Paramount Sees $5.98 Billion Cable Networks Write-Down Due to Skydance

Paramount Global said its looming merger with Skydance Media spurred a goodwill impairment charge of $5.98 billion in its second quarter, the latest warning sign for a media industry that is seeing audiences abandon cable in favor of streaming video in a manner that is upending the economics of the sector.

The company, which owns CBS, the Paramount movie studio and cable networks such as Comedy Central, Nickelodeon and MTV, said overall revenue in the period fell 11% thanks to declines tied to its film and traditional TV operations. Paramount’s streaming business, however, turned a profit for the first time, with ad sales at Pluto and Paramount+ rising 16%.

Still, the robust performance at the company’s streaming business was not enough to buoy overall results. Paramount said it lost nearly $5.32 billion during the period, widening from $250 million in the year-earlier period. The company said it was ready to cut $500 million in costs in the near future.

Paramount’s top executives remained sanguine. “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,” said a statement attributed to current leaders George Cheeks, Chris McCarthy and Brian Robbins.

Paramount’s results echo devastating numbers revealed Wednesday by Warner Bros. Discovery said it took an impairment charge of $9.1 billion for its cable networks, reflecting subscriber declines, ad-sales shortfalls and the loss of its longstanding package of NBA rights slated to begin after the league’s next season. Other media companies have also looked to trim expenses with job cuts and other maneuvers, and Fox and Disney have also laid off staffers in recent weeks.

Unlike Warner, which has executives who believe they can turn the business around over the next two years, Paramount will move into the corporate arms of an outsider. Skydance Media, a production outlet led by David Ellison, will take control of Paramount’s parent, National Amusements Inc., the investment vehicle of the Redstone family. Skydance sees a chance to cut $2 billion from the company over time.

Paramount’s TV operations, the company’s largest business, saw revenue fall 17%, owing to an 11% tumble in ad revenue and a 5% downturn in affiliate and subscription fees. Licensing revenue fell 48%

The film business saw a revenue downturn of 18%, due to the timing of releases in the period. In the year-earlier quarter, Paramount had “Transformers: Rise of the Beasts” in theaters. Revenue from theatrical fell 40%, while licensing revenue fell 9%.

Q2 revenue from streaming operations increased 13%, with subscription revenue up 12% year-over-year after price increases for Paramount+ (with more hikes to come). Ad revenue rose 16% due to growth of sales at both Paramount+ and Pluto TV. Paramount+ revenue grew 46%, the company said. Even so, overall subscribers to Paramount+ fell by 2.8 million, owing to the exit of a bundling agreement the company had for the service in South Korea.