New media giant targets $6 billion in cuts

The newly formed Skydance entity has set a target of at least $6 billion in cost savings over the next three years. In a letter to shareholders released on Monday, the company explained how it intends to reach that figure by combining two global streaming services, two film and television studio groups, and two television portfolios. The stated goal is to reduce duplicative spending across an expense base that exceeds $50 billion.

The savings plan breaks down into four main categories. Management projects at least $2.2 billion in reductions from eliminating redundant back-office and corporate functions. This includes removing management layers and increasing the use of artificial intelligence. The company also plans to rationalize its office footprint as part of this initiative.

Another $1 billion is expected from streamlining marketing and promotional spending. The company anticipates that unifying its streaming businesses and broadcast architecture will yield approximately $1.4 billion in savings. A further $1.4 billion will come from optimizing third-party spend, eliminating overlapping expenses, and consolidating purchasing decisions into a single centralized group.

Skydance noted that it is confident in achieving these targets based on its previous experience with Paramount. The company stated that its earlier efficiency program is on track to reach over $2.7 billion in run-rate efficiencies by the end of 2026. Some cost-cutting measures have already begun implementation.

Last month, the company began offering voluntary buyouts to employees before official layoffs occurred. At the same time, it adopted a policy requiring employees to work in the office five days per week. In the week preceding the earnings release, eight executives departed the company. Four came from the Warner Bros. side of the business, and four came from the Paramount side.

The company has previously stated its intention to merge the Paramount+ and HBO Max streaming services into a single platform. On Monday, it announced that it would take the first step toward that goal early next year. Skydance plans to offer a bundle of the streaming services at what it described as an even greater value to consumers.

Co-CEO Ynon Kreiz told investors during the earnings call that the company is looking for ways to optimize its content budget. The entity spends more than $30 billion annually on shows and films. Kreiz said that operating as one company allows for smarter choices regarding how to distribute and monetize both new content and library content.

Co-CEO and chairman David Ellison said the company will utilize AI to speed up production and decrease the costs of making films. He stated that these tools will help unlock more original storytelling by making budgets more digestible, allowing the company to take on more risk. Skydance noted it expects a $200 million headwind in the fourth quarter from theatrical underperformances at the Warner Bros. studio.

The updates accompanied third-quarter results for the legacy Paramount Skydance company. Revenue came in at $7.03 billion, which was roughly in line with StreetAccount estimates of $7.04 billion. Adjusted earnings before interest, taxes, depreciation, and amortization reached $1 billion, topping estimates of $913.5 million. The results do not include the impact of the Warner Bros. Discovery acquisition, which closed after the end of the third quarter.

Skydance detailed the business units of the combined entity, including studios, direct-to-consumer, and television. The company said it will provide full-year guidance during its fourth-quarter earnings report early next year. It stated that it will provide guidance on an annual basis to prioritize long-term value creation, while continuing to provide quarterly updates with forward-looking commentary where applicable.