Skydance Maps Out $6 Billion in Cuts After Warner Bros. Deal
In its first report since buying Warner Bros. Discovery, Skydance detailed $6 billion in planned savings and an HBO Max-Paramount+ bundle for early 2027.
Skydance, the media company formed from Paramount and now the owner of Warner Bros. Discovery, laid out on Monday where it expects to find at least $6 billion in annual savings from combining the two Hollywood giants, and said a bundle of its Paramount+ and HBO Max streaming services will arrive in early 2027. The plan came alongside third-quarter results that roughly matched Wall Street’s revenue forecast but fell short on earnings per share, and shares slipped more than 2% in after-hours trading, TheWrap reported.
What happened
David Ellison, chairman and chief executive of Skydance, told analysts on a conference call that the company is targeting at least $6 billion in annual run-rate synergies within three years. Run-rate synergies are the yearly cost savings a merged company expects once integration steps are fully in place. The savings would come from merging two streaming services, two studio groups, two television portfolios and overlapping corporate functions across an expense base of more than $50 billion, CNBC reported.
According to the company’s breakdown, as reported by CNBC and TheWrap, the savings are expected to come from four areas:
- At least $2.2 billion from back-office and corporate functions, including fewer management layers, shared services, reduced office space and wider use of artificial intelligence.
- About $1.4 billion from technology, chiefly by unifying the streaming and broadcast tech systems.
- About $1.4 billion from vendor and procurement spending, by cutting overlapping contracts and centralizing purchasing.
- At least $1 billion from marketing, through unified media planning and buying.
The company expects to reach about 30% of the run-rate target by the end of 2027 and 70% by the end of 2028, according to a summary of the call published by MarketBeat on Yahoo Finance. Achieving the savings will cost roughly $4 billion in cash, including $1.5 billion to $2 billion next year. “We’ll apply the same playbook we did at Paramount,” Ellison said, according to TheWrap.
Some cost moves are already underway. CNBC reported that the company offered voluntary buyouts last month ahead of formal layoffs, adopted a five-day in-office policy and saw eight executives depart last week, four each from Warner Bros. and Paramount.
The quarterly numbers
The third-quarter results cover only the legacy Paramount business, because the roughly $110 billion Warner Bros. Discovery acquisition closed after the quarter ended. Revenue rose 5% to about $7.03 billion, essentially in line with the $7.04 billion analysts expected, according to StreetAccount estimates cited by CNBC. Adjusted EBITDA, a measure of operating profit, reached $1 billion, ahead of the roughly $914 million forecast.
On a reported basis, however, profit was $73 million, or 6 cents a share, compared with the 20 cents analysts had expected, TheWrap said. CNBC put adjusted earnings at 45 cents a share and said that figure was not directly comparable with estimates.
Streaming was the bright spot. Paramount+ revenue climbed 21% to $2.13 billion and the service added 600,000 subscribers to reach 82.2 million, according to TheWrap. The traditional TV business remained under pressure, with revenue down 7% to $3 billion as advertising and fees from cable distributors declined. Ynon Kreiz, Skydance’s co-chief executive, said the company continues to “conservatively plan for a structural decline” of that business.
Streaming bundle and debt
Paramount+ and HBO Max together have about 203 million subscribers worldwide. Ellison described the planned early-2027 bundle as a first step toward a single streaming service and said the two platforms should share one technology system in roughly a year. The company did not announce pricing.
The combined company carries nearly $80 billion in net debt, TheWrap reported. Executives said they aim to bring leverage to about three times earnings by 2029 without raising new capital or selling major assets, though they may sell non-core businesses opportunistically.
What comes next
Skydance warned that weak box-office results from Warner Bros. films will cut about $200 million from fourth-quarter adjusted EBITDA. The company said it will shift from quarterly to annual guidance, issue a full 2027 outlook with its next earnings report and hold an investor day in the first half of next year. Its longer-term targets include mid-single-digit revenue growth and more than $10 billion in free cash flow in 2030.
