Skydance, a plan to save 6 billion. HBO Max and Paramount+ to merge from 2027
The $110 billion acquisition brings the group’s gross debt to $87 billion. David Ellison aims to realise 30 per cent of the savings in the first year
Fifteen billion dollars in gross debt before Warner Bros Discovery, 87 billion afterwards. This is the starting point for David Ellison’s plan for the new Skydance, a jointly controlled subsidiary with RedBird fund, led by Gerry Cardinale. Just over a month after the completion of the $110 billion acquisition, the group comprising Paramount, Warner, CBS and CNN has explained to Wall Street where it intends to find at least $6 billion in annual savings once the deal is fully implemented within three years, net of reinvestments. And it has set the first deadline for viewers. From early 2027, HBO Max and Paramount+ will be available under a single subscription.
Cost-cutting
Skydance expects to save at least 2.2 billion by consolidating administrative functions, reducing management layers and rationalising its offices. It anticipates savings of at least 1.4 billion from technology and a further 1.4 billion from centralising procurement and supplier management. Marketing accounts for another billion. The group aims to achieve 30 per cent of its target in the first year and 70 per cent by the second.
To implement the plan, Skydance is budgeting for one-off expenditure of around 4 billion, of which between 1.5 and 2 billion will be spent in 2027. The financial target is to bring the ratio of net debt to EBITDA to three times by the end of 2029.
The only streaming platform
As for streaming, there are two deadlines. The first is the launch of the joint package. The second relates to technology. Skydance aims to run the two services on the same infrastructure within a year of the deal closing, with a view to creating a single platform. Paramount+, HBO and HBO Max have a combined total of 203 million subscriptions worldwide, with potential overlaps between the services. The group has already transferred most of Pluto TV’s operations to the Paramount+ infrastructure and, from the fourth-quarter results onwards, will cease to report subscriber numbers on a quarterly basis.
The accounts (before Warner)
The July–September results still reflect Paramount Skydance’s position prior to the acquisition by Warner Bros Discovery. The latter joined the group on 6 October and will be consolidated from the fourth quarter onwards. Paramount Skydance recorded revenue of $7.03 billion, up 5 per cent, with a net profit of $73 million and adjusted EBITDA essentially stable at $1 billion. Paramount+ increased its revenue by 21 per cent, partly thanks to an average revenue per subscriber that rose by around 14 per cent. The studios grew by 23 per cent, whilst the TV networks saw a 7 per cent decline in turnover. The initial figures for Warner will already have to factor in lower-than-expected box office takings. Skydance estimates an impact of up to 200 million on the studios’ profitability in the fourth quarter compared with previous forecasts.
