Skydance’s first quarterly results since completing its merger with Warner Bros. Discovery met Paramount’s revenue target and exceeded profit expectations. But the share price reversed an initial after-hours gain, as investors focused on roughly $79 billion of debt and the cost of integrating the combined businesses. CEO David Ellison and co-CEO Ynon Kreiz told employees that content production, streaming integration and improvements to linear TV remain the company’s priorities.
Ellison and Kreiz set out three priorities
In a memo to employees, Ellison and Kreiz said that in the five weeks since the merger closed, Skydance had appointed management teams, established organizational structures and begun integration work across Skydance Studios, its direct-to-consumer business and television operations. They described the process as being at an early stage, while saying that a closer look at the businesses had strengthened their confidence in the company’s opportunities.
The executives outlined three goals: build Skydance into a leading global content-production platform and a home for top creators; accelerate the development of an integrated direct-to-consumer platform; and optimize its profitable linear-TV business, centered on CBS.
The memo also said the company plans to combine technology platforms for streaming, live programming and linear television, with the aim of improving the user experience and operating efficiency. Management said Skydance would compete by drawing on its production capabilities, relationships with creators, production resources and intellectual property, as well as its scale, assets and global reach.
Shares reverse after-hours gain as debt draws scrutiny
The market response to the results was mixed. Skydance shares rose more than 4% in after-hours trading before giving up those gains and ending down 2%. The stock has been volatile in recent weeks: it climbed more than 8.5% on Monday, after having fallen more than 11% from its pre-merger level.
The company’s ability to reduce its roughly $79 billion debt burden remains a key concern for investors and analysts. Before the results, Forrester media analyst Mike Proulx said the substantial debt from the merger raised questions about whether Skydance could expand the business while growing profits.
Company targets at least $6 billion in annual savings
Skydance has said it aims to cut costs by $6 billion following its acquisition of Warner Bros. Discovery, with most of the savings not expected to come from layoffs. In their memo, the executives said integration was already producing tangible results and reaffirmed a commitment to at least $6 billion in annual savings and efficiency gains.
Employees remain concerned about potential job changes and internal competition as Paramount and Warner Bros. Discovery teams are brought together. In late October, the company told employees to work in the office five days a week or accept a buyout offer. The executives thanked staff for adapting to recent changes and said the company’s long-term progress would depend on their work and contributions.
Skydance now controls assets including Warner Bros. Pictures, Paramount Pictures, HBO, CBS, CNN, Paramount+, HBO Max, Pluto TV, TNT, HGTV and Comedy Central. Ellison and Kreiz said the brands, content and global reach would help the company compete with Netflix and technology companies such as Google-owned YouTube. Investors will continue to assess the pace of integration, delivery of the savings target and the burden of the company’s debt.