sky dance is pulling back the curtain on plans to achieve at least $6 billion in cost savings over the next three years.
“The combination of two global streaming services, two film and television studio groups, two television portfolios and overlapping corporate capabilities allows us to reduce duplicative spending on an expense base of more than $50 billion,” the company said in a letter to shareholders Monday as part of Paramount Skydance’s third-quarter earnings call.
Skydance, formed through the merger of Paramount Skydance and Warner Bros. Discovery, said it expects to save at least $2.2 billion by eliminating “redundant back-office and corporate functions,” including eliminating management layers and increasing the use of artificial intelligence. These savings also contribute to “rationalization” of the office footprint.
Skydance expects to save at least $1 billion by streamlining marketing and promotional spending. Additionally, consolidating our streaming business with our broadcast architecture and consolidating our backend technologies will result in approximately $1.4 billion in savings.
Skydance said the final $1.4 billion in savings will be tied to “optimizing third-party spend,” eliminating duplicate expenses, and consolidating purchasing decisions into one centralized group.
The company said it was “confident that we can leverage strategies from Paramount to achieve these savings.” “The program is on track to achieve run-rate efficiencies of over $2.7 billion by the end of 2026.”
Some of the cost savings have already begun.
Last month, Skydance began offering employees voluntary buyouts ahead of formal job cuts. At the same time, the company adopted a five-day office work week policy. Additionally, eight executives resigned last week, four from Warner Bros. and four from Paramount.
The company has previously said it plans to eventually combine its Paramount+ and HBO Max streaming services into a single platform.
Skydance announced on Monday that it will take the first step toward that goal early next year, offering bundles of its streaming services “at even greater value.”
Co-CEO Inon Kreiz told investors on the earnings call that Skydance is also looking at ways to optimize its content budget. The company spends more than $30 billion annually on shows and movies.
“As one company, we will be able to make smarter choices about how to distribute and monetize both new and library content,” Kreitz said.
Skydance said it expects a $200 million headwind in the fourth quarter due to poor theatrical performance at Warner Bros. Studios related to already released titles and upcoming releases.
Co-CEO and Chairman David Ellison said on a conference call that the company will leverage AI to speed up production and reduce film production costs.
“We think these tools will help unlock more creative storytelling because the budgets that can take that much risk can be made more digestible,” Ellison said.
The update was announced alongside the Paramount Skydance Company’s previous third-quarter results, with revenue of $7.03 billion, roughly in line with the Street Account’s estimate of $7.04 billion, and adjusted earnings before interest, taxes, depreciation, and amortization of $1.0 billion, above the Street Account’s estimate of $913.5 million.
However, adjusted earnings of 45 cents per share were not immediately comparable to StreetAccount’s EPS estimates.
Results do not include the impact of the Warner Bros. Discovery acquisition, which was completed after the end of the third quarter.
Skydance said it would detail its combined business units, including studios, direct-to-consumer and television, and provide full-year guidance in its fourth-quarter earnings report early next year.
“We will continue to provide guidance on an annual basis as we prioritize long-term value creation, which we believe is more consistent with our strategic approach,” the company told shareholders. “We will continue to provide quarterly updates, including, where applicable, certain forward-looking comments to provide investors with an understanding of the near-term progress of our business.”
