Skydance, the company formed by combining Paramount Skydance with Warner Bros Discovery, told shareholders on Monday that it expects to cut at least 6 billion dollars of costs over three years by removing duplicated spending across the merged business.
The letter accompanied third-quarter results, CNBC reported. At least 2.2bn dollars is to come from cutting redundant back-office and corporate functions, including management layers, greater use of artificial intelligence and a reduction in office space.
At least 1bn dollars is to come from streamlining marketing and promotional spending. About 1.4bn is attributed to unifying streaming and broadcast operations and integrating back-end technology, and about 1.4bn to optimising third-party spending, eliminating overlapping expenses and centralising purchasing in a single group.
The company said it could "reduce duplicative spend across an expense base of more than $50 billion", and that it was "confident in achieving these savings, drawing on our playbook from Paramount". The Paramount programme, it said, "is on track to achieve over $2.7 billion in run-rate efficiencies by the end of 2026".
Changes are already in train. Voluntary buyouts were offered last month ahead of formal layoffs, a five-day in-office policy has been adopted, and eight executives departed last week, four from Warner Bros and four from Paramount.
Legacy Paramount Skydance reported third-quarter revenue of 7.03bn dollars against a StreetAccount estimate of 7.04bn, and adjusted EBITDA of 1bn against an estimate of 913.5m. The figures exclude the Warner Bros Discovery acquisition, which closed after the quarter ended.
The company spends more than 30bn dollars a year on shows and films, and expects a 200m dollar headwind in the fourth quarter from underperforming Warner Bros theatrical releases. It plans eventually to merge Paramount+ and HBO Max, starting with a bundle early next year.
Co-chief executive David Ellison said AI tools would speed up production and lower film costs. "We think these tools will help unlock more original storytelling," he said. His co-chief executive, Ynon Kreiz, said content budgets would be optimised: "As one company, we can make smarter choices about how we distribute and monetize both new content and library content."
The arithmetic deserves a moment. Two of the four components are floors, at least 2.2bn and at least 1bn. The other two are approximations, about 1.4bn each. Added together they come to 6.0bn exactly.
This is an unusual outcome. Four quantities, none of them precise, have produced a total that is. The imprecision has not accumulated, as imprecision normally does; it has cancelled, and what emerges is a round number with a decimal place to spare.
The structure also fixes the direction of the error. If two of the components are "at least", then the sum is at least their sum, which makes 6bn not the company's estimate of the savings but the smallest figure the letter permits. Every revision from here can only be upward, and the target has been written so that it cannot be missed from above.
Our analysts note that the base is "more than" 50bn dollars, so the saving is at least 12 per cent of at least that, over at least three years. The only unhedged number in the letter is the one assembled entirely out of hedged ones.
The Department of Unnecessary Research observes that 6bn is also a fifth of a single year's spending on shows and films, and thirty times the quarterly headwind from films that did not work. Both of those comparisons are exact, which is precisely the difficulty.