges to bring each to bring their carrying value for linear television assets into line with what they’re likely worth now – much less given years of declines and an uncertain future. WBD’s, of $9.12 billion, was trigged by the recent loss of NBA games.
The timing for Paramount is related to getting its book in order ahead of its acquisition by Skydance. The agreement announced last month will move forward as of 11:59 pm ET August 21 if no other better offer emerges. Paramount’s impairment charged widened its operating loss to $5.3 billion from $250 million in the 2023 second quarter. “During the second quarter of 2024, we recorded a goodwill impairment charge for our Cable Networks reporting unit of $5.98 billion,” the earnings release said in a small footnote.
Overall, the quarter was mixed with total revenue down 11% to $6.8 billion, short of Wall Street forecasts. The numbers beat on other metrics. Paramount+ subscribers decreased 2.8 million in the quarter to 68 million, with the company saying it principally reflects the planned exit from a hard bundle agreement in South Korea. Streaming revenue rose 13% year-over-year.
Subscription revenue grew 12%, advertising revenue rose 16%. Paramount+ revenue grew 46%, driven by year-over-year subscriber growth and ARPU expansion.
Paramount+ global ARPU expanded 26% year-over-year. Operating income increased $450 million from a year ago to $26 million, reflecting the revenue growth and lower costs for marketing and content. TV Media revenue decreased 17% to $4.3 billion, primarily driven by fluctuations in the timing of licensing revenues. Advertising revenue fell 11%, reflecting declines in the linear ad market.
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Affiliate and subscription revenue dipped 5%, largely due to subscriber declines. Licensing and other revenue plunged 48%, reflecting tough comps from 2023, which included the final season of Jack Ryan and a lower volume of licensing in the secondary market. Operating income decreased 15% to $1 billion.Filmed entertainment fell 18% to $679 million.
Theatrical revenue was down 40% as IF couldn’t match Transformers: Rise of the Beasts the year before. A Quiet Place: Day One opened just before the quarter ended. Revenues from licensing of film library titles fell.
“Our strong performance in Q2 demonstrates that we are delivering on our strategic priorities. We are proud of our results, including significant earnings growth largely driven by our DTC segment. In fact, for the fourth year in a row, Paramount+ is leading the industry in domestic sign-ups driven by our big broad hit TV series and blockbuster films. DTC profit growth for the past four quarters has totaled nearly $900 million and we are on track to reach domestic profitability for Paramount+ in 2025,” said co-CEOs George Cheeks, Chris McCarthy and Brian Robbins. “Looking ahead, we will continue to aggressively execute on our Strategic Plan which focuses on transforming streaming to accelerate profitability, streamlining our organization — including at least $500 million in annualized cost savings — and improving the balance sheet by growing free cash flow and optimizing our asset mix. We are confident that our Plan will drive long-term value by leveraging our broad hit content as we continue to transform Paramount for the future.”
Skydance is estimating even greater cost savings when it takes the helm, in the neighborhood of $2 billion, a number insiders at Paramount do not dispute. With layoffs looming , staffers are uneasy but Wall Street is looking to hear that more efficiency is possible. Deadline reported earlier Thursday that hundreds of workers are projected to be let go starting on August 13. In a presentation to shareholders in June, Cheeks, McCarthy and Robbins promised more details about their restructuring plans during the call.
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